I Answer the 20 Questions Every Investor Should Ask a Property Manager | Ep 109

James: This week I'm putting myself in the hot seat and answering some property management questions because, well, I think it's only fair that people who are looking for property managers hear answers to these types of questions on the Furlo Capital Real Estate Podcast, where we dive into the intricacies of passive real estate investing, which sometimes means hiring a property manager to do it all for you so that we can equip.

People to invest wisely in both property and people so that together we can build wealth while improving housing. I'm James, and this is my wife, Jessi.

Jessi: I can't wait to interview you.

James: Yeah,

Jessi: I love asking questions. This is great.

James: I know you're, you. It's like a

Jessi: pop quiz.

James: That's one of the reasons why I gotcha as my co-host.

Yeah. So what I want you to do is, um, I wanna say, pretend like you're a property owner, but you don't have to pretend you actually are. Yeah.

Jessi: I

James: actually

Jessi: am. And

James: you actually manage, but put a position like I'm looking to hire somebody. Yeah. Yeah. And so what I've, what I have done is I have created this guide that you can go to our website, furlo.com and you can download that has, um, questions you can ask someone when you're thinking about hiring a property manager.

Yeah. And I kind of broke it up into two parts. The, the first part is like, these are the core questions and mm-hmm. There happens to be 20 of 'em. I actually wasn't aiming for 20. It just, that happened to be it, and it came out to nice, strong number, number, and I was like, all right, this is what it is. My borderline was like, do I need to take one away or add one just to make the point?

No, but I didn't.

Jessi: Twenty's good.

James: And then after that I have part two, which is more like, um, just a vault of, it's over 130 other questions that can dive down into specific areas.

Jessi: Sure.

James: But for right now, I'm gonna have you focus on those core questions only. Mm-hmm. And ask me. Yeah. I've seen the questions ahead of time.

You've studied, so, so I, I think I can, I think I'll do all right on the answers for, for them. That's what I'm gonna have you do, have you ask it as if you are interviewing me and we're kind of gonna roll through them and, uh, yeah, just Awesome. So if you can hear the answers that I would give to some of these.

Alright. Yeah. Which I also think feel free to clarify, you know, follow up, you know, do your thing.

Jessi: Sure.

James: Yeah.

Jessi: And,

James: and plan

on,

Jessi: I mean, if someone were to interview you then. This is probably what you would say. So

James: yeah,

Jessi: it's kind of a freebie interview with you. That's

James: the, that's the hope. Yeah.

Jessi: Yeah. All right.

So this first section, four questions

James: Ooh. Yeah.

Jessi: Is about ownership, mindset and authority.

James: Okay.

Jessi: So do you Yes. Or your principles, which is you.

James: Yep.

Jessi: Do you own rental property of your own and are you manning managing any of your own units?

James: Yes, I do. I own a bunch. Uh, I own, uh, apartments and some commercial types of things.

I own some storage units or facilities, I guess. And yeah, we manage all of them. The only one we don't manage is one that is way out of town. Okay. And so I have someone else managing that, which makes sense. Otherwise, that would be really hard. We manage it as well, but yes. And I am the only principal, so.

Jessi: Okay.

James: Yeah.

Jessi: Um, have you ever had, this is a separate question.

James: Yeah. No. No.

Jessi: Have you ever had somebody else manage your properties?

James: Oh, yes.

Jessi: Like, other than being far away,

James: like the ones, yes. Um, at one point I did Right. Because as my, as my portfolio started to scale, I had all sorts of, you know, I was like, okay, like how am I gonna do this?

Yeah. And, and that was the original route that I went down was Yeah. Have other people manage it for me, so manage it because I knew that that would free me up from the day-to-day activities, let mm-hmm. Let me go off and continue to build. And so I tried that. Uh, unfortunately the manager wasn't a good fit for what I wanted to do.

And, and so, uh, yeah, eventually it just made sense for me to, to grow my own team. Yeah. So I could still free up my day-to-day time. Sure. Um, but essentially brought it all in house and then once I had that in place, it was like, oh, I should be doing this for other people as well. Sure. Um, 'cause I have all the systems, tools, resources in place, and so it just kinda makes sense to,

Jessi: to scale that way.

Yeah.

James: Cool.

Jessi: Uh, as we work together. How do you think about decision making authority between us?

James: Yeah. So in essence, I'm your day-to-day guy, right? So you are what I would call like the asset manager. You're thinking the big picture, the big strategy, uh, in terms of your investments and, and my role is to really make sure, like you don't have to worry about the day-to-day phone calls, worrying about tenants, the maintenance things, and when it comes to bigger things, like I'm gonna come talk to you like, hey.

Let's talk about the condition overall, what big improvements need to make sense. I even love having the conversations of when does it make sense to refinance or to sell, to, to trade up these kind of things to maybe 10 31, whatever it is. But that's kind of your, your role is like you're moving up that stack to free yourself to think more macro level in terms of your investing.

So I'm really, I'm the day-to-day guy.

Jessi: So what if I wanted to know about the day-to-day operations?

James: Um, yeah, I mean, if you can, uh, I like what kind of things would you be interested in knowing?

Jessi: Um, I don't know, like probably if, if a just if an issue came up or,

James: yeah. Okay. So we have in our portal, there's a couple different things.

A, you got the finances, so you could just see the, the income and expenses. Sure. But then we also track tickets. So when a tenant requests a maintenance thing, it shows up there and you can kind of see the status and what we ended up doing. And I

Jessi: always have access

to

James: that. Yeah, it's a 24 7 always on the main, not that I would check it

Jessi: necessarily,

James: but.

And I'll, I'll have that where, uh, and some owners set it up so they get alerts. Sure. Whenever those happen. Some don't. And so they'll actually say, Hey, I saw this from the tenant. What's the plan? What are you thinking? And my observation has been after a couple rounds of that, they stop asking. Right.

Jessi: I can, yeah.

I could see,

James: like, it's totally cool

Jessi: once I figure out how you deal with things and how you move forward with it. I can, I can trust that. Yeah. Okay. That's what you're gonna do typically. So

James: my other thing that I've observed is that if we have owners who had a, um, I would say problematic or a not perfect property management experience in the past,

Jessi: yeah.

James: Those tenants will actually reach out to the owners about whatever the issues going on, even though like, we'll have already introduced themselves, they're paying us rent.

Jessi: Interesting.

James: If they have an issue, they'll go to the owner. Yeah. And then usually I just tell the owner, yeah, just forward it to us.

And, and, um, and so we had that recently happen and, and now we're, we are actually over there today.

Jessi: So it seems like the. Communication between me and you is pretty open and you're accessible and

James: Yeah, and I'm like, and I'm on your team. Right? That's the, that's the way to think about it. And that's usually how I'll tell owners too.

Like, Hey man, like, uh, if you know,

Jessi: yeah, I care about this property because it's yours and I'm gonna,

James: yeah. And I've got, and I have that, that ownership mindset. 'cause that's how I think about things. Where, um, a lot of that things, the decisions I'm gonna make are gonna be very pragmatic. That's how I describe it.

There's that balance, right? Yes. We could absolutely fix this place up perfectly. Does that make sense to do it? Eh, probably not. Yeah. Could we try to maximize the amount of rent we could, but we gotta balance that with vacancy rates and things like that. And so. Yeah, that's, I manage it the way I want it, would want it to be managed for my own stuff.

And since I set the team priorities across everything, that's how it's,

Jessi: so this next question is, is perfect then. Can you gimme a few examples of decisions you typically handle independently versus ones you would escalate to the owner?

James: Yeah. So the, if you think about like there's the tenant side and then there's the maintenance side for tenant stuff, right?

If they're, if they're a little bit behind on the rent, I'm not gonna bother the owner about it, we're just gonna go through our process. Mm-hmm. If they get way behind, it's more of a check-in, Hey, FYI, they're not paying, here's the next steps that we're doing. And then on the maintenance side, if it's, uh, here's a really good example of one where we had tenants call about an electrical issue.

