The Power of Local Market Equity with Rhome President Charles Riska

Welcome back to Peter Lohmann's podcast. I'm thrilled you're tuning in today. I'm getting the opportunity to sit down with Charles Riska of Roam Property Management. Charles, welcome to the show.

Hey, thanks for having me.

So excited to get into conversation with you today, and I've got a whole list of questions I'm really excited to ask you about. Before we do that though, I'd love if you could just take a minute or two and share with the audience a little bit about your background and how you came to be in your current role with Roam.

Yeah, not a problem. So professional background, I'm assuming you want to know. My first calling is family, father and husband. So husband and father in that sequence. But I started in the business in 2008 at a smaller regional shop in Dallas called Prime Properties. We rebranded it to One Prop as we had aspirations of going into multiple markets. And so we eventually grew into 14 markets across 9 states and had about 6,000 doors under management. In 2012, my business partners and I started a separate company called Pathlight Property Management, and that was to manage assets for Home Partners of America, which some folks may know who that is, but they were the only client of that second management company. We sold that business to Home Partners in April of '16, one prop to NRT in July of '16. However, back, if we go back in the timeline, in 2008, I met John Corona, who's the CEO and founder of Associa. He was then a state senator and cosigner on his son's lease, and that's all I'll say about that. I got the opportunity to meet him through the cosigner capacity, and he and I kept in touch ever since and partnered up with him in 2018 to launch Roam.

Awesome. So you have a ton of large-scale property management experience. I don't have a lot of guests who can say they've run organizations or been part of organizations with thousands of doors under management, and I know you do today as well at ROAM. So excited to get into hearing more about sort of what changes as you scale up in property management. Before we dive into some of that though, I'd love to hear a little bit about Roam and sort of what makes Roam different from other groups in the industry. I've heard a lot of great things about Roam, quite frankly, and I'm just curious to hear kind of from your perspective, what are you guys up to over there that's different?

In context of the aggregators or the rollup players, is that the question, Peter?

Exactly. Yep.

Okay. Listen, I'll, I'll say first that there's no one way to do it. There's multiple ways, but I would say the thing that makes us different, which has been shared before in other, in other venues, is that when we buy a company, when we make that acquisition, it is a full stock purchase, 100% stock purchase of the company. It comes with the expectation and understanding that we're not going to rebrand that business. We're not going to go through, of course, the rebrand to the home brand Roam. We're not going to change technology platforms, operating rhythms, et cetera, right? So when we look for partners, we've, you know, we've done okay with some acquisi— with the acquisitions we've done, but we're very careful to make sure that whoever joins our family maps to our culture, maps to our family spirit, and is first and foremost running a very profitable company, right? With leadership deeper than just themselves as the founder president.

Thank you. That's really interesting. I'm hearing a lot of differences that you articulated. Stock purchase instead of an asset purchase, leaving almost everything in place, it sounds like. Looking for highly profitable companies. So in other words, not just buying doors, you're actually looking at the profitability of the business. And then looking for an existing leadership team who's already there. This is reminding me a little bit of Berkshire Hathaway where it sounds like you guys are not trying to centralize much, if any, of the operations. You're looking for companies that are self-sustaining, self-running, and are going to continue to stay that way. What's informed this approach? Because this is different than how a lot of folks are doing it. Like what experiences is driving this specific differentiated approach?

