Wrapping Up Season 3 with The Wisdom of Marc Cunningham

Peter Lohmann's Podcast. Peter Lohmann's Podcast. Peter Lohmann's Podcast. Brought to you by Lead Simple. Yum. To the extent you can make problems go away, you'll be successful in this industry. I believe that. To the extent you can't, right, to the extent you bring more drama to the situation, you want to argue more, you want to fight, you want to go to court, you'll fail. You will drive yourself crazy, you'll drive your people crazy, and you'll burn out.

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. We are here with Mark Cunningham, and I'm so excited to get in a conversation with you, Mark. So let's start right off. I'd love to have you give some, some background. I normally have guests just do 90 seconds, but I want to give you a little bit more time because I'm actually not super familiar with your background and the background of Grace. So take a few minutes and I'd love to hear kind of how you got into the business and sort of your journey in property management.

Yeah, absolutely. So in 1978, going way back in the time machine there, my dad decided he was done being a middle school teacher and decided he would start a property management and real estate company here in Denver. That's where we are. So he, he started Grace Property Management and I was, I was just a little kid at the time, so I was kind of employee number one because I was free child labor.

Yeah, I love it.

I did. I grew up in the industry and my dad would have me mowing a lot of lawns and I trashed out a lot of properties. I painted a lot of doors, I pulled a lot of weeds. So I did grow up in that world as a really little kid. I remember my dad like putting me in the car and like driving me with a lawn mower to terrible parts of Denver. Like, I can mow the lawn and when you're done, go inside and lock the door and I'll be back at the end of the day. I mean, we didn't have cell phones.

It's like, oh, okay, Dad.

Anybody talks to you, you don't talk to 'em. You just go inside and lock the door.

That's amazing. Now, were these all third party or was this some of the that your dad owned?

This was all third party. This was all third party. Yeah. So he started that company. We started off small. I mean, he had a couple properties. He did a little bit of commercial as well. So it was commercial residential. So I spent my summers working for my dad And then as I got a little bit older, I could drive. So now he didn't have to drop me off with the lawnmower. I could drive myself with the lawnmower and went to Colorado State University. I studied finance and real estate there. I did some things in the multifamily world, the commercial world. After I graduated college, I started investing in real estate myself as well. And then at that point in time, this is back like in '96, I was living and working in Cheyenne, Wyoming. Peter, have you been to Cheyenne, Wyoming?

I think I was there with my family as a teenager. I think we did an out west trip and that was one of the stops, but I don't really remember it very well.

Well, no, of course you don't remember it. Nobody, you shouldn't remember it. It's not the end of the world, but it's right next to it. And so I was living up there and my dad called me and said, "Hey, I need to hire a property manager. Do you want the job?" So I jumped to that opportunity. This was 20-some-odd years ago. So at that point in time, I think there were 3 of us in the office, managed about 100 properties. So since then, we've just kind of grown slow and steady. Since then, we've made some acquisitions, we've bought some competitors. We haven't done anything crazy, but we've— our mantra has always been follow the opportunity, right? Follow the opportunity. So when the housing crisis came about, what was the opportunity? Was to buy foreclosures. When the housing sales market got crazy hot, what was the opportunity? It was like to sell everything. When the housing goes down. So we follow that opportunity that takes us into commercial, takes us into some multifamily, takes us into fix and flips, buy and hold. So we, that's kind of how we operate. So today, my dad's retired at this point in time, he still, still owns some of the company. My brother and I own some of the company as well. We manage residential, commercial, industrial, we do sales as well. We just keep plugging away with what we're doing. So we manage about 1,100 doors. We've got a team of 30-some-odd folks, and that's kind of the Grace Management story.

It's awesome to meet someone who's over 1,000 doors in one metro area because you're still just in Denver and the surrounding area.

Correct.

Yeah. I really view that as a milestone, which I haven't yet achieved myself. There's a— I think maybe I could— it could fit on one hand the number of people I know that run a management company with over 1,000 doors in one metro area. So that's a big accomplishment. I want to tease at a thread, which is you said you follow the opportunity, and I actually find that in property management we are overwhelmed with opportunities. Everything you just listed and a million more. So when you're thinking of— because I imagine there's some things you don't do. In fact, I know there's a lot of things you don't do because you're very clear about that. And I'd love to hear about how you decide what is worth pursuing when you see an opportunity and what is something that is going to be a distraction and is not going to take your business to the next level?

So yes, we believe in following the opportunity, and I agree with you 100%. If, if you just open that up, you're going to chase your tail and go crazy because there are millions of opportunities for us to be following. For most of us, the problem isn't a lack of opportunity. The problem is we get so shiny object syndrome and here's the next big thing and, oh, let's go do this and let's go do that. So, we have been very, very focused. I think that's the word, right? We got to make sure that we're focused on the best opportunities. So, I view it this way, right? There's this spectrum of opportunity for all of us. And on one far end of the spectrum, you have the things that are easy to say no to, right? So, when my wife, hey, can all of my family come visit for Thanksgiving and bring all the kids and stay with us for a month. That's an easy no. Like, no, please, no, please, no, please, no. That's an easy no. On the far other end of that spectrum, you have the easy yeses, right? The things that if you said to me, hey, Mark, you know, I got a condo, Mark, in Hawaii, not using it next week. You want to just go, go hang out? Yeah, absolutely. So, so those are the easy ones, right? Everything else in the middle is where we have to make the hard decisions. Oh, should I go to this conference? You know, it's a lot of money and there might be something there. I might pick something up, so I probably better go. Otherwise I'll miss out on the opportunity, right? FOMO.

Then you start doing the mental math of, well, if I had just had 2 doors, you know, if I do the lifetime value, it would have paid for itself 3 times over.

And you know that closing agent has been bugging me for lunch and I don't want to do that, but it might lead to something. So I probably better go have lunch. With that person. And we do this over and over and over again. And so my advice to people in a business is always when you're first starting off in this business, you chase everything. You don't say no to anything because you have nothing going on. But as you grow and as you become a little more successful, you've got to kind of like slide that bar on where you define your yeses and your nos. And you start saying no. The first time someone says no, it's terrifying, right? Because you're like, oh, I said no to an opportunity and I probably missed out. And I got, I got FOMO. I don't have FOMO. I have what would be— I have FOP, fear of participating. I don't want to participate in anything because the problem comes if you say yes, yes, yes to all the stuff over here. Now you miss out on the best opportunities. And so suddenly you're saying yes to everything and you're missing out on the good stuff. So what we've done in our company is we kind of keep sliding that bar further and further and further. To where we're going to say no to most things. The only things we will say yes to are like the slam dunks. Heck yes, I'm all in. I don't even need to think about this. That's what I want to do. Now, does that cause us to miss out on maybe some little opportunities over there? Maybe. But it allows us to stay focused and have the bandwidth open for the really great opportunities. So our default is no.