Mm-hmm. Like, Hey, we're just trying to flip on these lights. They're not working. And so we went out there, checked it out, couldn't figure it out right away. And I didn't tell the owners 'cause it seemed like a small thing. Once we were like, okay, this is. Beyond more involved my maintenance tech skillset.

Jessi: Sure.

James: We were go, I then had an electrician come out just to be like, Hey, can you come take a look? Mm-hmm. At that point in time, I gave an FYI to the owners. Mm. Hey, this is going on. Just so you know, I, I don't know the extent of the issue.

Jessi: Yeah.

James: The electrician came back, said, okay, what's happening is X, Y, Z.

So, uh, we need to, like, we need to re rerun these wires here. Mm-hmm. And so, um, at that point in time, I was like, all right, what's your bid? What's your quote? It was over the threshold that I had for the owners. Okay. And so then I reached out to the owner. I was like, Hey, do you want us to do this? Like, yeah.

You know, I don't have a choice in this case. Yeah, you kind of have to do this, but like. I waited to get permission from them, they said yes, then we move forward and they ended up rerunning it and it was all fixed.

Jessi: Awesome.

James: And in that particular case, the owners had enough monthly cash flow where we were just able to take it from that monthly cash flow.

They didn't have to put money in

Jessi: Nice.

James: Um, to get it done. So,

Jessi: and that, uh, threshold of spending is kind of predetermined

James: and Yeah. Yeah. I usually, when in doubt I say, yeah, make it lower, you know, like 500 bucks or something like that, just so

Jessi: they're in the know and

James: Yeah. Which that means most maintenance stuff we don't have to ask about.

Mm-hmm. But if it does get to a, like, I would put it into the repair category.

Jessi: Sure.

James: Um, that's when we get to call and then usually I'm like, eh, eventually they might decide the, to raise it to, you know, seven 50, a thousand, whatever, depending on their comfort level.

Jessi: That makes sense.

James: Yeah.

Jessi: So have you ever had a situation where you and the owner initially saw things differently and how did you work through it?

James: Yeah. Um. On occasion. Just one simple example. We had one where it was a, a new property that we had taken over. It was really interesting. He had had a tenant in there that was paying a lot

Jessi: Mm.

James: More than what the market could bear.

Jessi: Wow.

James: That tenant moved out 'cause she was going somewhere else.

Jessi: Mm-hmm.

James: I went ahead, did all the market research and said, Hey, here's where I think rent should be.

Jessi: Yeah.

James: Um, that tenant was renting it for 2,800 a month. My math was that the actual like market rent was like 2300 a month, which is like, you know, 500 bucks. Yeah. Significant. That's big. And so I was like, how say this is what I would recommend you, you come in at. And he was like, well, I was getting 28. I'm like, I know you were.

Yeah. But you're not. And so he was like, okay, well let's do 2,600. And at the time I was like, I, it's, and this is in the fall

Jessi: Yeah.

James: Where this is happening. I was like, I just, I'm, this might sit here a while. I'm like, but we can like. We'll do it for a week or so and kind of see what happens. And yeah. We got zero phone calls and so then he was like, okay, lower it to, you know, what should we lower it to?

I was like 23. And he was like, well lower it to 25. And then another week later we lowered it to 24. And then, and I think we actually had one bite at 24, and then another week later we lowered it to 23 and all of a sudden we got phone calls.

Jessi: Yeah.

James: But because we, we, we now bumped into that Thanksgiving, Christmas time.

Mm-hmm. I was like, ah, like, I wish we had done this a month ago. Right. Because we, we would've had it filled. And so that was just one of those in that situation, you know, I was willing to let it ride. Mm-hmm. It seemed relatively low risk to, to do his

Jessi: Yeah. To try it,

James: you know. Yeah. To try out his thing. Hmm.

And so that's what we did. Uh, um, yeah. And, and usually for like maintenance, he type of things. Mm-hmm. Uh, there's other things that we'll do where. Uh, you know, if they have to put money in mm-hmm. Sometimes owners are like, dude, I can't afford this. Like, we can't do that. Yeah. And, and so we have to have hard conversations there, but like, well, how's this thing gonna get funded?

Sure. Sometimes I'll say, well, I'll tell you what, like, I'll fund the repair mm-hmm. And then you can just pay me back with the cash flow over time. Mm-hmm. I, I have done that in special situations. Sure. Sometimes I charge interest. Yeah. Um, for it kind of depending on what it is. 'cause sometimes you man, like, we just have to do the repair.

Jessi: Yeah.

James: Um, or often give it to them. Be like, Hey, if you want to do the repair, that's cool. Like, that's one way to save money as long as you do a good job. Yeah. So,

Jessi: so it sounds like you're willing to work with owners. It's not just like a cut dry, here's how I run things. Do it or don't. Correct.

James: Yeah.

Jessi: You're willing to work back and forth and try different things.

James: Yeah. But honestly, 80% of what we do, we don't have to ask. It's just the normal operation stuff.

Jessi: Yeah. Uh, all right. The next section is economic performance and incentives.

James: Okay.

Jessi: So at the portfolio level, how do you track performance metrics like vacancy and collections?

James: Um, it's all built into our software where we can see Yeah.

You mentioned

Jessi: Thiss portal.

James: Yeah, so our software, you can kind of track, uh, you can just see what people still owe money when payments have come in. And so we can, they've got some easy dashboard things that show our percentages kind of cool that we have. Um, I also look at the number of open, uh, work orders tickets that we have.

That's not necessarily a hard metric, but, you know, my goal is always to get that zero.

Jessi: Right.

James: Never does, but, um, you know, that's what we're trying to get to. Mm-hmm. Um, those are just some of the really easy top line metrics. One that I want to start implementing is the new software that we're using for communications.

Technically tracks like how fast we respond to stuff. Oh. And so, um, yeah, we're just getting started on that one. So I don't have

Jessi: Interesting.

James: Uh, it's just, it's, it's still very variable 'cause there's not a lot of data, but over time, I, you know, in six months to a year from now, it'll be a lot more stable and we'll be able to ask questions like, okay guys, what do we need to do to, to lower those times to some reasonable threshold?

Jessi: Sure.

James: If you know, or maybe not. Maybe we'll be awesome. It seems like we'll have to lower it, but

Jessi: what metrics do you personally pay attention to each month?

James: Um, yeah, I care a whole lot about, uh, when we hit that fifth of the month, how many people still owe money? That's

Jessi: so late payments.

James: Yeah. That's probably my big one.

Jessi: Or on time payments, I guess.

James: Yeah. You're just

Jessi: tracking

James: payments. I care about late payments. That's the one I'm watching.

Jessi: Yeah.

James: And it would have that, that's my first slot on my dashboard, so I see it every time I open it up. That's the big one that, that I care about. 'cause you know, that's all this if Right.

I gotta get on. If

Jessi: you've got money coming in, you can take care of most other

James: mm-hmm. Issues.

Jessi: Mm-hmm.

James: And we're sending out reminders and all the fun jazz.

Jessi: Cool. Uh, can you walk me through your standard fee structure?

James: Yeah. Um, so we charge a percentage of whatever the collected rent is, and it kind of depends on the, you know, the size and location.

And even the type of one that it is. So I've charged anywhere as high as 12%, and that might be for a house that has rented out by the room that's, uh, you know, a ways away.

Jessi: Sure.

James: And, um, all the way down to say like 6% for, it's kind of a hands, hands-off, commercial type of situation where it's got some long-term tenants that are Yeah.

That are locked in and you do a

Jessi: lot less,

James: it's pretty straightforward on that one. Okay. And so, um, that's kind of the gamut for it. Uh, I've, yeah. And then in addition to that, there are some one-time fees. Like there's a, like a getting started fee for when we, you know, when we put 'em into the system.

Jessi: Yeah.

James: And then when we're signing new leases, we'll charge for that. Okay. And, um, which there's a difference between a residential versus a commercial. 'cause a commercial takes a lot more effort, but it also tends to, you know, select in for five years or more. And so, um, so we'll charge differently for that. And then, um, and then it's just, I don't know if this is a fee per se, but I have an in-house maintenance person.