Well, before I answer that question, I want to just add something to what you said about the Berkshire Hathaway model, right? So I would say though, and I didn't share this initially, is that if you look at the resources of the size of company that Asocia is, and Roam is an Asocia company, that's the rental division of Asocia. We offer the opportunity to any seller when they come on, when they sell their company. And by the way, we do require that the seller stay with us, right? For a period of time because it's so critical that there's minimum change moments to their staff to keep their staff happy, excited, and aligned. And so that's why the sellers stay. But those sellers, once they sell in partnership with myself and my team, they can determine if they want to tap into the resources of Asosia. Do they want to use our HR facilities? Do they want to use our payroll facilities? Do they want to use some of our maintenance facilities, marketing, so on and so forth? If it's better for them, then there's just the opportunity to use it. If they want to do a technology shift, we can support that. Now, we don't have our own CRM or ERP that we're building. That's not our rhythm. That's not our model. We're going to let the professionals do that. We're going to focus on building a premier management company with with great leaders. Back to your question though, your second question of what shapes those decisions to do it this way, right? So it's really interesting when we sold OneProp, several of those things weren't necessarily promised, but we had an understanding that we would be that buyer's national platform to go run it. But it wasn't long after we did a 7-month due diligence process with them post-LOI. But shortly after closing, we started a rebrand to the new company's brand and the seller started reorganizing multiple departments, both people and process. And so when that happened, culture struggled. Culture, I, I won't say it failed, but it definitely struggled. Mm-hmm. Several employees left, some, some key clients left. We didn't have any institutional clients really, maybe one. But most importantly, our local market equity eroded. And so the sum of all of those experiences, of course, shape our current and future ones, right? That, that applies to everybody. When I came to Associa, when John Corona said, hey, come run, would you be willing to partner with me and, and do the rental, build a big rental division here at Associa? I was more than happy. I had a great relationship now with him for 8 years, 9 years. And that sounded exciting and fun to me. I was 40 and a little bored. And so we started it up. And what I didn't share is in my past history, you know, when none of that growth for OneProp and Frameworks, none of that was acquisition-oriented. It was all organic growth. So all I knew was organic growth. I just happened to get into the market at the right time in 2008 as reluctant landlords were coming in. But We didn't buy, we didn't buy companies. And so when he asked me to come here, there was a natural inclination for me to organically grow the business, you know, off the backs and partnerships of associates, HOA business, right? And that was attractive to me at a time where reluctant landlords were really not around much. And so we started going about, my partner and I and Kirk Gillespie started developing rhythms and platforms and laying the foundation for growing it organically and having that supported that way. And it got to a point about a year in where Mr. Corona came up to, to me and said, this is beautiful. Now let's go buy some companies. And I actually, it actually gave me great pause because I did not understand the acquisition rhythms of Asosia because I was in my little rental bubble, right? And so, I wouldn't say he had to convince me, but he had, he heard my story, of course, and he said, let me tell you my story. And so at Asosia, they did the same thing. They bought companies, they rebranded, they put them on the same technology platforms, right? Same operating rhythms. And what happened? At least for John, clients attrited, culture struggled, and And that's not to say that some folks aren't very successful with that. I personally was not successful with it. John was not. When he buys a company, he doesn't want to, he doesn't budget any attrition for staff or for clients. And so he quickly pivoted away from, hey, it doesn't have to be a socia. It can be an associa family company. We don't even brand it that way. It just is a standalone company. And so how do we create connective tissues in the background to make sure the right financial controls are on the business, that they have the right operational support from home office, et cetera, et cetera. And they figured that out. So when he shared that with me, he and I were aligned in our approach and going and doing acquisitions to, to grow the business both organically and with an acquisition focus came pretty natural.

Got it. Thanks so much for sharing that history and context. So, if I'm hearing this right, Associa's initial approach was more conventional with a rebrand, centralized technology, centralized the processes. That caused a lot of friction. He quickly pivoted, and now it sounds like it's the case that when Associa makes acquisitions, similar to what you described with Roam, they sort of leave everything as is, barring some, you know, maybe a few things here and there.

Very small things. But yeah, and so that's the playbook that they've implemented and it's well known in the market that that's how they do it. And so that was one that I could get behind. And so once I understood that, it was all steam ahead.

Fascinating. You mentioned an interesting phrase in that great explanation. You said something about the power of local market equity, or what I took from that is sort of like the power of a property management company's brand in a local region.

Right. That's right. The brand equity in that market.

Yeah.

Not eroding.

And this is something I think about from time to time, like how much power does a local brand have in a region? It sounds like you ascribe quite a bit of value to that. Is it been your experience that maybe property managers who have been around a while have a little bit more brand value than they, than they may guess or may expect?

I think the really good ones know it, right?

Okay.

That could be a fair statement for a portion of the audience. Of course, I think the good ones know it, right? When you've been in business for 20 to 30 years in a market, or 15 years even, or 10 years, if you're the market leader and I mean, you own a property management company, right? So in your market, you know who your competitors are and you know who the leaders are most likely, or you have a sense of that, right? And if you were at the top of that list, you know that I probably am the top based on these factors. And so for that reason, yeah, a lot of folks probably know this. Some may be not quite clear on that yet, but there's value behind that. And when you take something that's existed for 20 years in a market and immediately it's overnight gone and we're now something else, not everyone resonates well with that. And the market surely will address that because you're creating a change moment, a very big change moment for every client, right? The fact of the matter is like, it's a stock purchase. It's business as usual, right? There's not a change moment in the client's eyes. You just keep on rolling and the business keeps going and, and it's still successful with those processes and those, technology platforms and those opportunities. And so it's a big trigger moment for a client when they experience that.

Yeah.

And it can create fear. That was my experience, my personal experience.

Sure. Yeah. This strikes me as a very low ego approach to sort of rolling up management companies. What you hear from a lot of the big groups who are acquiring other firms is like, Well, as soon as we acquire, we implement the X way, right? Like our company's way, our technology, our processes, our systems, our management agreement, our lease agreement. And you of course get the sense from that, that they believe they know best of how to run property management companies seemingly in every market in the United States. And to layer on top of that, it's like our brand is now going to replace your brand because our brand is better. And they, there's this thesis around building a national brand for property management. Everything here is the opposite. It's like, nope, we're going to leave it local. We're going to leave your people in place. We're going to leave your tech in place. We're going to leave you, your processes in place. So it's a very, like, I love that you guys are super clear on this. You make no bones about it. You're like, no, this is what we're doing. Here's why. And this is what we believe. And I think for operators who are hearing this, a certain percentage of them are probably resonating very deeply with what you're saying and maybe others not so much, but I can really appreciate the fact that you guys are clear on this and you are really upfront about it from the get-go.