That's powerful. Yeah. And there's a bunch of great quotes and kind of frameworks here that can be useful. The classic one is everything you say yes to, you're saying no to something else. There's a lot of great literature on opportunity cost, which is exactly what this is. So that's awesome.

And people that are people pleasers, they have the hardest time. Are you a people pleaser, Peter?

No.

Oh, good. Look at that. He said no so easily. He didn't even think about that. So I have on my email or my desktop, I have a doc saved. It's just called No. It's called No.

I love it.

Thank you template. So when I get an email, hey, can I come visit your office, Mark? I get that all the time, right? Can I come visit your office? And so I'll open up my No, my No thank you template, and it just basically says, hey, thanks so much for reaching out. I appreciate the opportunity. At this time, I'm a little overloaded, so I must respectfully decline. But thanks, and let's stay in touch.

Yeah, I think the The idea is, is exactly that. It's like, how do you— I don't have a problem saying no, but I know a lot of people do. And so that's a great suggestion, is to actually kind of pre-write it. ChatGPT could help you with that. Hey, how do I say no gracefully? And, you know, that's great.

I heard someone say the other day that they made a rule for themselves. It's a principle. They won't say yes to anything on the phone because there are people, right? So it's like right now, if you were like, hey, Mark, would you mind coming out to the event we're doing? I could say, you know what, Peter, let me think about it. I have a rule that I never say yes to anything on the phone. I need to give myself 24 hours. I'll get back to you.

Salespeople hate him. It's like that.

Yeah.

Oh, I love it. Oh, that's awesome. All right. So I want to also, so you shared some really great background about sort of, I don't want to call it traditional, but the ongoings of a property management business, but you have another business. Which I think of as kind of like a media business called PMBuild. And you have some stuff that you sell on a website. You've got an amazing YouTube channel, which I highly recommend. We were talking about this before the show. I'm in one of those situations where I feel like I know you, Mark, because I've listened to a whole bunch of your videos. And you also have a podcast, which I've been really enjoying as well. So I'd love to hear about how did PMBuild get started and I know it sounds like your dad had a teaching background. I sense some of that instinct in you as well. Seems like maybe that's an avenue for you to engage in kind of giving back and teaching what you've— sounds like you guys have figured out. I know you guys have figured out a lot of really cool stuff because a lot of your ways of thinking about customers and tenants and contracts and just a lot of the nuts and bolts of property management resonate deeply with me. And I can tell there's been a lot of thought put into that. So I know I'm kind of throwing a bunch of stuff at the wall, but I think you get what I'm trying to ask about.

Yeah, absolutely. And I'll tell you the story, but I will just— on your last comment there, yes, I agree. And I think most of the common wisdom in our industry is wrong. And that's— so that's where we come from, right? We've been doing this a long time, and all the, all the new— put that word in air quotes— all the new stuff is usually wrong that you hear in this industry. It's just— it's— so that's kind of where we— we can get more into that, but I don't know if anybody's ever asked me how we started doing this stuff. So I'll give you, I'll give you the 60-second version or maybe 120-second version because I find it fascinating. But then again, I think I'm a fascinating guy, Peter. So I'm a little bit biased there.

I'm interested.

So this was probably like, what, 6 years ago? And I was attending a conference, a property management conference, and a buddy of mine was doing, was organizing like breakout sessions right at this conference. And they had somebody cancel. And so my buddy was like, hey, you know, Mark, I know you're into systems and processes. Would you come and do a breakout session on systems and processes? And I was like, why do you want me to do this? Just trust me. I'm just— I'm in a bind, man. Would you help me?

Last minute. Yeah.

Okay, no problem. I'll do that. So I go in and I do this little session, this little breakout session. It went fine, right? I'm in there and I'm talking to a group of people and I'm kind of a personable guy. I mean, I just kind of— I try to keep the energy level high. And so I do this little talk. And that went fine. So about a month later, I get this call out of the blue. And this woman says, hey, this is gonna sound crazy. But I'm an agent for real estate speakers. And I need a property management speaker. And you did this talk at this event. And one of the ladies who works for me was in your event. And she said you were great. And I'm in a bind, because I'm supposed to have a property manager fly out to Virginia next week and give it a give a conference, and she's sick, she can't go. I know this sounds crazy. Would you go to Virginia next week and talk to the State Association of Realtors about property management? She goes, I have no idea who you are. I'm taking a huge risk here. You could totally flop, but I'm stuck. And I'm a cynical guy, Peter. I'm a cynical guy. So I was like, okay, so look, I'm waiting for her to be like, so if you send me a check for $1,000. Yeah, yeah, book you, make you famous. I know this sounds crazy, you know, check me out. This legit and da da da da da. So I look at it and I was like, and they'll pay $1,000. And I was like, wait, you'll pay me $1,000 to fly out? And I had no idea what I was doing. And I was like, well, if this is all the opportunity, right? I was like, well, that's kind of cool. I mean, I got nothing going on next week. Sure. I said, okay, okay, I'll do that. So I go out there and I speak to this group and I don't know what I said. I was terrible, I'm sure.

Was this like a 1-hour presentation or an all-day?

I think it was like a 3-hour, it was like an hour 4 in the morning.

Oh wow, okay, so this is pretty serious.