Mm-hmm. And so when he goes and works, like we just have an hourly rate that we'll charge for that. Um, but yeah, those are, that's pretty, which I think's pretty standard.

Jessi: Yeah.

James: For, yeah.

Jessi: That was my next question was like, compared to other property managers, are you in the ballpark of what they charge? Yeah, totally.

Are you?

James: Yeah. Yeah.

Jessi: High end. Are you low end? You're, you're kind of in the mix of

James: everything. I'm probably medium high. Okay. Is my guess. I'm probably not average. I'm probably slightly above average is my would guess.

Jessi: Do most small property management companies have everything in house? Or do they like hire out contractors to fix stuff and, um, do other like, I don't know.

James: No, I think, um, I think a lot. I don't know. When you say small, there's kind of. Something magical happens around the 40 unit mark.

Jessi: Ah,

James: because then you have enough revenue coming in that you can hire someone Yeah. To help you out. And there's usually, usually enough work where you can actually hire a technician almost full-time.

Jessi: Okay.

James: And so, and so that's usually at that point in time, they're trying to do most of it in-house. Mm-hmm. But they're still hiring contractors for like, for doing the cleaning Sure. And things like that.

Jessi: Okay.

James: Um, big turns, which Yeah. We're like, I dunno, we're that small to medium-ish size, I guess.

Jessi: Mm-hmm.

Are there any situational or less common fees that tend to surprise owners if they don't ask upfront?

James: Hmm. Not for me.

Jessi: Because you, you kind of disclose all those different fees up front.

James: Yeah. And actually the way that I've set it up is when you get the property management agreement, there's a, there's a preamble, there's a one pager summary at the beginning where I'm like, here's a.

All the fees, here's how they all,

that's

Jessi: kind of nice.

James: Kinda work out. And it was honestly, it was for me, I was like, okay, what am my lawyer draft here? What am I committing to

Jessi: charging here?

James: And so I put it all on one easy page to just to real quickly see what they all are and then the future pages, you know, say it all in the, the legal way.

Jessi: Okay.

James: And so there aren't any surprises that, um, that I have just 'cause I didn't want any surprises. Yeah. And obviously that's a lot of the, I'm a very much golden rule type of thing where I'm like, how would I want myself to manage

Jessi: Right.

James: My properties. So that's how I set it up. So try to have a straightforward fee structure.

Try not to have any surprises 'cause I don't want that. For my own stuff.

Jessi: Yeah. So how does the free fee structure work during a vacancy period if you're charging a percentage of collected rents?

James: Yeah. So I have a minimum fee that I'll charge. Oh, it's usually somewhere in the 75 to a hundred bucks a month, which honestly only matters for single family homes, has been my observation,

Jessi: because typically you've got other units that are covering.

James: Mm-hmm, mm-hmm.

Jessi: Yeah. Okay.

James: Yeah. Yeah. So yeah, it's a per property.

Jessi: Okay.

James: Uh, flat fee, which I don't, maybe that's not smart on my part, but, um, yeah, I,

Jessi: I mean, the goal is to have it rented to not have it vacant for a long time, so,

James: yes. Yeah. I make, shouldn't have to worry less, but like, yeah. So like for a single family home, that's one where Yeah, I'll make like 75 bucks a month.

Mm-hmm. And we're actively trying to, to do stuff and to spend time and energy on it. So yeah, I don't make any money during that time. Um, I didn't, I charge a fee for leasing it, which I do charge, and that's, I'm like, that's where I want to make my money. And I honestly. If I take on a property that has some initial vacancy, I don't actually charge anything for those for those months.

Wow. Because it's like, you don't have any money.

Jessi: Right.

James: So I don't wanna be that guy.

Jessi: Yeah.

James: And so I'll usually wait, um, okay. To do it. And I've even had it where it's like, again, we had, I had this one owner where he had a tenant who just as we took over, she moved out.

Jessi: Mm.

James: And, and so it was like, okay, we had to do, uh, cleaning.

Mm-hmm. And, you know, all this stuff,

Jessi: figures.

James: And, and he was just, he was in a situation where like, she sent him the rent, which was fine. And, and what I ended up doing was like, I just paid for, I fronted the money for the cleaning so that they could get in there and then they get paid. Mm-hmm. And then, um, and then I just had a bill that was kind of just outstanding.

Jessi: Sure.

James: Um, there, and then once he got his tenant, I was like, all right, um, yeah,

Jessi: this is due.

James: And even then I made the decision to not. Pay it all right away. Mm-hmm. Because then he would've had zero cash flow.

Jessi: Yeah.

James: And I was like, ah, I just, that doesn't feel good either. I know. He is like, he's been hurting.

Jessi: Yeah.

James: And so, um, so I'm like, nah, that's okay. I can wait a couple

Jessi: months. You're flexible when there's vacancies and you're onboarding.

James: Mm-hmm.

Jessi: Mm-hmm. All that makes sense. You can't do that that the time.

James: Yes.

Jessi: It seems like.

James: Yes.

Jessi: Correct. 'cause if you, if you did that for everybody all the time, like you'd be floating everybody,

James: you know Well, right.

And once a tenant, once a unit has been filled and then a tenant moves out, it, it, I have a combination of I have a reserve.

Jessi: Mm.

James: And I can take that last month's cash flow and be like, I'm just gonna, like, I'm not going to pay it out. I'm gonna hold onto it. 'cause we're gonna pay for all the other stuff.

Yeah. And so, um, so it's not as bad.

Jessi: Yeah. And you do, you tend to find that, um. Vacancy rates are pretty low with the properties that you manage. And so it's,

James: I was doing the math and mine's about 7%. Okay. Which honestly is average for Oregon right now. Sure. So I'm, I'm normal.

Jessi: You're in the, in the range.

James: Yeah.

The hard part recently has just been that rents have been flat to declining.

Jessi: Mm.

James: As a landlord, that just hurts to be like, oh, I'm not getting as much less. Yeah.

Jessi: Expenses are

James: going up still. I'll list it for the same amount as what I had last time. Mm-hmm. It just sits a lot longer.

Jessi: Yeah.

James: And I'm, I'm, I don't want to lower the rent 'cause I like the income.

Jessi: Sure.

James: So that's just been hard, but you.

Jessi: All right. Third section out of six.

James: Six,

Jessi: we're getting there. Uh, tenant quality and leasing trade-offs. How would you describe your tenant screening philosophy?

James: Oh man. Uh, I want responsible tenants, which I define three ways. They pay their rent in full on on time.

They take care of the property as if it was their own. And then they communicate respectfully with myself and other tenants. And so we are looking for people who. Are responsible, and we've got different screening criteria that help them measure those things. Mm-hmm. So like, we're checking their income, we're checking their credit, we're checking their background, we're talking to a previous landlord mm-hmm.

Where we're spending time talking to them mm-hmm. And getting a feel form. And so, um, and then we just have a very, like, it's a yes no type of check, check sheet on whether that, did they do this, did they this? And, um, so that's what, that's what we're looking for.

Jessi: And is that, uh, primarily you or a different team member going through those parameters?

Like how I, I guess how does your team d out the, that process?

James: Yeah, great question. So we. I've, so there's different ways to structure management companies. Some companies, um, and I just think this is especially the larger ones, what they do is they go, they have an person who's in charge of a portfolio of properties and they do the, the screenings, everything.

Mainten

Jessi: property

James: properties. I mean, well they don't necessarily swing the hammer, but like they, they do all the communication. They, they're the, the point person

Jessi: Okay.

James: For that property. And then you have the other structure, which is more of a team structure where you might have, uh, SMEs, subject matter experts.

Mm-hmm. So you have and person who's good at tenant marketing and screening mm-hmm. You have and person who does maintenance coordination. You have and person who answers the phones and, and, and does a lot of the communication back and forth. Mm-hmm. I am trending towards the team model. Mm-hmm. And that may change where I actually have clusters Sure.