I think it's important. I think it's been, and listen, that's not to say, Peter, that those strategies and plans that have been formed by our peers in the marketplace are bad, right? I don't know all of those companies' goals and, you know, what their initiatives or what their objectives were from the outset. But, you know, maybe they budget this much per this much attrition. This is how we're about, I don't know, right? Maybe they're doing it the right way for them and that's fine. There's a lot of different, there are several different ways to, to do this business, both as a regional player, whether you have multiple offices or You're just a single player and you're in one office, right? There's a lot of ways to do the business. Now listen, collecting rent is collecting rent. It's a people business. And you have to relentlessly execute on customer service, period. But that's their way. I appreciate hearing you say not ego, right? Folks who know me probably would say Charlie's pretty arrogant or probably pretty egotistical. The fact is I like to kind of stay in the background as much as possible and just quietly go about my job and doing it and, and doing it right. And the model that, that John Corona at Associa has put together for us to do that is it, it speaks to my personal moral values as well.

So, got it. So as I think about the model that you've articulated, you know, buying up slowly and carefully property management companies in different areas and Making minimal changes, you know, the owner stays in place for a certain amount of time. I think the, because you're not centralizing much, if anything, the natural question that comes out of this is, well, who's kind of running the show locally there and how do we make sure, how do you make sure that these companies continue to grow and be profitable? Because eventually I'm guessing most of these owners move on. There's a reason they sold the company. They may have other interests, they may be looking to retire, what have you. They may stick around for a year or two or maybe more, but when they do eventually move on, how do you ensure that the local operator is incentivized to continue to grow and to continue to drive profits? I mean, after all, that's why you bought these companies. Really curious to hear about that because that's, For me, that's what comes up as what would make me nervous about this approach because when you centralize everything, you have much tighter control in theory over a lot of what's going on. When you take more of a decentralized model, I'm curious about the incentives and the leadership.

Yeah, that's a whole other topic, the centralization versus decentralization, which I'm going to maybe come back to that, but I want to address the question first about keeping folks incentivized and having controls on the business is kind of what I heard, right? So I'll say this first, for anyone who is interested in talking to us, we're happy to talk to you. The importance of the seller staying with us for a defined period is their— it is, this is the biggest change moment for their employees and their loyalty in most cases is to that owner of the business, right? And if that person leaves, what happens is, do I need to look for work? Do I need to, or am I going to get riffed? And are they going to centralize everything and my job's obsolete now? So those concerns, we take those off the table right away. But while we do that for a while for those owners, those sellers, my goal, and I tell each of them this, is I want to win them over. My goal is that they, they love it so much that they want to stay with us, that they don't leave. Now, listen, some of, some sellers I've had too in the last 6 years who have said, hey, my goal is to retire in this period of time. And they're, they're upright, they're forthright with that. Right. And, but if the business is just them, like we're not buying the business because they're all the, they're the, they're the business. Right. That's the importance of the leadership underneath them and what they've cultivated. And so for those folks, we've helped them. Those two, one of them has retired and the other one is halfway through his committed time period, but with great second layer and third layer leadership behind. And so he will retire and we are excited for him. But others, it's my goal to win them over and want to have them stay with us, right? Now, it might be that they don't stay in the current capacity of being that branch president, that branch leader in their, in their market. It might mean that we have a different regional or national role that we'd like them to consider. And that's been, and with this applies to our organization as well as our competitors and peers too, that as you are pulling all of these companies together, you're constantly shifting and adding new roles. Now, the key is, at least in my opinion, to minimize the shifts as much as possible, but new opportunities do arise with growth. And that's one of the greatest things about growth is the new opportunities. And so, yeah, we have several who have gone past their time of commitment and they're still on our teams and they're doing other things. And so when I see that, that's probably one of the most fulfilling doing things for me. Now, now they have a replacement leader running that company. We have national and regional leadership that are assigned to shepherd and steward these branches, right? We aggregate data very cleanly through a data lake. So we have all of our data in one view. It's easy to, to see how we're doing and whether they're on Appfolio or Propertyware or Rent Manager or Rentvine, whatever it is, we have all the data.. And a KPI is a KPI. We can talk about how they're doing in that, in their operation. So we do give those branches a layer of leadership over them. That's the big change that every one of these sellers has to go through, right? I'm used to working for myself and only for myself, and now I have a boss, right? Well, what does that look like? And it just so happens that the person who's supporting you was also a seller maybe., right? And so you've been in the same, that same boat, but we do have regional operations leadership that are assigned to these new companies to support them and help drive their objectives.

Okay.

Got it. So that's the main change moment for, for the, any seller, everyone below the seller, it's business as usual, right?

It's business as usual. Makes sense. So the data lake sounds exciting. I would love to play around with some of that one day, and I'm sure that's fun to sort of have a place where, like you said, all, all the property management software data comes together and you can run standardized metrics against it. What are like two of the most important metrics that if you want to get a sense of how a specific operation is going, say you made an acquisition a year ago in Houston or something, What are like 2 or 3 of the metrics that if you're on a desert island, you want to look at these metrics to understand how that specific, I don't know if you call them branches or locations, is doing?