It was, yeah. So I do it and I get back and then she reaches out, she's like, hey, you were awesome, like they loved you. And so what this woman is, is she's an agent for real estate speakers and she sends speakers out to real estate conventions and all the things that all these states— it's a whole industry, I didn't even realize this was there. And she's, I want you to go travel for me and do all this stuff. And so, I was like, "Okay, follow the opportunity." So, I started doing these things. I started traveling to different real estate events and coming up with different topics that I'd talk about and that went really well. And then, this is before the PM Build stuff kind of came on board though. And then, I would get people that would reach out to me afterwards and be like, "Hey, can I get 10 minutes of your time, Mark? Can I just have a little bit of your time?" And I would say yes. Then finally, I was like, "No, I don't have any time." I can't. And I remember that somebody was like, well, could I pay you for your time? And I remember thinking like, you'll pay me for my— you want to pay to talk to me? I was like, yeah, I guess. And they were like— I was like, well, what do you want to pay? Like, well, what do you want to charge? I didn't know what I was doing, Peter. I had no clue. So then I started kind of like doing a little bit of coaching. I was like, okay, yeah, I can do a coaching schedule and this and this and this. And then people were like, well, hey, can I get copies of your docs, your system manual, your processes. At first I was like, okay. And I was like, no, no, this is our stuff. And then somebody's like, well, can I pay you for your forms? Oh gosh, I don't know, can you? So then we started selling some form package, and then, then that turned into people asking us to do little short video segments and send it out. And we thought, well, why not just put that on, on YouTube? Do a little 5-minute talk on how to, how to start property management business, how to improve your lease renewal process, whatever. So we started doing weekly or bi-weekly videos on that. So everything was very organic. None of this was planned. There's no master plan in any of the stuff that came in place. And then, you know, a year or two later, we had some vendors reach out. They're like, hey, can we, can we get access to your followers? Because we do have a lot of people that, that, uh, follow us online. And I was like, well, I don't, I don't even know. What do you mean get access? They're like, well, can we sponsor you? I guess, I guess you can sponsor me. So then we've got that whole thing going on, and then We put on some events. And now, now our latest, by the way, is we're having people come out to our office because people kept saying, can we come visit your office? I was like, no, no, you can't. And finally I thought, well, gosh, maybe we put on an event at our office. So now that's our latest. Now we're opening it up to people to come and spend 2 days with us at our office. So it's all been very, very organic and just kind of following that opportunity as things present itself with that whole PMBuild. We started the podcast. 2 months ago, hadn't done that. But that's kind of the, the long and short of it.

Yeah. And, you know, one last plug for your stuff, Mark, for listeners, the YouTube channel and the podcast especially, I get a ton of value out of. And it's nice to hear another practitioner in the space sharing their real-world experiences. We've got some amazing podcasts and a lot of those are from vendors and we love our vendors and they give a lot of great value. But it's a little different when it's coming from someone who's actually in the game every day. So I love that. I've had a little bit of a similar journey. We're not going to go into that detail here, but what's your reflection on the revenue that comes in from PM Build and sort of the media stuff that would be like your coaching and your having people visit your office and your sponsorships, the revenue that comes in from that when you think about the revenue that comes in from your, from Grace, This has been throwing me for a loop a little bit because the— I don't know exactly how to talk about it, but it feels different. And I'm curious if you've had some time to think about that and what it means and how it feels.

So when you say it feels different, what do you mean?

It feels like every dollar I earned in the management company was extracted from the earth with hand tools. And it feels like every dollar that comes in from sponsors was handed down from heaven. I just don't know how it's just, it feels easier and the margins are wildly different, of course. And so it's getting to the point where if I'll, I'll just be super candid, like my end of the end of the year cash in my pocket from all the media stuff is starting to eclipse my end of the year cash in my pocket from the management company. Which is 10 times bigger, right? It's just, it's totally different. And I'm just, I'm right in the middle of trying to figure out like, what does that mean? And you've been at this a little longer. I was curious if you thought about this.

Yes. Yeah. I like the way you framed it, framed it there. So I spend about half my time in my property management business. My role, I'm the president of the company. So my role is big picture stuff, moving forward, put our plans in place for next year. Where are we going? Directional thing. I mean, I definitely have my finger on the pulse. Later today I'll be in the office doing an interview with a PM, so I still get involved in that level of things. So I'm involved there. I spend about half my time there.

Do you have like a number 2, like an integrator type person who's sort of overall the staff?

2 number 2s. Okay. We've got, we've got 2 VPs that really, they are, oh man, like I love them to death. They run the things. They are— they're the brains, they're the operations, they're just— they're awesome. So yeah, we've got a VP of property management and a VP of operations that do that. So they run the things on the day-to-day basis. I spend about the other half my time doing this stuff, right? Doing the one-on-one coaching, speaking at different places, doing the videos. So it's about half and half. And I would agree with you that the, the financial side from the, uh, the education It is easier to use your analogy of how you're falling from heaven versus extracting it from the ground. I like that. I think it's this, Peter. The property management business is hard. It is hard to make money in property management. It just is. And, you know, people can say, oh, it's a cash cow. And yeah, maybe it is, maybe it's not, but it's hard at the end of the day because it is so labor intensive. It is so highly regulated. It is hard. It's harder than most industries and most businesses that are out there. If I were starting over, honestly, I don't know if I would start a PM business today. I don't know if I would. I think it's too much risk. It's too hard. It's harder than it's ever been operationally. Now, is it profitable? Yeah, of course it's profitable. We wouldn't be doing it. We've got good scale, so it's very profitable there. So financially, I'm I'm a financially driven guy. I am. I wouldn't be doing all this PM Build stuff unless that were very lucrative for me as well. People are like, oh, thank you so much for your videos. I'm like, oh, I don't do it for free. But for me, it's a balance. But people say, well, why don't you just quit the PM business and just do your other stuff, right? Just do the PM Build. And I always say I couldn't. I couldn't because what makes me effective when I'm doing coaching or when I'm doing speaking or when I'm doing the videos is I'm talking about what just happened in the business. So if someone's, oh, we're getting sued by a tenant for mold, I can be like, oh yeah, we got sued last week by a tenant for mold. Here's what we did, right? I'm in that every single day so that when I'm talking, that's why I'm so relatable. You know, people will say, gosh, I just, I really like your stuff. And it's because I do it. I'm not a consultant. I'm not a coach. I'm a property manager. I'm doing this stuff every single day. And so therefore, when I talk about it, of course it's relatable because this is, this is what I do. So that's why I don't think, I don't think you can divorce the two, you know, you as well, because you lose your edge if you suddenly just say, oh, I'm just an educator.

I used to own a management company years ago, and let me tell you how we did it back then. All right, Grandpa. Yeah, sounds good. That's like maybe the what I make up about how it would go if I sold.

I think you're right. I think if you stepped in, this is how I do it for me because I've thought about this. I really have. I think if I stepped out though, the clock would start ticking on the time that you're going to be relevant. And eventually, probably sooner than you think, you will lose your relevance because you no longer have that company.

I think I agree with you, but I think I also disagree. I think that's something that we make up because if you look at— there's tons of examples in our industry of people who have been out of the game for years and years, or maybe never even owned a management company, and they have a lot of valuable insights. So maybe it's something that we're just clinging to out of fear and comfort.

Maybe. For me, that's my shtick. That's what I do. I talk about that. So I would lose my relevance because my relevance is I'm a very operational guy. The business side of the business is what I talk about. If I'm not doing the business side, I feel like I'd be cheating. I don't do this. But here's what you should do.

Yeah, it also, it also might get kind of boring to just help other people nonstop, 24/7. That's maybe something. Yeah, maybe. Yeah, maybe you're like, that actually sounds pretty good.