In the future. Um, but I like that team model. 'cause you just have, you get multiple eyes on things. Yeah. So I am not the one anymore who is calling. And screening tenants. I'm checking on the work and approving it. Yeah. Yep. But, um, I don't, but they, they follow the process that I've created and the whole checklist system that I have.

Sure.

Jessi: Yeah.

James: And we can check in every morning and go, where are we at with Soandso?

Jessi: That's awesome. Uh, so when you're leasing a unit, how do you balance speed versus tenant quality? 'cause I, I imagine those processes take time.

James: Yeah. And that is a balance. 'cause vacancies are like, that's the death and nail of investing.

Mm-hmm. You lose so much money during a vacancy. Yeah. That it's like, man, what do we gotta do to fill this thing?

Jessi: Yep.

James: But

Jessi: you don't wanna

James: put anybody in there in there. Not just physical vacancy. There's economic vacancy as well. So you don't want a tenant who's, yeah. They're in the unit, but they're not paying the rent.

Jessi: Yeah.

James: Or they're breaking things. Right.

Jessi: Causing problems

James: and taking care of it. Yeah. And I tend towards, I want the quality tenant. 'cause if you get a good one in there, like it could be great for at least the next year, potentially the next five to 10 years. Yeah. And so. I, so it's really like setting that rent is the trick.

Your screening criteria should always stay the same. Mm-hmm. Don't change that. Yeah. And if you're not finding anybody, the tr the answer isn't, well lemme just lower the income requirement. Oh, okay. The answer is, let me lower how much income they need to have by lowering the rent.

Jessi: Yeah.

James: And so that's the, that's the trick.

Jessi: Mm.

James: And um, and, and that's what I'll do. Mm-hmm. And I'm usually like. I'll be relatively quick to change it. Mm-hmm. Like, I'm not gonna wait. I most, I wait a week before. Okay. Um, if I'm like, man, I'm not getting any, it's all about the number of leads. Like if I've got people who are asking questions like, all right, the price is where it needs to be.

Mm. I'm just looking for the right person. Mm-hmm. But they gotta hit my screening criteria. Right. And that's for multiple reasons. Number one, they're there for a reason because this is how I know someone is a responsible tenant. But then number two, if I change it up just to fill it, that potentially opened myself up to a discrimination issue.

Yeah. Because I'm not treating everybody the same.

Jessi: Yeah.

James: And so I kind of, we just treat everyone the same.

Jessi: Yeah. Use the same criteria.

James: It takes, as long as it does same process. If we're not getting the kind of leads that we want. Yeah. We just change the rent,

Jessi: let's say the rent.

James: Because smart people like deals.

Right? Sure. So they see it. Sure.

Jessi: Let's say the rent was set appropriately. About how long is that process from like this, this unit became vacant to It's filled.

James: Um, it depends

Jessi: on average.

James: Ooh. On average, um, it's gone up over time. It's probably somewhere between, it's probably like two-ish weeks.

Jessi: Okay.

James: Is my guess.

It's kind of weird. So we've got it set up where it's like. I, I kind of, I prime tenants when they first move in to say, Hey, you might gimme your 30 days notice. Mm-hmm. And this is your move out date, but you might physically be out of there sooner.

Jessi: Mm.

James: Let me know when you are actually out of there sooner and that's when we'll aim to get it rented.

Jessi: Oh, okay.

James: And so we've had it where people pay for like the entire month. Mm-hmm. But let's say they're out on the 20th and I know that we get cleaners who are in there on the 21st and the 22nd. Mm-hmm. We've been setting up tours ahead of time.

Jessi: Mm-hmm.

James: And then a lot of times what'll happen is we've got someone who's like, okay, they're ready to move in on the first and technically it's the zero vacancy.

Yeah. Because, and what I'll tell them is, Hey, if I get someone to move in ahead of time, I'll refund you whatever that was. Sure. And, you know, and sometimes I do refund them two, three days. Yeah. And which like, you know, we just include that as part of their returning the deposit mm-hmm. Piece, you know, and it works out really well.

Yeah. And so, um. You know, that doesn't always happen. Sometimes tenant are like, no. Like they either don't give the 30 days or, uh, they're just like, no, I don't wanna be disturbed. Mm-hmm. Which I'm like, ah, man, I really wanna give a tour. And I also set 'em up where I'm like, the way our process works Yeah. Is I'm only giving one or two tours.

Right. Because Yeah. People are already applying, we're already having the conversation and then I'm taking 'em inside. So by the time we get to, like, they're pretty committed. Yeah. We're not doing open houses and things like that. And so most tenants are like, oh, okay, I get it. If you're only doing one or two, cool.

Jessi: Yeah.

James: So that's what I try to do to minimize it.

Jessi: That's awesome.

James: It doesn't always work, but, you know, and time of year matters, like in the, in the wintertime, especially between Thanksgiving and Christmas, I'm like, dude, it my civic the entire month. It's just how

Jessi: it's, yeah. But there's, people are not motivated to look, look for a place right.

Then. Yeah. Uh, so are there any situations where an applicant technically qualifies based on your criteria, but you still decide not to move forward? And what drives that call?

James: Um. As long as the fair housing people aren't listening sometimes. Um, uh, yeah. Um, it's, we've had situations where, I guess the way that I've phrased it is if we, so we'll have people, you know, we, we do an ad.

Mm-hmm. They'll inquire, we go. Awesome. Step one is to apply. Lemme know if you have any questions. They usually ask questions, and then after they apply, our very next step is to set up a phone call with them. Mm-hmm. And just ask questions. And really what we're doing is we're just clarifying what was inside of their application.

Mm-hmm. Hey, just wanna make sure it is just you two. Mm-hmm. Do you have any pets? You said you don't smoke. Does that include cigarettes, marijuana, and vaping? Mm-hmm. You know, tell me about what would your, is there anything I need to be concerned about?

Jessi: Mm-hmm.

James: On a background check. Tell me what you think your credit score is.

You know, stuff like that.

Jessi: Mm-hmm.

James: Um, we're also doing research on like, what attracted you to this property? Where did you see this property? You know, that kind of stuff. So we just can get a handle line. And, um, sometimes in that conversation we'll walk out of it. We still, we always walk through the process.

Jessi: Mm-hmm.

James: It's just a question of how, um, man, I got something in my throat. It's just a question of how, um, how, I don't wanna use the word strict, but how, um, how in depth we're gonna change chase something down.

Jessi: Mm-hmm.

James: You know, if they, I don't know, sometimes they might say something where, just use an example.

Maybe they say they don't smoke, but there's something about it. Mm-hmm. I don't know. They gotta raspy voice. I don't know.

Jessi: Yeah.

James: Where I'm gonna spend a lot more time going through their Facebook page and looking at all the pictures and looking for evidence.

Jessi: Interesting.

James: That kind of stuff. And sometimes, honestly, we have a great conversation and I go, oh yeah, you're, you're fine.

Jessi: Hmm.

James: I go to the Facebook page, I surf it and go, yep. I kind of. It meets how that conversation went. Mm. And so then I, uh, you know, we move on.

Jessi: Hmm. So you definitely rely much more on your process than on your spidey sense, if that is a way to call it that, because that's trackable and legal and all those different things.

However, if something does, if something does seem like a red flag, you'll look into it.

James: Yeah. Our, our screening criteria is set up in such a way where we could always find something if we need to. Sure. 'cause we, 'cause we look at all the things that matter.

Jessi: Yeah.

James: Now I remember back in the day, you and I had a situation where there was, how did it work?

It was a boyfriend, girlfriend, another set of friends

Jessi: mm-hmm.

James: That happened to be a boy and girl. And then that girlfriend's mother was moving in.

Jessi: Mm-hmm.

James: And they had two ESA animals mm-hmm. As well. Yeah. And the mother, something like disability wise about her or something like that. As well. And I was like, holy cow, we've got the disability thing.