So other than door count always needs to be plus 1, that's the common denominator, right? Plus 1, not status quo, plus 1, plus 1 or greater. We boil it down to 2 things, rent and vacancy. Revenue cures all ill. Is rent coming in and on the vacancy, how are we managing vacancy? Are we being intentional with our communications with our clients? Are we directing them as the experts to make the right choices in those vacancy moments, whether it's during a rehab, post-move-out, or whether it's during showings, right? And lowering prices. We see that nationally prices are softening a little bit. It, right? Well, a lot of these clients got in the market the last 10 years or so, and so they've only seen these high rents and yeah, now, now we need to beat the market expert that says we need to, we're going to decrease it by this much for this reason, right? So we focus on, on those two things quite heavily.

So it sounds like when you say rent, are you looking at average rents or like the rent collection? Rent collected. Yeah. Rent collected. So like the delinquency amount or just the overall rent roll?

Yep. So behind every one of those, behind rent and vacancy, you have a series of processes that need to be followed. And so that's what we focus on. Okay. If, again, you said desert island too. Yeah.

Those, those are my two. Yeah. I'm surprised you didn't say churn or, but maybe that's captured in the sort of, you must be like plus one or greater.

You said two. Right. So I said common denominator is plus 1 or greater, right? So yeah, you can cover it there if you want and you can call it churn there. But if you boil it down to just rent and vacancy management, if the rent is coming in and your client's getting paid, now other things apply, right? Are we overspending on maintenance and rehab, or are we overdoing things that maybe we shouldn't be doing? Right. But these are just the two. Rent coming in, revenue, QSL for clients. They see their distribution coming in and standard distribution minus your management fee and maybe one or two small repairs every once in a while. You're not going to hear a lot. Vacancy is the second. Vacancy, mitigating vacancy to have as few days vacant as possible. I'm not talking days on market, I'm talking actual vacancy. We start marketing in most of our companies well before the tenant vacates. And in several markets, we show during the last notice period. But if we're mitigating vacancy and getting rent coming in quickly and we're following the processes, now most of the companies that we've acquired have very similar processes and it's not uncommon for them to say, well, I want to know what the ROAM rate is. And so, well, this is how we manage vacancy. How do you manage it? Well, we do the same thing. Well, but we don't do this as well as what you're saying. Yes. Well, so go for it if you want to do it, right? Yeah. But if you have rent coming in and your client's house is occupied, turns mitigated. So that's why if you only gave me two, I'm focused on rent and vacancy.

Love it. Appreciate that. That sounds like some deep wisdom coming out in a couple simple truths. I heard there's a great quote I heard recently. It's like, Take simple truths seriously. I forget, I'm kind of mangling that, but the basic idea is like sometimes we confuse complexity with wisdom or intelligence when in reality some of the most simple things can be the most powerful if we take them seriously. Take a simple idea seriously. I think that's how the phrase goes. I think I heard it on a podcast recently. Awesome. So I want to ask you about, so I want to shift now to the perspective of an operator who's listening and maybe they like what you're saying. What are some tangible steps they could take to maximize the value or the attractiveness of their company to a potential acquirer like Roam? Let's pretend they were thinking about selling in the next year or two. They're getting a little older, looking toward retirement, and they want to make sure that they maximize the value, you know, they want to get paid as much as they can for the work they've put in over 20 years to grow the business.

Yeah, that's a great question. And as you were, you know, asking it, I thought about there's several different areas to start with that answer. I'll say this, if the business is only you and you have carried You have worn several hats regardless of your size, but you've worn several hats and have not delegated opportunities and you've held onto a lot of things, then that's going to be a struggle. That's going to be a struggle. And that's going to, that typically shows as we get into the conversations and even it reflects in the financials. Some companies have really strong profit., but there's not, they're not deep in leadership. Right. And so when you remove that leader who's wearing all these hats, now all of a sudden you have to bring some, maybe 2 or 3 people in. And so I think the first thing to do, the first thing for consideration and answering that is building a good leadership team below you and focusing on, on them. And, um, that's probably the most attractive thing to me. Is when I talk to a company and it's not all about them. It's, hey, this is who runs this, this is who runs that, and so on and so forth. Because then if the seller decides in 2 years I'm gone or I need to, I want to be done. I, Charlie wasn't successful in winning me over for another, another term, right? Then the business is safe, right? And so Team is the most important to me is having that. Now listen, we only buy profitable companies, right? So you have to be profitable. But as we look inside those profit numbers, and I think some folks get lost or oversimplify it by, oh, they have 1,000 doors. I want the 1,000 doors in my portfolio and I'm going to make these changes and I'm going to make it this much profitable. It doesn't matter if it's profitable today. I'm going to make it profitable. I don't want to do that. I don't want to make something profitable. I know what that looks like. But if we look inside this profitable business and we're looking at these numbers and the conversation and the focus from the seller is, let me tell you about Sally and let me tell you about Jim, right? Let me tell you about my team. And those are longer tenure team members. The longer tenure shows that to me that that person, the seller, has had leadership presence for a period of time with individuals that he or she has won over and that they respect and admire and have loyalty to. And so the reason they are profitable in my eyes is because that leader took the time with them to build them and to help them be aligned to whatever those company objectives are, which they are clearly executing on. And so, you know, of course we look at profit, but we go right to the team. We'll ask about door count, door count, fine, 500 or 5,000. We'll ask about door count, but we focus on the individuals underneath it. Because those are the people that are going to be joining our family. We're not, it's not a play where we're looking to reduce staff by 20 or 25, 35% because we have a centralized centers of excellence here or there. And This is how we're going to optimize our efficiencies. Like, it's not that.