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All right. So let's, let's stay here. So I'm curious. So you help a lot of property managers, as we've been discussing. What are some of the most common mistakes that you see property managers make? Maybe to give a little bit more context for you, let's talk about the property manager who's somewhere between 100 and 200 units. So they're in those early days. They've got maybe their first employee or two, and they're just starting to get into the heart of this game. They're looking to grow and scale, but they're having trouble. Like, where do you see some of the stumbling blocks?

Biggest stumbling block on the front end is we have no filter for owner clients, right? We're so desperate for business that if someone's, yeah, I think, I think I'll hire you, like, great, thank you, let's sign here, let's go, because we're so desperate and hungry for clients. And then suddenly you get to 50, 100, and you look up and you're doing 10 different things, right? You've got 10 different categories, and for this owner you're paying this mortgage and you're you're doing things that you're not doing for anybody else. And that owner wants you to call them before you spend any money on maintenance. And you said you would because he's got 4 properties. And then this owner over here, you got to call him once a month and go through his operating statement line by line because that's what he wants. And you've got all this stuff going on and it's just— it's chaotic. That's the biggest mistake is I think the lack of consistency and saying, hey, here's, here's what we do, here's how we do it. If you want to work with us, then you got to buy into the way we do it. And that will cause you not to bring everybody on But that's, that's the path of growth. That's the path of sustainable smart growth versus hitting the wall with 100 owners doing 10 different things in 10 different ways. So I think that's, that's mistake number 1 that we see. I'll let you comment there. Would you— what do you think?

No, 100% agree.

Yeah.

And that goes all the way back to the beginning of our conversation about, you know, there's a lot of opportunities, but you can't chase all of them because there's an opportunity cost associated with everything that you do.

Yeah, yeah. So we are huge on ensuring that the prospective owner-client is a fit for us, and if they're not, we don't want to work with them. We just don't. So we'll— we will— our closing ratio, people always talk about that, like, it's pathetic. Be pathetic because we get a ton of leads and I know a lot of them aren't good. So I, I said one of my property managers the other day, I said, he's like, hey, how many of these things should I be closing down? And I said, I'll tell you, If your closing ratio is 100%, I will fire you because it means you have no filter type of thing.

Yeah. And I'll just say two quick things on that. One is we actually mark those leads as invalid in LeadSimple. We have a stage that says invalid, we declined, and so we can keep track of those and they don't count against our closing ratio. The other thing we do is we set up, and you probably do too, we set up referral agreements with our competitors here locally. Who will take on that type of business, whether that's low-end or commercial or industrial or HOA, a bunch of stuff we don't do. And then we'll refer them, make a warm introduction to, to our friends across town, and we get paid for that. So it feels a lot easier to say no when you know that there's a chance you're going to get a check.

So a bad owner-client comes to you, you're like, this person's crazy. And you're like, hey, you know who you should talk to? See, we call that sabotage, Peter. That's what we call—

well, if it's truly someone who's crazy, I won't do that. But if it's just not a fit because of the property type, it's a little different.

Yes, yes. Uh, so I think that's the biggest mistake. Another big mistake— I don't know if this is a mistake, but I think it's a misconception. I think this is the biggest lie in the property management industry, is every property manager thinks that every other property manager knows what's going on Their business is tight. They've got their trust account solid. Everything's going great except for me. I'm the only one that can't figure this silly business out. That's what everybody thinks. Because when you even, when you go to events even, right, people get up on stage and they tell you how great they are and they have their presentation. Oh, you just gotta do this, this, this. And I, it's awesome. And then people get to be like, oh, it's not awesome for me. This is really, really hard. I think that's the biggest lie because I talk to lots and lots and lots of property managers, and I can tell you we're all trying to figure this out, right? There is no golden playbook. There's not. You got to figure this thing out, and every business a little different. And yes, there's principles to be followed, absolutely, but at the end of the day, we're all figuring this stuff out as we go.

100%. And my reflection is that when I do— I don't do a lot of coaching, I just do very small amount, but the little bit I have done, the folks who come to me, they already know what they need to do. They just need the confidence to move forward. And it ties into exactly what you're saying. They think that it should be easier or it should be more obvious, or it seems like everyone already has this figured out, but really they don't. And so you just need the confidence to just execute and move forward with what you've already I feel like most people I talk to, they already have an idea of what needs to happen. They're just uncertain because it seems— I don't know how to exactly articulate it, but as soon as I say, "Oh yeah, no, that's exactly right. Just maybe do this a little bit differently, but it's fine either way. Just go ahead," then they start to make massive progress just with that little bit of help.

Well, I think most of us operate, especially when we're small like that, we operate from a place of fear that that we're one day away from all of our owners firing us. I know it's going to happen. It might be tomorrow. Like, oh, I survived another month. And we have this just this fear mentality that our owners are just ready to walk away. And I think that's another big misconception is our owner clients need us more than we think they think they need us. They need us a lot. We are a sticky business. We are an incredibly sticky business. And yes, we have owner clients that leave every year because They're going to move back, they're going to sell. But unless you're doing a crummy, crummy job, your owner clients aren't going anywhere. And that, that means you have the ability to put standards in place and say, no, I know you want us to do XYZ, but we're not going to do that. We're going to do this. I— and yes, we are going to have a fee increase next year because it's necessary, and your owner clients aren't going to leave. And yes, we're going to charge you for this, we're going to do this, and we're going to operate this way, and your owner clients aren't going to go anyway.

That's true. Yeah. And the ones who were going to leave were going to leave anyway.

Exactly.

I have walked a number of coaching clients through price increases, and I can't think of any examples where— I think the most I've ever seen is one, one client left. It's always zero or one that leaves after a big price increase.

That's exactly right. We, we do this a lot with maintenance, like a company that doesn't have maintenance as a profit center and then bringing this on as a profit center. And I can't tell you how many times I've gone through this exercise with PMs. You know, like, Mark, if I start charging for maintenance, they're all going to leave. Say, no, they're not. Yes, they will, Mark. Well, how many really do you think will leave? Oh, probably 20% of them. No, I think you'll— you think you have 2 people that leave and they don't know they will. And then they do it. And if you roll it out properly and then they come back, can't believe it, nobody left. It's almost like I knew what I was talking about. Yeah.

Love it. We've been talking a lot about dealing with your owner clients, and the easiest way to deal with a horrible owner client is to never onboard them in the first place. That's, I think, one of the most challenging things to do in this business is filter out those owner clients before you sign the management agreement. It's easy sometimes if they have a junk property and they say things like, I'm never going to Fix this because the tenants can just deal with it, right? We all say no to those. But for the clients that seem like they say all the right words, like, how can you get a sense early on of whether an owner-client's going to be a great fit or not? If I remember, you've got a little framework that you like. I'd love to hear some details around that because I think it was really powerful.