And this was a three bedroom place, so technically you can have up to seven people. And um, but then it was only one bathroom. And technically if you only have one bathroom, you don't necessarily have to rent to multi-gender if they're not married or a family. Mm-hmm. Like there was also this weird stuff, but then there was the age thing and like, it was just a discrimination, like, oh my gosh.

Jessi: Yeah.

James: And so that was one where they were like, oh, I remember we had our three times criteria for that.

Jessi: Mm-hmm.

James: And they like barely were over the line

Jessi: Yeah.

James: With five people. And I just remember them like, oh my gosh. Like, that inherently didn't feel right to me. Yeah. To which I was like, something's wrong with vice screening criteria.

Like I need to re-figure out the, the income thing. Three X is really simple. It's easy math, but maybe that's just too simple for situations like this. And I remember you and I were like,

Jessi: yeah

James: dude, I hope something comes up.

Jessi: Yeah.

James: And sure enough, we called the previous. Landlord and they were like, I couldn't believe it.

They were like, these guys are horrible. Do not rent to them. Their pets were bad. Like they destroyed everything where it's causing us thousands of dollars to go through and fix up all their damage. Yeah. Like so bad. You're like, I was Okay, perfect. That's, that's what I was looking for. And so I found if my spidey sense is going off, there's something there.

Mm-hmm. I just need to keep asking. Yeah. And eventually I figure it out. Mm. Um, now we've had situations where it's kinda the opposite, right. Where it's like, man, on paper, this doesn't seem like it should work.

Jessi: Mm.

James: Like maybe their credit score just trashed Sure. Or something like that.

Jessi: Yeah.

James: But they come at it from a good reason where it was like, oh, you know, I had a bad relationship.

Mm-hmm. Or my spouse did some stuff, or I had some medical issues and Yeah, the bill's piled up. I didn't get a hold of it, but I'm on my, you know, on the way up.

Jessi: Yeah.

James: You know, that's I, I'll usually be like, no, you know what, I wanna take a chance. Yeah. And I've had it too, where I've had other situations where.

I knowingly took a chance on someone. And honestly, most of the time it doesn't work out. But I'm also like, yeah, you know what? Honestly, if I can probably outta my house for, for nine months and you know, and I give 'em a shot, I can, you know, I can sleep well at night knowing that I did that.

Jessi: Yeah.

James: I've just also have learned, like in those situations, if they get behind on your rent, you don't go, ah, take a week to figure it out, out, like work quickly and pull that record quick.

'cause they're not gonna pull out of it,

Jessi: which hopefully you have that conversation with them ahead of time and you're, I mean, you know, if you're, if you're like, this is close and it's going to be tight, you know, so here's our process if you ever can't make a payment or those sorts of things.

James: Yeah. Mm-hmm.

Jessi: They know that I, you know, upfront.

James: Yep.

Jessi: Okay. That's, that's actually the next section here. Oh yeah. Number four is rent enforcement and issue resolution. Oh, perfect. So hopefully let's talk about it. Talk about it ahead of time. Uh, how do you typically see rent payments perform across your portfolio?

James: Um, it kind of depends.

Storage is not as good. It's everything else that

Jessi: kinda makes

James: sense.

Jessi: It's like outta sight, outta

James: mind. Part of, I inherited a pretty messy situation where the previous

Jessi: Yeah.

James: Uh, property manager essentially didn't collect rent. Right. And so now we're coming in, I'm be like, Hey guys, guess what? You gotta pay rent.

Actually you do have to pay

Jessi: rent.

James: Dude, we got this one tenant again. I inherited him. And, um, he actually, he got some, he got some financial assistance. Mm-hmm. Which paid for his back rent. So he's good through December. And I was like, okay, but let's talk about January. Like, yeah,

Jessi: what's

James: the plan? What's your plan?

And he was like, I don't have one. I know it's like, uh,

Jessi: crickets.

James: Okay,

Jessi: good.

James: I feel like January is coming kind of fast. Um, and so, uh, yeah. What's the plan? So just like to

Jessi: create a plan?

James: I, yeah. Um, and so we like, so in that situ, and I get it, he, he had lived there for get this for 18 months without having to pay rent.

18 months. I mean, why, as far as at concerned, like, I don't have to pay rent. This is awesome. Yeah. And so now I'm coming in and, and, and even when I took over, he was like, Hey, I'm working with CSE to get to get back payments. So I was like, all right. Like, so I waited, uh, I waited a whole month

Jessi: Wow.

James: For it to happen.

'cause I was like, I, he's like, I had to paperwork. It's all, you know, it's all approved. We're just working through it. And so I was patient.

Jessi: Mm-hmm.

James: And now it's done. And now I'm like, ah, man, do I wanna be this guy? He's gonna kick him out like right afterwards. So I'm like, but the answer is yes.

Jessi: Mm-hmm.

James: And it's two adult people living in the, they're brothers living in this unit.

Jessi: Mm.

James: Like, not, they don't have jobs and it's not a disability handicap type of situation. So I'm like, dude, like,

Jessi: yeah,

James: I hate to be this way, but I'm gonna have pretty low patients on this.

Jessi: Yeah.

James: And so, yeah, they're getting a move out letter.

Jessi: Hmm.

James: Um, on the fifth of next month, and it's just gonna be hard. Yeah.

Um, but yeah, I, I have five, have other tenants. But anyways, um, so for residentials, it's fine for people who I screen and bring in, we do a great job of setting expectations ahead of time. I got this whole video series that I actually require everyone to watch. Whoa. That talks 'em, like it says, here's.

Expectations.

Jessi: Mm-hmm.

James: I have of you, here's expectations you can have of me. Those are separate videos. Mm-hmm. And then I actually walk them through the rental agreement, like, here's what this thing is that you're signing. 'cause we do everything digitally. And you know, with DocuSign you're just like, click, click, click, click, click.

Right? And so I slow it down on purpose with here's what you're agreeing to.

Jessi: Yeah.

James: Which very much mirrors that other video.

Jessi: Mm-hmm.

James: And then the final video I give is actually a financial foundation. Like I talk about crazy concepts like spending less than you earn. Hmm. And saving for emergencies. And, and then also like, here's what saving and investing looks like, and here's what an asset is, here's what a liability is.

Yeah. You know, those kind of things. And I've had multiple tenants over the years be like, oh my gosh. Like we were getting ready to go out and buy a brand new car and go in the debt and we didn't because of what you shared with us in there. And I had other people who were like, yeah, our credit score was actually better when we moved out because we did the things that you recommended.

And so, 'cause I'm like, dude, I have an incentive here. I want you to be, have a financial, you're financially

Jessi: stable '

James: cause then you can pay my rent, pay

Jessi: rent and

James: be responsible. So, so I'm like, yeah, I've, I want you to be here. So, um, so people who we bring in mm-hmm. It's very rare that we have a problem. Yeah.

And I mean, it happens and I, and I get it. Um, it's usually when I'm inheriting another property that someone else was managing or it was self-managed, not really self-managed very well. Yeah. Then there's, there's a cleanup period. Yeah. So that hurts my, my rent payment numbers.

Jessi: That makes sense. Yeah.

Suppose

James: if I was really smart, I

Jessi: break 'em out. Once you've onboarded new people, typically that there's

James: not, but, and that's something I can probably do a better job with owners and be like, Hey, look, I'm not gonna come in and magically fix this thing. Sure. There's been habits and behaviors that have been established here, and I've done this enough now where I just know tenants aren't gonna be like, oh, new owners time to, or new managers time to buck up.

No. They try the same playbook with me.

Jessi: Sure.

James: And then I kind of get to be the bad guy and

Jessi: mm-hmm.

James: That's okay.

Jessi: I'm do it. So give us, uh, I know you've hinted at different pieces of it, but when the rent isn't paid on time, what does that usual process look like? As far as like timing and action?

James: Yeah. Um,

Jessi: so let's say the fifth comes round, there's nonpayment

James: paid, they're gonna get what?

They get an email slash text message, sometimes phone call. Mm-hmm. Um, from us saying, Hey, Red's late. Yeah. And then, um, and then we're waiting, uh, we usually wait a few more days just to kind of see what they're gonna do and then depending on their reaction, 'cause sometimes we get a attending who's like, totally get it.