So hopefully that answers the question. That really does answer. And it is a different answer than I've heard from other folks I've asked that. So again, again, appreciate that differentiation and clarity on what's important and why. Right. I think you did a great job explaining why it's important that a property owner or a property management company owner has a leadership team in place and I couldn't agree more. I mean, if I just put my own personal opinion on it, I've invested a lot of time and energy building out our leadership team, and I advocate heavily to my peers in the industry to do the same. You are not going to win an award for working the hardest at the end of your career. Bring in other experts or elevate folks within your company, give them power and responsibility and see what happens. I think you'd be pleasantly surprised.

I know I was. I love it. I love it. They have to feel empowered and they have to have the resources to be successful. And that's our job as a leader. One of our, two of our main jobs as a leader is to do those things, provide them the right resources and empower them. And that means letting them make mistakes, right? Yep. And then sometimes you have to help clean up those mistakes, but that's part of the process.

Yeah, that's one of the hardest things in my experience is getting, becoming okay with mistakes happening and, and not constantly going back and double-checking everything before it goes out the door. Now, obviously super critical things.

Yes.

You need to double-check those, but your team, if your team isn't making mistakes, they're not growing and learning. And when those mistakes happen, how you handle it is going to inform what happens Next, if you get really angry at them, how could you do this? What are you, an idiot?

Right?

What do you think is going to happen? They're not going to ever try anything new. They're going to come to you for everything and they're going to drown you in, hey, can you look at this? Hey, is this okay? Whereas if you support them and say, hey, I would have done this a little differently. Here's why, but I love that you took the initiative. It's fine. We're going to clean this up. Just next time, here's a couple of things to consider, but thank you for taking this on.

That's right. You know, different companies, different sizes require different door count sizes require, you know, more people, right? And so I would say to the smaller operator who might be thinking as they hear this conversation, they might be thinking, well, I only have 300 doors and I only have this many employees and I don't know that that's applicable to me. Is, are they talking about bigger organizations? No, we're talking about every size organization. We should, every leader should always be looking for their replacement. If they're not, then that's a failure. That's a failure. And so in my opinion, that's a failure. So, and I also think it's a level, it shows a level of insecurity too, right? And sometimes we see in life and work that you don't want to hire the person who's smarter than you because you don't want to get replaced, right? It's actually counterintuitive by hiring that person. You're made to look like the rock star because you hired the right person., right? And so for those smaller operators where the mom and the pop is wearing a lot of hat or the operator's wearing a lot of hats still, who's their replacement in their organization? Do they have someone identified? Right? And for those smaller operators, often what we see happening is they come in and they say, hey, I've got Sally, who's my replacement. She's been with us for 10 years. She's got her broker's license already, even though I'm the broker, the qualifying broker. But I'm doing so much of the corporate accounting and I'm doing all of the, a lot of the client accounting, and I'd like to focus on this, right? To those people, we say, let's talk about what technology you're on. This is what we, we run on primarily. We do have a centralized option for client accounting that can get you out of the business if you want to get you out of that part of the business, if you want to get rid of it. And oftentimes they're already on the same stack we're on. And so it's a no-brainer for them to say, thank you for doing all my client accounting. We're so grateful. I'm going to go focus on growing door count over the next period of time. And so everyone's a little bit different, but there has to be that Sally.

There has to be some depth in the leadership role. Yep. Yeah. That building out of the leadership team and delegating tasks, getting comfortable with getting things off your plate, it is such a mind shift for entrepreneurs, because in my experience, when you start a company, right, think about the psychology behind starting a company. You're implicitly saying everything out there sucks and I'm going to do it better, right? That's sort of what you're implicitly saying by starting your own business. You're like, the other people that are doing this are horrible. I'm going to figure out a way to do it better. And what's required for success during that time is you have to work your tail off and everything has to be perfect because for those first few clients and those first few residents and those first few properties, like you just have to work so hard and you have to do everything yourself and it all has to be perfect. Like that's sort of what's required to start something out of nothing. And so all of a sudden here comes Peter and Charlie on a podcast saying, Well, you need to stop. What are you doing? You need to stop doing everything. And like, mistakes are actually good for your team and get all this off your plate. We want to see a deep leadership team. Right. And you're like, what? Like, that is completely not what was required to get me here. And it's not at all. For some people, it's even like almost, it feels immoral to them to unethical in some weird way that they would be giving other people more work to do so they could work less or delegating things they think the client hired them as a human, them specifically to keep an eye on. Well, my owners, they're counting on me to make sure this is happening. And now you're telling me I need to give that power to somebody else. I need to talk to my client about that. So it's just a very, it's a confusing time.