Yeah. So the first thing we do is we, we don't use a BDM, business development manager. We don't have a salesperson. That way. If we had more time, we could talk about that.

That does sound a little juicy. We might have to come back to that. What were you saying about everything that, you know, in the industry is wrong these days?

Yeah, I don't like to say this publicly. I'll get, get beat up. I don't, I don't know if I buy into that model, right? The whole concept of a BDM didn't exist up until about a decade ago.

Today's episode is brought to you by RentScale. No, I'm just kidding. They're actually not a sponsor of this episode.

Oh, that's funny. So up until a decade ago, this didn't exist. The idea didn't exist. So here's the challenge, the ongoing challenge with the BDM concept. A BDM is a salesperson, right? That's what they can do. And a good BDM can sell, right? I mean, think of whatever you sell. You're selling cars, you're selling pens, like whatever it is you're selling, a BDM can sell. My philosophy for this business is not every owner-client is a client we want to have, which is what we're talking about right now, right? We have to filter those folks out on the front end. And you're saying, how do you do that? Well, here's how you don't do it. You don't hire a BDM to go sell and then expect them to be able to filter clients. Struggle doesn't work in their head because, hey, you're a good salesperson, right? Yeah, I can sell ice to an Eskimo. Okay, great. Oh, but by the way, don't bring on anybody crazy. That doesn't make sense to them. They're like, do you want me to close or do you not want me to close? Because a good salesperson is a good salesperson. The whole point of them being a salesperson and what makes them great is they have no filter. They can close anything. They get the deal closed. Now, there are nuances. I get that. I'm not trying to throw the whole industry under the bus. I'm not saying that at all. There are nuances, but That is, at the end of the day, that's this right here. That's why it's never, never going to be a smooth process, because they're going to bring people on that they shouldn't be— that should be bringing on. And you can say, well, we only pay them if they're here for this long. Like, the, the model is not designed to function well. And then even if they bring the right people on, then you still have the second biggest challenge, which is the handoff, right? So if I'm trying to sell you, right, I'm the BDM, Peter, you're the owner-client, and and I filter you and you're a great guy and you love me because you're like, man, yeah, this is great. I'm like, okay, Peter, here we go. Here we go. And I'm like, oh, hey, Peter, by the way, you're never going to talk to me again. I'm going to introduce you to Larry over here. Larry's who you call from now on. Nice. Nice knowing you. Goodbye. All right.

We got to pause. We got to pause. I got to address some of this. This is going to be fun. So first, I do want to point out you've grown to 1,100 doors without a BDM. Now, that is impressive. Now, you did have a little bit of a head start on us because you started in 1978. And we started in 2013. So, you know, but still, that's amazing. 1,100 doors with no BDM to the point of if you just hire BDM, they're just going to sell, sell, sell. They're going to bring on bad clients. Yes, I think it's pretty straightforward to set some basic guidelines and boundaries around we don't do this, we don't do this. If they leave, we're not going to pay your commission. And I do think it's possible to find a BDM who generally cares about the prospects in the sense that they want the prospects to be successful with their real estate, period. And if that means making an introduction to someone who's going to be a better fit across town, they'll do that. If that means onboarding them, they'll do that. If that means saying, hey, actually, after talking with you, I think you'll be better off self-managing, here's why. They'll do that. I do think those people exist. They're harder to find and they probably charge more, but I don't know. What do you think about that?

Yeah, I mean, you're saying it can work and yeah, it can work, but I'm looking for what works best, right? That's what I want. So I believe, you know, could, could— does the model work? Of course it works, but I think there's a better way. So what we do, our property managers are our BDMs. To, to use that common vernacular, right? So when a lead comes in, our property manager is the one who's going to contact that individual, talk to that owner-client, and determine whether or not they want to be the property manager for that owner-client. So now, now the filter magically works, because if you're the prospective owner-client and I'm the property manager, and I know that if I bring you on, I'm working with you, my filter process is completely different now. It's not BDM filter process. It's a, do I want Peter calling me when I can't rent his property? Is, is, is when, when I see Peter's phone number on my caller ID, does my stomach go into knots? I'm like, oh no, I can't stand this guy. Then I'm gonna say, you know what, I don't think that, that would be a really great fit for you, Peter. And there's, there's no form— I mean, I can give you some formulas, but there's no magic formula. It's just a, this is not somebody I want to work with. So that helps us attract folks on the front end because now you also know part of my sales process, by the way. Now, Peter is— hey, Peter, if we work together, I'm your guy.

Yeah, people love, people love that, man. People like that. They really do.

I'm not handing you off to anybody.

Yeah, they like that. Yeah, the handoff thing, the handoff thing though, I mean, that's pretty standard. I mean, that's pretty normal in B2B sales.

You know what else is pretty standard? Failure, Peter. I don't want standard. I want what's going to work really, really well. We, you, We can't do this business for 45 years if we do it standard. I don't like standard. If you tell me what standard is, I'm probably going to be like, yeah, that's probably not the best way to do it. That's the difference between super successful businesses and everybody else who's struggling. So sorry, you got me on a soapbox, Peter. I'm sorry.

No, this is good. This is great. So what about— so I'm curious, do your property managers who bring on these clients, do they get a commission or is just part of their job?

Our property managers are 100% commission-based, so they get a percentage of the portfolio they manage.

Oh, okay.

Real estate agents, they bring on a new property, they just got a raise. They get fired by an owner-client, they're not making as much money.

Wow, that's different. Okay, I want to come back to that, I think.

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So my next question is, what about the question of like speed to lead? So your property manager's busy, they're managing properties, they're dealing with their existing owner clients. A new owner call comes in. How do we make sure that someone has capacity to actually get that call?

Yeah, great question. So this is our model for growth. I said later today I've got an interview with a property manager to potentially bring on. We're going to bring that property manager on if we hire her with zero doors. She got nothing to start with because all of our other PMs are basically filled. Their slots are basically filled right now. So we have the problem you're talking about. So lead comes in and PMs are like, I don't want it. My portfolio is filled now. They all have some, some room, but this is our model for growth. So when we get our PM, which we hired a new PM 3 months ago, and she's filling up, so she's still taking leads, but she's filling up quickly. And so what do we do? We go hire another PM and we start filling her. So all these leads that are coming in, they're going to go to her and she has nothing but time. So as she gets filled and then she'll eventually be like, hey, I I got to slow down. Okay, no problem. We go hire another PM. That's our model for growth. So we've got, I don't know, 12, 14 PMs. And when they, when they all get filled, we'll bring on another one. That's, that's a very scalable model for us.