I'm working on it, whatever. Sweet. Mm-hmm. No big deal. Yeah. And, and that's kind of my thing. Like if they communicate, I get, I'll be flexible. I really will be. If they don't communicate, nah, no. That's when paperwork comes out and we're moving forward and just letting the, the system work. Mm-hmm. Oregon is very, uh, tenant friendly.

And so I, I'm kind of like, yeah, as long as they're willing to play ball, I'll play ball. But if they're not, you know, but then we'll do it. Mm-hmm. Um,

Jessi: so what's the timeline of when you file paperwork?

James: Um, again, it kinda depends. Uh, it's usually around the 10th, if I'm honest.

Jessi: Okay.

James: We're not doing it on the sixth.

That's very rare that I'm doing it unless there was like. We had an issue in the previous month.

Jessi: Oh, yeah.

James: And then an

Jessi: ongoing issue.

James: Yeah. So like this one example I gave of the guy who, you know, I was like, Hey, what's your plan?

Jessi: Yeah.

James: And he was like, I don't have one. Like, yeah, he's gonna get one on the sixth.

Right. And, and it's gonna be the 10 days and, you know mm-hmm. Whatever, we're gonna do that. Okay. So, situational dependent.

Jessi: Uh, so what are some of the factors? You've mentioned some of them, but what are some of the like, specific factors for when you decide to continue working with a tenant versus just moving on with formal enforcement?

James: Yeah. Communication's gonna be the

Jessi: thing that's like the biggest thing.

James: Yeah.

Jessi: It seems like

James: I've, I mean, I've had tenants who have lied to me like, oh, we're working on it and I'm usually pretty forgiving.

Jessi: Sure.

James: And then eventually like, no, you're not.

Jessi: Yeah.

James: It's, and, and on those situations, like, ah, I should have pulled the trigger sooner.

Jessi: Sure.

James: Um, but, uh, I don't know. Again, I, I also like if I were the tenant, how would I wanna be treated? And I don't wanna just necessarily be that, that. A landlord who's just like,

Jessi: yeah,

James: this is the letter of the law. Do it. Don't

Jessi: care.

James: And so

Jessi: pay

James: your, I've I've had multiple ones where I've like, we've terminated and I've gotten the keys from them and they've been like, Hey, you were pretty fair the whole time.

Like, I get it.

Jessi: Yeah.

James: You know, which I minimizes damage Sure. Has been my experience. Like, and I'm willing to forego a few weeks of rent, maybe even a month of rent for them not to damage the unit outta frustration with me.

Jessi: Sure.

James: It's balance.

Jessi: All right. Got it. Uh, maintenance. Let's talk about some maintenance decision making maintenance.

How do you typically handle repair approvals with owners? You talked about a threshold?

James: Yeah. At some point that's, that's the big thing.

Jessi: Okay.

James: If it's, um, if it's summer, if it's under some amount, like we're just gonna do it.

Jessi: Mm-hmm.

James: And I will talk with the tenant to kind of get an idea for like, okay, is this emergency status, do we need to get in there today, tomorrow, or is this like, eh, we can get it scheduled in the next month or two, wait till the nicer weather, something like that.

And then, yeah, if it's, if it's going be above a certain amount, well then either if we're gonna do it in house, we'll make an estimate. I'll talk to the owner. If it's, if we're hiring someone else out mm-hmm. Again, I'll have them come out, make an estimate. And depending on what it is, like, I might even reach out to the owner ahead of time, be like, Hey, like, like we do with the electricity thing, I was like, I don't know the full cost yet.

Step y, this is coming down the pipe. And so then when I gave him the estimate, it was within minutes. He had already approved it and we were fine and ready to move on. And so I could, you know, talk to him. So that's kind of like, it's that threshold.

Jessi: Yeah.

James: Really.

Jessi: And, and that. Varied based on what the owner's preference was.

James: Yes. Was

Jessi: that right?

James: Okay. I usually like, when we're having our first conversation, I'll, I'll like, Hey, there's some blanks to fill in here you

Jessi: comfortable with?

James: Yeah. I don't really care what the number is. Sure. Like what makes you cut? Like what's your reserve amount? Mm-hmm. That's a big one. How much money are we gonna keep just in the account, just in case?

And usually, you know, they'll be like, okay, well, you know, they'll ask what I recommend. Yeah. And I'm like, well, it depends. It's like for a single family home. I'm usually like half a month's rent.

Jessi: Mm-hmm.

James: Just in cases.

Jessi: Yeah.

James: I went, but then as the property scales up, you don't need to hold half a month for every single unit.

Jessi: Sure.

James: I'm, I, I'm usually 'cause that like it's just, it's never be crazy gonna be that much. Um, I honestly, like the most I think I'll ever hold for someone will be like $1,500 for it. I actually think I have the biggest ones for my own properties because I was like, I don't want to ever have to put money back in.

Yeah. And so, um, but it's usually in that like $1,500 range. Mm-hmm. Even for big places. I'm like, dude, the chances. 'cause there's two things, right? There's, you want to have that reserve, but then there's also cashflow that comes out mm-hmm. From the month. And so we could just pull from there. Sure. So if it's a multifamily, I'm like, yeah, no, we'll just like, I'll just give you a smaller distribution for the month.

Sure. Yeah. Instead of you getting six grand, you're only gonna get. Four grand. 'cause I pulled 2000 and maybe even that other, you know, the, the times when we have to spend just on maintenance stuff, like $3,500 or whatever. Mm-hmm. It's pretty rare.

Jessi: Okay.

James: And then if it is bigger ones, I'm just calling 'em like, Hey, unfortunately you're, this is a $10,000 thingy that happened.

Jessi: Yeah.

James: So your reserve wasn't gonna cover it anyways. Sure. And oh, and then so there's the reserve and then the other one is, Hey, what threshold do you want me to give you a phone call for? And um, and that's usually gonna, I'll say like, man went in doubt started at 500 and then when you're ready we can move it up to a thousand and that's gonna take care of most things.

And so those are the two big ones.

Jessi: And then,

James: and I don't care what the numbers are,

Jessi: if you do dip into that reserve, the goal is like to build it back up.

James: Yeah. Over

Jessi: time and then

James: not over time, like Yeah. Well, yeah. I guess as fast as possible.

Jessi: Yeah. As you collect rent, you build that back up as fast as possible.

Get back

James: to, yeah. The reserve is really designed for handling some of those bigger expenses just so they're not having to necessarily write a check. To get it, to get it to me. Um, but honestly the way that we run it, 'cause Oregon's got really weird rules. If you have, as a property manager, I have to have what's called a client trust account mm-hmm.

To, to manage owner and tenant funds. Mm-hmm. I can't just be a normal bank account, it's like a special thing. Mm-hmm. And also part of those special rules is you can't have a debit card linked to that account for some reason. And so, like, you can write checks and you can have an ATM card, I guess. And so, yeah, it's kind of interesting.

And my software lets me do like an A CH transfer, which honestly is what I do most of the time. Sure. But because of all that, and I didn't just necessarily wanna give my team access to like, here's how you send payments.

Jessi: Right.

James: We actually have a wholly, totally separate expense system that we'll use for regular expenses.

Um, because what it let me do is it lets me give every single. Employee a card and I can set spending limits. Mm-hmm. And then what they have to do for every single expense is they have to upload a receipt. They have to give a memo, what was this for? Then they have to say what was the property for? And then, um, then either they or my, or my bookkeeper will then choose here's the accounting category that it goes with.

And so it just keeps everything super organized and then even for certain payments. So if they're using the card, cool. And then we can also send out payments that way. So I'll just say it allows us to, to pay for expenses ahead of time. Just be like, Hey, this is an emergency. Yeah. We're just gonna get it done.

I know it has to get done. Mm-hmm. We're just talking to the owner to figure it out. Like that's how I can float it because I got 30 days before I have to pay off that. It's essentially a debit card.