Let me, let me address that a little bit. I've got a friend, he's actually my property manager in Tulsa, Oklahoma, and I'm not going to say his name, but great, great gentleman. And he's probably one of the most trustworthy people I've met and hardest working people I've met. And I asked him when he decided to go start his own thing, I said, what are your goals? Like, what are your long-term goals for this business? And he said, Charlie, honestly, I just want to get to like 200 homes. Have a couple of employees, provide a really good service, local service, provide really good, like, hands-on, almost boutique feel customer service, a little white glove, right? And I know that at 200 doors with this kind of staff, I know I can have a really good living and a really good life. And that's what I want to do. And there's nothing wrong with that. Right? And so that's fine. Now, as he goes to exit, right, maybe he'll sell it to his, you know, property manager, right? There are those kinds of conversations. But his goal was to do it for a period of time, which is nowhere near close, and to get to a certain door count. And that's fine. So what you just said can be fine. But if the goal was, hey, I want to grow this to 2,000 doors in the next 5 years and be in 3 markets, then it just won't— that won't work. And but those mindsets aren't aligned. And so the latter already knows they're going to have to do those things and move those efforts off of themselves and on other people. But you said something, you said, I feel immoral, or I can't remember the exact word you said, but giving it to them and me doing less work. It's not about doing less work. It's about doing the highest and best use of your time. Like what's the value proposition of your time doing these these items as opposed to doing these items, which could bring in more value to the company, which could bring in more opportunities to that staff. So it's about highest and best use of the time. But as a starter founder, when you start something, it's all on you. You just have to be willing at, depending on what your goals are, you have to be willing to let go of things at the right times. And sometimes it's a little bit later than, than not, but you have to be willing to do that.

Yep. Awesome. I want to ask you about M&A activity in the broader marketplace. So here we are a little bit past, a little bit more than halfway through 2024 as we're recording this. What's changed with M&A in the property management space in the last, say, 6 months or so relative to 2023, 2022?

Well, the cost of money's gone up, right? And so whether it's debt or equity, the cost of money has gone up significantly. So I think we've seen a slowdown, right? Matthew Whitaker, if you were on the phone with us, I don't want to quote him because I haven't had this conversation with him a bit, but he used to say we're in the whatever, 7th inning or 5th inning of a 15-inning overtime baseball game. And I think there's still a lot of runway. I think we're far from done. But what we have seen here recently with the rate changes the Fed's made and how that's affecting, including interest rates for homes, it's affecting a lot of things, right? Buying is slowing down significantly across most large MSAs. Cost of funds to go do acquisitions is different, right? Depending on whether different aggregators are achieving their goals, right, or not achieving their goals, could be playing into what I perceive as a slowdown, an overall slowdown in acquisition M&A activity. We haven't slowed down at all. We're, we're still going full steam ahead. I just got the, just got the work the other day on what Vision 2030 looks like for Asosia. And so it's going to be a tripling or quadrupling of efforts for us on the M&A side from now going forward.

But overall— for Rome, for Rome as well, not just Associa?

Yeah, for Rome as well.

Yeah.

When I, when I say Associa acquisitions, Rome is a part of that. So we, it's important for us to continue going and we're, we're meeting our objectives, our financial objectives and doing well. And so there's not a slowdown for us, but you know, a lot of factors can can lead to a slowdown, right? When you look at the main aggregators in— at least that you've— we all know who they are in our trade organization, NARPM. I don't have calls with them to say, why are you not buying right now? We don't, we don't have those kinds of calls or, hey, I'm looking at this one, but you can have this. We don't do that. We don't talk. And so we're— I'm pretty open about how we're doing things. It's what I've said is the way it is. But I don't know if they're meeting their objectives or not, or if it's, you know, a mix of that and just market financials or market economy, or if it's one or the other. I don't know. But there's been a slowdown. I, and I, I tend to lean more towards it's the rate, the rate environment that we're in right now. Yeah. And, and we just have to wait it out.

And so when you say there's a slowdown, Does that just mean there's fewer transactions happening overall?

I think there's fewer transactions happening overall. And I also think some of the folks that have historically bought are pressing pause for a season.

Got it. Well, I know that for a fact. Yeah, that's definitely correct.

And so those equally the same thing, right? Fewer transactions and they're, they're stopping. Some of it's just all out stopped. And I don't know if they know when that, that spigot will get turned back on or if it will. Sure.

But there's a pause button play. So I'm trying to think about what this means for you and then what this means for a property management company owner. For you, presumably this is good because there's fewer, there's less demand, and so you could potentially be in a better position to negotiate against a property management company owner if last year they had 8 people who were interested and now there's only 3. From the perspective of a property management business owner, this is probably not ideal because if money's more expensive, that lowers presumably the multiple you'd be willing to pay. And also if there's fewer interested buyers, then I can't really play them against each other and kind of run like a little auction or something. Am I directionally correct in those statements?