They're each managing whatever that would be, 70 doors or something like that.

Anywhere from 50 to 100. That's the other thing I love about this model. This model allows a PM to customize their portfolio and manage what they want to manage. So Sherry, one of our PMs who's amazing, she's been with us for 10 years, uh, she's got grandkids and she doesn't want to work 60 hours a week, so she manages like 40 doors. That's all she wants, and she's very, very happy with that. I got another PM who's a younger guy, got recently got married, bought a house recently. He is very money-driven. He's managing about 130 doors. Works hard, but you know what? It works for him. So our model works for Sherry and it works for Ben, my other PM with 130 doors. And it just, it's very attractive for them.

So you said it's 100% commission. Wow. So but this new person, do they have some stipend until they—

Exactly.

Okay. Yeah.

Yeah. We say, listen, in month one, you're going to, you know, your portfolio is going to pay you about $17.23.

Right.

Sure.

So, yes, we have a, we have a base. That they— that slides down over time as they earn their— as they build a portfolio up.

So then is there some tension with enforcing the systems and processes that, that, you know, work with these property managers who are fairly autonomous in terms of their— they're managing their clients, their single point of contact, they're the ones that bring them on, they're the ones that collect the rent, all that?

Not as much as you'd think. So we don't have a pure portfolio style. We also have a leasing— we have a leasing department, we have an accounting department, we have a resident services coordinator department. Like, we have teams within there so our PMs can focus on the things that they do best. So it's not like, hey, good luck with your portfolio, hope things go well. It's not, not that at all. We are extremely process dependent. We're extremely system dependent. So they, they follow our processes and we do a lot of training. Around that. So it's not, it's not that hard because what we say to them on the front end is, to the degree you follow our process, you're going to be really successful here. To the degree you try not to, this isn't going to work. But that's why we have a VP of property management. You asked me about my number 2, so we've got our VP of property management. All the, all the PMs report to her, and her job is to make sure they know the processes, they follow the processes. She's got weekly one-on-ones with every one of them, so they do follow the processes because if they don't they're not going to work here.

Love it. This is so interesting. I don't know that I've heard you talk about this in detail before, but this is quite different.

Peter, they ask me boring questions. That's why you're a great interviewer.

All right. So I'm trying to get a picture here. So you've got a bunch of property managers. They are each managing 50 to 100 units. They're fairly autonomous. It's a hybrid style. So there's some element of portfolio, some element of departmental. Their pay is directly tied to the revenue of that portfolio. I'm assuming that's they're getting some percentage of the management fees that come in and the leasing fees that come in. And when a new owner lead comes in, there's some method by which you're distributing those leads among these property managers. Hey, who wants it? What part of town? What kind of client? You know, something along those lines. And it's just— I can see how a lot of things are lining up here, right? The, the property managers are going to be successful they have every incentive to do a great job for the clients because their income is directly tied to the success of their clients and the growth of their portfolio. I mean, imagine how nice for those property managers when one of the clients they've been working with says, hey, great news, I just closed on a fourplex. Beautiful. That's more money for me, that's more success for the owner, and that's no additional work for you, Mark, or labor costs for you. So that I could see how this is lining up a lot of It's sort of smoothing out a lot of problems that happen as you grow a management company. Now, no solution is perfect. I'm sure you've had challenges that you've had to figure out and overcome, but this is really interesting. This is not a model that I was really familiar with.

Yeah. Well, it's nothing we set out to do. It's just little improvement, little improvement, little improvement over many, many years. So this is where we're at today and it does work very well. I mean, I'm very happy with it.

And these are W-2 employees, the property managers, or the contractors?

They're independent contractors. They're licensed real estate agents. So that's the umbrella of, of me saying they're independent contractors. If I were in the real estate world, a lot of companies do sales. It's the same thing if you hire a sales agent, right? They still have to follow your processes. They do your thing. You don't just turn them loose. You're like, hey, here's, here's the forms we use, here's the processes we use. And they're just like a realtor. Yeah, exactly. So our folks are licensed sales agents, um, and they're— they, they operate under that model. It just, it's pretty easy.

Got it. So then, but, but the, the management agreements are still in the name of the brokerage, and if the property manager leaves, you still have those, you'll reassign them?

Exactly. We have an independent contractor agreement with, with our ICs and independent contractors, our PMs, and it's very clear that yes, the company owns the portfolio, right? You don't own them. They— and that's never happened. No one's ever tried to leave and take their portfolio with them. People always ask me that, well, aren't you afraid they're going to run off and start their own company and take that with them? And like, no, why? If we treat our people great, why, why would they leave? They could. I mean, sure, somebody could leave, but that's my job, right? Create a place that nobody wants to leave. And we've done that pretty well.

Yeah, and the reality is they're already— I mean, the advantage of going out on your own would be, oh, well, I'm going to eat what I kill. I'm going to be my own boss. I'm going to be the determining factor of how big my paycheck is going to be. But they already have those capabilities with the model that you've created.

Yep. And then that's the other little key component there. We're putting the piece of the puzzle together. The other piece of the puzzle is they don't go drive those leads. They don't have to generate leads. That's my job. That's the company's job. We, we give them the lead. Hey, here's the email inquiry. Here's the phone call. So they don't have to figure out how to market. They don't have to figure out how to generate leads. They do no marketing. That's what the company does. So that's an important component because if they had to go get their own leads, well, then yeah, then what? Do I have to give to them? But what I have to give to them now is, is we generate the leads for them.

And how do you decide who gets what lead?

So we have an individual who— the leads come to this individual, they disperse the leads, and it's completely the company's option on who gets leads and when they get them. So nobody has a right to a lead type of a thing, and that we distribute the leads. Some of it is simple, like geography, you know, where you are, where you manage. How busy you are, or do you want leads right now, and how you're doing with your current portfolio. You know, if you're overloaded and swamped and starting to drop balls, we're going to pause leads for you for a little while because you've got to be able to manage your portfolio. So it's completely our discretion.

Do you have some metrics you look at to determine how loaded any particular property manager is?

Yeah, yeah, we use what we call a performance evaluation sheet where we've got on a monthly basis, what, 6 main functions that we use big picture overall to determine how a PM's doing. Have we had any owner complaints in the last 12 months? What's their turnover time? What security deposit return time? Work maintenance, work order closeout time. So yeah, we've got some high-level metrics that if any of those— and we just use like a red or green system. So if they're red on any of those, that's gonna— we're gonna dig into that.

And is that, that data that make— that makes up that spreadsheet with the red or green, is that all being kind of manually collected and put in there by somebody, or do you have some cool like systems that are doing that automatically?