Jessi: Mm-hmm.

James: Um, it's kind of, it's pretty cool. It's like an interest free account

Jessi: that is kind of cool

James: For me, the trick was it let me put in spending controls for all my teammates Yeah.

And just make sure that everything's documented before it gets approved and or finalized or whatever. And so super convenient.

Jessi: Yeah.

James: Um,

Jessi: that is kind of nice,

James: but yeah, I think I went off track on the question, but that's okay.

Jessi: Yeah. Got in the weeds there a little bit. But it, it's, it's, that's useful to know as an owner, you know, I know that you're not just gonna spend a bunch of my money and then cause a problem later or, you know, but yet you have systems in place where you can take care of things and then account for it later and

James: yeah.

Jessi: It would be all clean. Uh, so compare preventative maintenance versus deferring work. What's kind of your general standard on that?

James: Ah, yes. Um,

Jessi: yes.

James: If I'm honest, my default is to, you know, if it's not broke, don't fix it. That's typically what my default is. And I have some owners who like, that's like, no, no, no, no, no.

I want it nice. You want all the time. Yeah. And, and I'll just be honest, like that's not necessarily how I think about it for myself. Mine's a lot more pragmatic.

Jessi: Mm-hmm.

James: And so just depends on the owner. Like we'll be a lot more, get in there. And there's some things where it's like, man, if it was someone where it was their house and they lived there and it was super nice.

Mm-hmm. And now they moved out to another state because of a job and they became accidental landlords and turned it into a rental and their house is nice. I'm like, yeah, all right. We're actually gonna get in there and like, if little things are broken,

Jessi: yeah.

James: We're gonna fix it, be on top of it. Because the owner and I actually, I'll ask the owner ahead of time too.

Mm-hmm. I have, I have this whole. It's a property knowledge worksheet is what I have everybody fill out when I first take over management. Mm-hmm. And it's a bunch of questions and I tell 'em like, look, this is just so we don't do the whole 20 question back and forth thing, and I'm asking you, where's this and this.

I just, I do it all at once. Yeah. And I mean, and I'm asking everything all the way from the big stuff. What's your goal? What's your communication style? What's the, to the little things like, what's your nickname for this property? I'll call it what you call it, to where's the sewer clean out on this thing?

Where are the mailboxes at? 'cause that's not always obvious. Like it's a whole bunch of those very practical, nitty gritty types of questions. So that I'm like, yeah, I'm, 'cause eventually I'm gonna be like, Hey, like I didn't know the answer to this. So it's just all in one place, which is really nice. And um, so anyways, in there, um, I'll also ask like, like what's your,

Jessi: what's your level of quality

James: here?

What do you want you wanting? Yeah. So I'm trying to suss that out as well.

Jessi: That makes sense. Especially knowing that. Your personal preference might be very different from somebody else's, so,

James: yeah. Yeah. You

Jessi: just ask up

James: front. It depends on the property. Right? You got some where it's like workforce housing or it's, you know, it's class C, like, it's

Jessi: like doing whatever, like

James: we get it

Jessi: fine.

Yeah.

James: Make it clean. Rent it out. Yeah. Then you have others. Yeah. No, this is, this is top of the line.

Jessi: Mm.

James: You know, you treat 'em differently.

Jessi: Yeah.

James: I tend to go more like work workforce cash loan properties. Sure, sure. That's just, that's my preference. I like the fixer wrappers. What can I say?

Jessi: Yeah. Uh, all right.

Last section here. Boom. Expectations for a long-term fit.

James: Ah yes.

Jessi: So beyond rent increases, what are some of the ways you hope owners improve the properties over overall performance over time?

James: I remember when I came up with that question, I was like, oh, this is a good one. This is so hard because that is number one, is like, I'll do the rent increases.

Uh, the big one's going to be like, so vacancy, which I get is related to that, is trying to minimize that vacancy. Mm-hmm. That's huge. So like I said, when someone gives me their 30 day notice, we don't just sit on it for 30 days. Right. Like, that kicks off a whole process. And our goal is to get this thing rented ahead of time.

Mm-hmm. And um, you know, and to get everything lined up. And we have the people processes in place. We're doing a move out inspection to kind of figure it all out. Um, like we got one where they're moving out and there's some sink that needs to be refinished and like we catch that kind of stuff and we get things lined up ahead of time so that boom, we can get in there and do it quickly.

So I think that's just, we just have time, which is huge for an owner because again, vacancies kill it.

Jessi: Yeah.

James: And we are looking for those kind of things. Mm-hmm. Um, other things that we'll do, um, just some long-term planning, like, you know, we, 'cause we look at the properties regularly. Yeah. And, you know, when we see stuff like we have like an official annual inspection.

Yeah. And that's, we're actually going through like, what is the condition of the roof, of the siding of the inside, da, da da, da. And just really trying to help the owner think through, Hey, what are some of those CapEx expenses that you kind of wanna have on your radar and be thinking about ahead of time.

Sure. So we do those kind of things and, um, that's awesome. That's, that's helpful.

Jessi: They can plan ahead for, you know, not, not deferring the maintenance, but actually keep staying on top of it so that things don't wear down. And

James: Yeah. And there's other things, property

Jessi: value,

James: because I'm an investor, there's things that I look at mm-hmm.

And some owners take me up on the, hey, let's talk strategy. Or like, what is the long term? Does it make sense to refinance? Sure. Like, I'm getting ready to refinance. I'm like, oh, okay. Awesome. Let's you have a vacant unit, we're gonna lower the rent, make sure it's full. Mm. And we're gonna lock in an annual lease so that your lender goes Awesome.

Yeah. As opposed to being at vacant, stuff like that. Yeah. And so, because I know that's the kind of thing that you're looking for. Yep. And And we're just having discussions, or when they're looking to acquire another property. Mm-hmm. I'm like, yeah, let me check it out. Mm-hmm. I'll even help you with the underwriting.

I'm good at it.

Jessi: That is kind of cool. 'cause you have that, you're not just a property manager, you have the investment perspective as well.

James: Yeah. Mm-hmm.

Jessi: Mm-hmm. So you can evaluate properties and give advice and

James: Yeah.

Jessi: Yeah.

James: And who knows, maybe they got a situation where, yeah, they own this investment. They've got some funds, not quite enough to go buy another rental.

But I'm like, Hey, I've got a passive deal coming up. Why don't you just put $50,000 into this deal for the next six months year, earn 12% on your money, and then. When that's done, then go off and buy your own asset and I'll manage it for you and Yeah. You know, and so, so there's options like that, that we can do.

Um, that's awesome. But I think just being able to devote time and attention and have systems mm-hmm. And it's just huge.

Jessi: Yeah. Uh, so in six months, what would tell us both that this relationship is working well?

James: Yeah. Um, I think it's gonna be, it's just your, your property's where you want it to be. Yeah.

Like you got tenants who are in it. 'cause in six months I'm gonna solve whatever the issue is. Mm. Or it's gonna be like very well on pro, you know?

Jessi: Yeah. You'll have

James: a plan. It depends on what it's like. If it's a tenant issue in six months, we're gonna know, like, okay, this thing's being resolved. They're not Mm.

Or oftentimes there is a lot of deferred maintenance and it's like, and it's all done. Mm-hmm. Because if we just prioritize it, get 'em on the list and get it done, and, and I think those are gonna be it. There's gonna be some communication stuff. You're gonna be looking at the reports and go, oh, cool. I had this one.

I, I, I couldn't believe it. Uh, I'm, I'm debating on whether or not to put it on my website as a testimonial, because I've, you know, we met, I gave them and then, uh, you know, or I started managing it.

Jessi: Mm.

James: And then, um, they asked for just a quick update on something. I was like, oh yeah, here's this. Oh by the way, here's all this other stuff that's going on.

Mm-hmm. And they were back like, wow, this is, we've learned more about this property just from you than we have in the past 15 years. That's my word of updates. And I was like, holy cow. 'cause they did this from it themselves. And then they had managers and stuff like that. And, and they, they ended up moving to me.