I mean, I think, you know, if you look at a supply and demand curve, that's kind of where you're going at. And there's probably some truth to that for sure. In regards to how we do it, our buy box is unchanged. How we value is unchanged. We were talking to, we don't get in bidding wars. We just don't do that. And we just, we just will not do it. And so we, we provide very, very fair valuations. We do a multiple EBITDA. It's well known in the space. And so we provide a very fair valuation, whether there's 3 or 4 companies I'm competing against or not, is not going to change how we would value that business.

Okay. Interesting. Okay. Got it. And it sounds like, I think I heard you just say that your multiple hasn't really changed. You're still valuing companies roughly the same way that you had been.

Not roughly. We're valuing them the same way that we've always been doing it.

Got it. All right. That's really interesting. Very helpful. Thank you for that context. As a property management company owner, And I know you're a little biased in me asking this, which is fair. What are some considerations I should have when I'm looking at selling my business to potential acquirers? Like, what considerations should I have as I'm evaluating my options besides the obvious one, which is who's gonna pay me the most?

Right. Yeah. You always wanna maximize value, right? That's a great question. Again, I could start in multiple different places. It kind of all depends on what the goals of the seller were when, when they started the business or bought the business, where, however they got it. It's kind of like when an owner, a client prospect says, hey, I want you to manage my rental property. Well, okay, let's get to know each other first. How long did you own it? When did you buy it? What were the goals you set for that property when you bought it? And getting to understand what makes them tick as an investor. So yeah, there's no bias. I would just, my recommendation to everybody is ask around, right? Get opinions from people who have done it, get opinions from people who have spoken to all the buyers. Of course, depending on what your motivations are for selling, right? As well. And depending on, and this is going to sound really bad, but depending on your loyalty to your team, some sellers believe it or not, in phone calls with us as we talk to them, they, I won't say they disparage their team, but it's clear that their team's not a priority. Could be one of the most profitable companies, but their teams aren't a priority and their longest tenured person is a year and a half. That's a red flag for me. I'm out. The churn in the employees leads to churn in clients as well, right? But it shows that there's something in my opinion, wrong when we're constantly churning our staff, right? And so when I see that, I red flag it. So assuming that your values align to my values, my family work values and my work family values, I should say, and how we perceive culture and what the, not just the importance of it, but what is it in your organization? I would be asking, what is my employee experience going to be like after we change, right? When we make this change, how are my employees going to be affected? And I personally would spend a lot of time on this. Again, it's based on past experience, my own past experience as sellers, right? How are my employees going to be affected is probably my number one thing after, you know, of course, assuming you get the valuation you want,, right? And I would ask about every potential change moment that they're fearful of or have concerns about, whether that's technology, whether it's a, you know, retooling departments, whether it's centralization of a certain function. I would ask about every change moment because as humans, we're not wired, our DNA is not wired for change. And so, you know, take the selfish hat off and most of the people we talk to are really considerate of their teams, right? So it's the very few who fit that one example I gave. But take that hat off. You got your valuation. Ask all the questions on how many change moments there are going to be, how your people will be impacted, what opportunities they'll have. Ask examples of everything that I just said., right? Because not every company is the same. If you're a 300-door shop that, and you don't want to do the client accounting, your, your concerns might, or questions might be different from someone who's got 3,000 doors with a deep bench everywhere. So, but I think that, that probably covers it pretty well.

Yeah. Appreciate that. I'm sure that's really helpful for folks who are listening. If we go backward a little bit, you, you were part of a, a, an organization that grew to 6,000 doors. And that sort of boggles my mind a little bit. That's 10 times, 9 times our current size. What changes as you scale past, say, 1,000 doors? So where I am at today, we're at about 670 doors. The, the path to 1,000 is fairly clear to me. It's kind of just a scaled-up version of what we're already doing. Most of our management's already in place, so it's adding some direct team members, adding some remote team members, maybe layering in one or two small tech changes, but it's hard for me to fathom 2,000 or 3,000 or 6,000 doors.