It's, it's pretty manual. No, that actually our PMs fill it out themselves on the front end, so they're the ones that track it. They bring it to their, their one-on-one at the end of the month, and I think it's a great way to do it. Yeah, so they know how they're doing before we know how they're doing.

That's awesome. Thank you for sharing that detail kind of behind the scenes. So maybe just to close the loop, So when a PM does get an owner lead, what are some of the ways that they're vetting that owner to make sure that they actually want to work with that owner and that owner is going to have the right mindset? Because I know you've talked about, we're not your assistant, Mr. Owner Client, we are the experts and you need to be willing to take our advice. Like, how do you suss out some of those details?

Yeah. So the first thing is, so if you called me, right? So you're a prospective owner client and I'm a prospective property manager. Most PMs, the first thing they say to the prospective owner client, like, oh, hey Peter, how you doing? Hey, so tell me, tell me about your property, Peter. So that's the first thing most of us say. That's wrong, right? Don't do that. Here's the first thing I need to say to you. Hey, so, so Peter, tell me a little bit about you. And you're like, oh, well, my property is on— and I was like, no, no, that's great. I do want to hear your property information, but tell me about you, Peter.

I love this.

So because I'm, I'm not vetting your property yet, I'm vetting you. I'm trying to determine if I want to work with you. One of our philosophies is we can manage almost any property if the owner is right. That's one of our little metrics there. So I want to know about you. And then we're going to have a conversation. We actually have a doc that our PMs are filling out, basic stuff, property address, all this kind of stuff. But at the end of this doc, we have 4 questions, 4 yes or no questions that the PM must check yes or no. To decipher about you. These are kind of 4 filters. So question number 1 says, is the owner-client financially stable? So if you say to me, Peter, hey, Mark, if you don't get this thing rented by next week, I can't make my mortgage payment, you're not financially stable. This isn't going to work.

Or— Yeah, so I got to pause you right here. So I love this, by the way. I— let's say just like you said, I call, I'm the owner-client. You say, hey, tell me about yourself. We do a little bit of this. And then you say something like, Hey, just so you know, from time to time rent payments don't come in on time. Would it be a problem for you if the rent was delayed by a month? And I say something like this. Yeah, that actually would be a big problem because then I wouldn't be able to pay my mortgage. What do you say then? Do you say, okay, great, have a nice day. We're not going to be able to work together. Click. Because I always feel the social pressure to, like, follow through with the rest of the conversation, even if I've hit what I, what I myself 3 minutes ago would have said, oh, it's a red flag. We never want to work with a client like that. But when I'm actually on the phone, I find it really difficult to actually stop the conversation and literally say no.

I think for us, what we're going to do is play that out to what our recommendation is, because you said this earlier, we're the expert, we're going to tell them what they need. So what we would say in that case is, okay, well, what you do want to make sure you structure is have a reserve set up with 3 months of rent as a reserve. Set up. Like, that's what you want to have done. Now, if you're like, well, no, I, I'll never make my payment, then we say, well, eventually, if you own real estate long enough, your tenant's going to pay late. They're going to. So how are you going to handle that if that happens? That's what the conversation would be. And if they're like, well, you better not let that ever happen, Mark. Well, I can't guarantee that, so we probably wouldn't be a good fit because I don't think we would be able to meet your expectations, Peter Lohmann.

Right?

So we turn it around. It's not like a You're a bad owner. It's a, you know what, I don't think I'm gonna be able to do the job for you that you need me to do for you. So it's probably best if you just find somebody else. So that's question number 1. Question number 2 is, is the owner-client emotionally stable? That's a little bit harder to discern in the conversation. My recommendation is don't ask the owner-client that question verbatim. You don't wanna ask about their emotional state. But you've talked to crazy. I mean, you've talked to prospective owner clients that you're like, "Man, this guy is just nuts. I don't want to work with this person." So we've got to discern that. One of my PMs asked me, they're like, "Mark, how do I know? How do I know if they're emotionally stable?" My go-to response is, "Well, if they cry on the first conversation, that's a deal killer. Or if they own more than 2 cats, you just got to cut them out, Peter. You just got to cut them out." So that's question number 2. Question number 3 is, are they realistic in expectations? And that means realistic with what the rent's going to be, realistic with what our communication timeline is, realistic with how often we're going to be here for them. Like, everything has to be realistic. Or do they expect the property to rent for higher amounts in the current condition, which is terrible? And when they call, you better pick up immediately. And they want you to call them 3 times a week with updates. Are they realistic in expectations? And then the last one is, are they willing to trust us as the expert? Are they willing to trust us as the expert? So that's when I give them advice. Do they say, okay, yeah, let's do it? Or do they say, no, no, I know you're telling me I should repaint this bedroom. It's good enough, rent it as is. Oh, so you're not trusting me as the expert because it's not a manipulation thing, but it's a, I know what I'm doing. Here. And so those are our 4 criteria. If we can't answer yes to all 4 of those, then my PMs don't have permission to bring on that account.

Powerful. That's powerful. I love those 4 questions. Okay, so I've got a great picture now of how that works. You're bringing on owner clients, they're being distributed to the various property managers. I want to ask you about churn. I think I heard you, you had a great line about churn. You said something like 5% is always going to churn no matter what you do. 5% is going to churn if it's a hot sales market. And then I don't know, I'm probably getting that a little bit wrong, but I think you've got some really clear thinking around this topic. So I wanted to give you a few minutes on it.

Absolutely. This actually, I think this is next week. Did you like— are you spying on me, Peter? Because I think this week our video is on this topic. So yeah, what we always say is 10% of your owner clients are going to leave every year because life happens. People move back, their sister's going to sell the house because she's a real estate agent and there's a death in the family. Like, you're going to lose 10% every year. It happens, happens with this hot sales market, as hot as it's been. I mean, it's not hot now, but as hot as it's been the last decade, I think that attributes another 10%. So best case scenario for most companies over the last decade is you were losing 20% of your doors if you were doing great work. Now, much above that, you got to really ask yourself what's going on. The best way to avoid churn is to do what we just talked about, which is set expectations on the front end, right? Because most of the churn that happens in most companies is because of improper expectations. The owner was like, hey, you're going to call me before you spend any money, right? And I'm like, I want to close this. I'm like, I'll do my best.

I will.

I will. I'll do my best with that. And then I don't. Now they're mad and now they leave. Well, whose fault was that? That's my fault. Because I didn't vet them properly. I didn't set proper expectations on the front end. So I just measured ours the other day. Our churn for this year is in the single digits, so we're under 10% churn. Now that's with the sales market kind of coming out of a hot sales market. But why is our churn so low? I will also tell you that this, this isn't as impressive. Our closing ratio on the front end is terrible. If we bring on 100 leads, we don't close a high percentage of those leads. But the benefit is we retain the people we keep. So I would rather grow slower and steadier with good clients who make the business easy, because our owner clients are the most challenging part of this business. If you have got difficult owner clients, you're going to drive yourself crazy. Some of the best decisions we've ever made are clients that we have declined to work with. So if we get a good base of owner clients Everything else falls into place. So that's why I think, yeah, you've got to measure that churn on an annual basis.

Yeah, I love that. And we measure churn, we look at both our unit churn and our client churn separately because we do a fair bit of small multifamily. And so we have about 2.1 units per client on average. So I do look at those separately. We had a brutal year for churn in January. We lost over 100 doors. Across a couple clients. So we've been digging out of that hole. But yeah, I think that's amazing that you're only in the single digits for this year. That's, that's a testament to the—

yeah, let me, let me make one other comment on this. This is another one, like a philosophy for us, right? You just said you lost a couple clients with a couple hundred doors. How many owners were the— were they?

It was like 3 or 4 clients that totaled up to like 100, 120 doors. Yeah.

So another philosophy for us is we don't like big owner clients. That's a huge negative for us. When someone calls like, hey, I got 50 doors, like, I immediately am like, uh, I, I probably don't want them because they're gonna probably ask for more stuff because they're big. They're going to ask for exceptions, they're going to expect more from us, and eventually they're going to leave. Every client you have is eventually going to leave you. And when that client with 100 doors or 50 doors or even 25 doors, when they leave, it's going to be a punch in the gut. I'm much happier to take on ones and twos and ones and twos than the guy with, with big portfolio. I don't like that. And I know that's counterintuitive. It's like, oh, if I can get this guy with 50 doors, that'll make such a difference. You know, one else is going to make a difference when he leaves and he's going to leave eventually. He's going to leave. So I would prefer not to take on the big owner. And I think they leave faster, those bigger clients, because it's a numbers game for them. They're investors. Everything's a number. So if they can find someone to shave 5% off the management fee that you're charging, of course they're going to do it because it's a huge reason to leave. So that's something else that I like the way we've built our business. Like, we've got incredible stability. We've got a couple owners who are a little bit larger, but if an owner leaves, I'm not losing sleep over it tonight. So the owners we have, it creates a safer business, it creates a more valuable business because there's no risk of a big owner-client leaving and taking 20% of our business away.

It is more valuable. That's factual. I just shared in my newsletter an article by a business broker who specializes in working with property managers, and there's literally a formula they use to discount your business's value if you have too many large clients or too many units per client on average. So that's, that's real. And actually, there's a little bonus if you have a very low If you're 1-to-1, it actually goes up. There's like a multiplier.

That's another metric that PMs should be utilizing to measure, right? Owners to doors. Like how many— that should be in your dashboard. You should know that all the time.

Awesome. So I want to highlight one more thing that I love from some of your videos and podcasts, and we'll wrap. So you said your job as a property manager is to make problems go away fast. And I love that you add that little piece on the end because that actually is really important. So I think a lot of people, when they get into the business and they start growing and they're dealing with owners and problems come up, they're very interested in— my, my COO calls this right fighting. They want to be right. They want to, they want to show the tenant, you know, no, that's not what it says in your lease. And they want to show the owner You know, actually it says here where you signed, right? And they want to, you know, just— they have this urge for justice and for not losing a single dollar if they weren't in the wrong, right? And especially when you're acting on behalf of an owner-client, that's not always the right instinct. So I'd love to hear you share kind of how you came to that philosophy and the way you think about it.

We couldn't be in business for 45 years if we didn't have the philosophy of our job is to make profit. Problems go away. And by the way, you said fast.

We—

that the phrase make problems go away, we've had that for 15 years. We added the word fast about a year and a half ago because we realized that that's a big part of it, right? That's our job. To the extent you can make problems go away, you'll be successful in this industry. I believe that. To the extent you can't, right, to the extent you bring more drama to the situation, you want to argue more, You want to fight, you want to go to court, you'll fail. You will drive yourself crazy, you'll drive your people crazy, and you'll burn out. So from a sustainability standpoint, we have to make problems go away. And that means sometimes you don't win. It means a lot of times you don't win. Sometimes it means you write a check when you did nothing wrong, and you got to say you're sorry when you did nothing wrong. And as you just said, for a lot of us, that's really hard because it offends our sense of justice. But they snuck that cat in, Peter, It's the lease says no pets. Okay, so what are you going to do? So are you going to go evict this tenant for getting a cat in, or are you going to say, hey, that's fine, sign the pet addendum, pay whatever, and let's just move on? But Mark, they lied to me. Like they said they had no cat and it was in the window. Doesn't matter. Make the problem go away. And we bring that into everything. So when a problem comes to the PMs, they know that's their job. Job number one is make the problem go away. How can you make the problem go away? Fast. And oftentimes that means, as you said, we can't win. We're not going to win. I'm not interested in winning. I'm interested in getting a good night's sleep and doing this business again tomorrow.

Here's a little psychological hack that's made it a little easier for me. The NARPM accounting standards, which everyone should be on, by the way, has an account code, a GL code. It's called owner and tenant concessions. Owner and tenant concessions. This code is to be used when you give something away to make a problem go away. You waive a late fee, you credit back an owner for a maintenance call, you agree to not charge an owner a lease renewal fee because it was only for 8 months instead of 12 months, even though your PMA says anything over 6 months you should get the fee, right? That little GL code, just budget, put a budget to it every year. Just say, you know what, 2% of revenue, owner and tenant concessions, half a percent of revenue, whatever it is. And then when it comes up, you're just like, yeah, we budgeted for that. It's in the budget. That's what it's there for. Code it to owner and tenant concessions. Let's go have a beer.

Yeah, that's wise. Well said.

That's the way I think about it. It's just, it's just cost of doing business.

It is a cost of doing business. That's right.

Awesome, Mark. Well, this has been great. Thank you so much for coming on the show. For folks who want to follow along with you and keep up with PMBuild and Grace Property Management, where can they do that?

So PMBuild.com is our URL where we put all of our property manager training stuff, videos, downloads, everything you can imagine is there. Our new podcast is called the Property Management Business Podcast. So we're excited to be putting that out there. And if you kind of want to see how we do our property management company, for Grace Management. Our, our website, our URL for that is rentgrace.com. You can check out how we have structured our business.

Awesome. Thanks so much, Mark.

Appreciate it, Peter. It's been fun.

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.