What are the scaling changes that happen on that journey? We could do a fill an hour up on that, um, or two. I would say that first, when we talk about growth, it's critical to as we did scale, it's not just about the gross number, right? Dilute it down to the market. And because scaling $6,000 in one market could look different than scaling $6,000 in 9 markets or 9 states, 14 markets, right? So you want to get to, you want to race to 100 as quickly as possible and keep kind of status quo operations at the market level. Pretty consistent. I'm talking about our legacy brand, One Prop specifically, right? Because that was homegrown. Every time we went into a new market, we were promoting one of our people from Dallas and saying, hey, let's go relocate you, right? It was very much homegrown effort. So having the consistency in operations and having a— I wouldn't call us a national brand then. We were a regional brand, even though we were 9 states, but we were still a regional brand. Having that consistency in product and in execution was really simple. Because everyone was nurtured through this incubator in Dallas. And I would hire you as a $13 an hour customer support rep. If you told me you weren't going to relocate in 2 years, we didn't hire you. You had to be willing to relocate because we were going to grow you quick. And so going through that process and scaling to 6,000 doors looks different than, so you want to get density in one market and the race to hundreds critical, 400's the next step. But I would just say this. You said something earlier about basics, right? And don't ignore the, the basics, making it right. I think sometimes we overthink the amount of change we need to make because of size and scale. And so that sometimes leads to different technology changes, or I need to add AI in now, right? Or I need to do this and do this. And the fact is you don't have to make a lot of changes. You just don't. If you have good principles and you have good density, good processes and good density in a market, your technology can almost stay flat. It can almost stay flat. At OneProp, we were on, you're too young to know this, but we were on, when I first started there, It was called, I can't remember. It was a server-based, the guy had a little hat, Promos Landmaster. Promos Landmaster. Okay. I've heard of it. Yeah. Yeah. They had a great accounting stack, by the way. And we moved to PropertyWare. And so we went to PropertyWare around 1,400 units and we grew on PropertyWare from 1,400 units to 6,000 and we never bought another technology. There was nothing else that that was changed in there. Wow. It was just taking core processes and making those core processes fit in every market with the centralized service model that we had, that we ran. It helped that everyone was homegrown, right? And they knew those processes from day one. And so, but you could say that in any market, if you, as you continue to grow, just have really good processes. We had zero virtual employees and we ran, we, when we sold, we were a 41% margin company. Wow. The more doors you get and the more density you get, the tighter those PM territories can become, right? Which reduces windshield time, which reduces time for the property managers in the field because they can go hit 3 houses in a 4-square-mile radius, right? And so the changes we made were more geographic in terms of process orientation. It was, it was just really more geographic changes.

To that we had to refine as we got bigger. So did— it sounds like maybe you guys were set up like portfolio style where each property manager had a certain number of properties that were theirs?

We were departmental.

Okay.

Yeah. Departmental style, departmental all the way. And when we would open a new branch, for example, in— pick a market— Phoenix, Arizona, right? All the client accounting got done out of Dallas. Okay. And that property manager going and opening a new market with zero properties or maybe 10 properties, they had one sole focus, go grow the business. And so follow our rhythms and grow in the business. And they would go grow the business and then they wore multiple hats, right? Well, when they got to about 100, so in that way they were portfolio minus they didn't do the accounting. And then when they got to a certain size and they hired their first PM assistant or PM, and then those duties moved to that person while they did listing duties, right? Or vice versa. And then when they got to the next size, they hired a leasing agent, right? And then that leasing agent did all the leasing and marketing. PM did all the PM. And now that person's the manager of those two people growing the branch. So a little bit of a hybrid as you grow a new market. But I, I would say that sounds interesting. It just really, it just really depends on the, there's so many, there's so many good people we know, of course, in the space that are offering consulting. Consulting services. Dev Newell's one that comes to mind. There's a couple others, right? That, yeah, really answering that question of what does scale look like and the changes as you go. The most important thing is how do I minimize change? How do I minimize the change moments at every level and not do it just because I, for the sake of change?

Sure. So. Fascinating. I love that you provide that context and I think I've taken a lot away from that to think about growing to 6,000 doors with 41% margin in multiple markets with no RTMs and practically no technology.

I mean, my hat's off to you and the team. We had 100, we had 110 employees at 6,000, at 6,000 doors and they were all boots on the ground local except for, you know, the centralized accounting team was all in Dallas, right? Things like that.

But it was all boots on the ground. Yeah.

That's incredible. I do want to say this, by the way. I'm a fan of virtual employees. I call them global. We call them global team members here. And we have at ASSOCIA, we have a lot of global team members, both on the rental side and on the association side. But on the rental side especially, I've come to learn, do you know who Kelly Tollison is? I don't think I do. Kelly was the NARPM 2020 past president, national president. And she and her husband owned a company out in Seattle that Kelly joined us a few years ago and she's on our team and Kelly is the one really who opened my eyes to global team members. It wasn't that back in the day I was averse to them.

I just, it wasn't what it is now. There wasn't 20 vendors in our space offering to help you with it.

That's right. It was kind of just starting back in the day. But what we had was working really well and real estate is a people business based on effective communication and setting expectations. And so we had that. We now have that still, but we have some global team members on our team and they're awesome. They're awesome in every sense of the word.

They are team members. So couldn't agree more. We, uh, we have a higher and higher percentage of our total headcount is, is global. And, uh, we treat them like full team members in every sense of the word, in every way that we can. I regret that we can't offer them health insurance on our plan and, and some of the other benefits, but we try and make up for that in various ways. So I'm a huge fan of global talent for property management as well. Well, Charles, this has been awesome. Thank you so much for taking time and sharing some of your story and some of your values and your approach to property management and growing property management empires. If folks want to follow along with you and with Roam and everything that's going on, what's the best place for them to do that?

They can go to our website and go to the acquisitions tab and just give us their contact. Or if you know Kit Garen, Kit Garen is one of the OGs of NARPM and he, he's, he's great. He's our VP of acquisitions. You can reach out to Kit. His email is kit.garen@romepm.com and he'll take that call and talk to you a little bit about your, what you want to do.

Awesome. Well, thanks again and I appreciate your time today. Hey, thank you.