'cause they had issues with like multiple managers in a row, which I felt so bad for them. But, uh, but you know, it, stuff like that mm-hmm. We're just like, okay. And so I would say if you get into six months and you feel like a, my property, like it's being, it's under control. Yeah. And I've got, I've got transparency about what's happening, but I am not having to worry about it.

Mm-hmm. Um, or if, yeah, if there are issues like. You're aware of them and you know what's going on. I think that's where you can kinda comfortably be like, okay, yeah, I feel good about this.

Jessi: Mm.

James: I'll say to, I'm not perfect. Like, we've definitely made mistakes. I don't reply back as fast as I want to. And that's something that I'm, that I'm working with on my team to just to get me outta that loop.

Jessi: Yeah.

James: So that, uh, replies do happen faster. Mm-hmm. I'm not there yet, but I'm working on it. Yeah. And, um, but that's an area where I'm like, eh, I would like, I would love to have a response time that is within a couple of hours. Mm. And I'm more like a day or two.

Jessi: Yeah.

James: And, and it's just 'cause I'm, you know,

Jessi: there's a

James: lot another stuff.

So I don't know. That's kind of, uh, yeah. I'm not perfect. I get it. And that's the other thing is like, yes, I am an owner and I like to manage it. Like I've, I had that ownership mindset, um, but I'm not you.

Jessi: Yeah. It could be slightly different, but you do, it will be, you'd get the. The core principle of kind of what we're going for.

Like, we want our property to be well taken care of, and we want to be making a profit and

James: Yeah.

Jessi: You know, not have to worry about the day-to-day things. Yes. So it's like those are the big

James: Yeah.

Jessi: The big buckets. Cool. Uh, last question. Yeah. If either of us feels like this isn't the right fit over time, what does that professional transition look like?

James: Yeah. So here's an interesting one to fire

Jessi: you.

James: So my, I purposely decided not to use that word. Um, I, uh,

Jessi: transition apart

James: when they sign the property management agreement. Mm-hmm. We agreed to it for a year, and then it kind of turns into a month to month thing.

Jessi: Mm.

James: But I always tell everyone, like, honestly, if you're not happy Right.

I'm not gonna,

yeah.

Jessi: Just talk to me.

James: I'm not gonna lock you in.

Jessi: Sure.

James: And we can find another route for you to go. I'm almost like, yeah. If you're not, let's talk like,

Jessi: yeah.

James: I can fix it. If, if I'm not doing something that you don't want, like, I'm, I'm for you.

Jessi: Yeah.

James: So if I'm not doing something that you like, look, let me know.

Yeah. And, and I'll change.

Jessi: Mm.

James: And. And, you know, and we'll adapt the, the system to what is it you want. And so, um, but yeah, I, if it ever comes to that point where they want, I'm just like, yeah, whatever. What do you need? You know? We'll, they have on demand all the reports. Sure. So they can download that at any time.

And then usually it's like, Hey, you need to deposits. Mm-hmm. Yeah. We'll transfer it over to you or to your new manager. Yeah. We try to make it pretty easy.

Jessi: Yeah. It seems like you do a lot of upfront work to get aligned on like, what's your philosophy of investing and where are you headed with this?

What's your expectation? What's your threshold for where you wanna spend your money? So it's, there's very few surprises. I guess

James: that's what I, that's

Jessi: what I, I try to have happen. I mean, I could see if there was some sort of emergency and it blew up and they just had some life issue. I don't know. Yeah. It, it doesn't seem like there would be a bad, you know, transition

James: my, uh, correct.

Yeah. No, that's, that's definitely. Like, again, like I try to set expectations early on with tenants. Sure. I'm trying to do the same thing with us with owners as well. Yeah. I'm actually like, I have this whole video series for tenants. I'm in my head, I'm like, you know what? I should really create one of these for owners as well.

Just 'cause like one of the videos that I always send them is, here's how to navigate the portal and to see stuff. And I have, and I had one owner who's like, yeah, you can show 'em on my stuff. And it was a good like medium set where he had a couple properties, six units total. Mm-hmm. And so you could kind of like, it wasn't overwhelming, right?

Like if I showed you mine, you'd be like, there's 120 units here. This is ridiculous. Like it would just be like, it's overwhelming.

Jessi: It's too much. Yeah.

James: But for his, I was like, this is perfect. 'cause it had a little bit of everything in there, so it was a great case study. Yeah. And so this is a video that I like.

I'm like, you should watch this 'cause it will show you here's how to log in, here's how to see things on the dashboard. Here's how to get to the reports, here's the reports that I like and care about. It's the owner report by the way. Mm-hmm. And I'm like, 'cause that to me it's like, it's a one shot, it has it 99% of what you want.

The mount roll is probably the other one that mm-hmm. That I'll look at. And so, um, that's. I, I have that. Mm-hmm. And I'm kinda like, ah, that feels like that's one part of a bigger part of, of a, a series and kind of going through that stuff. But yeah, I, I try to set it up. It's interesting too, there's, there's just different investors, right?

There's the accidental landlord and, um, that's, they just have a different set of expect expectations walking in versus someone who is like, Hey, I've grown my portfolio to a point. I can't manage it. I have been managing it myself. There's, so there's the, I have been managing it myself. Mm-hmm. I have, um, you know, a family and kids and a life and I don't have time to do this, and I can tell I'm not doing it as well as I want.

Yeah. They'll hand it off and then you have the other words. It's like, not only that, but I'm growing the portfolio and I have this other direction I'm headed in.

Jessi: Mm-hmm.

James: And, and they're looking to get help to scale. So it's kind of like there's those three different groups.

Jessi: Yeah. Different.

James: And three of 'em have different expectations for what they're looking for.

Um, both Good. They're all. It's all good. I've, I have my favorites, but, um,

Jessi: um, so one, one last question. This might be,

James: that's it. One last one.

Jessi: Be, have, have you be vulnerable.

James: Oh, okay.

Jessi: Have you ever had to dissolve a relationship with an owner or has an owner had to transition away from your property management for some reason?

James: No, not yet. Okay. I think I'm still new enough that, um,

Jessi: it's all been good. Well, you, but you've managed quite a few things.

James: Yes. So

Jessi: it's like, that's that's good.

James: I've had,

Jessi: for now I've,

James: I've got one owner who I'm like,

Jessi: I can see you

James: if I don't like it. The, it didn't go how we thought, so yeah, this was on me and I've got a way to make up for it.

Where

Jessi: unexpected.

James: They, they were, um, um, they moved outta state. Mm-hmm. They had a house. They gave it to me. I got it rented to a couple who, like on paper they looked awesome. Mm. No problems. Sure. That kind of thing. I will admit I did the screening. This is a hundred percent on me. Mm. And then, um, it was after I had done it, in the midst of all doing that, I had hired someone to be the tenant screening person.

Mm. And so I had her give the keys. 'cause I was like, you're gonna kind of manage this relationship going forward. And so I was like, here's a great time to do it. She, she got done and was like, so you rented to them, huh? I was like, yeah. She was like, did you meet them in person? I was like, yeah. She's like, okay, we'll see how this goes.

Oh man. She was so right. Which is why I hired her. 'cause she's awesome. Oh no. But, um, yeah, they, they ended up, since that

Jessi: happens,

James: um, they, they, they just didn't pay their rent. I was like, what the heck? The, the husband ended up going to jail for some other, like it was, he was supposed to show up to some court thing, which, hang on that word.

Didn't show up on the report, by the way. Huh. And it was like for a child support type of thing or whatever. So they incarcerated him and so he wasn't working, she didn't have enough money, and she was like, and I need the money to pay for other stuff. So they just didn't, and it was like, it was this whole mess and it was this.

Wow. And it was this couple who had moved out and now they had two mortgages.

Jessi: Yeah.

James: And we're getting zero income. And I was just like, ah, shoot. And they made promises, oh yeah, we're gonna get it all figured out, whatever. I was like, great. And they're like, we're applying through CSE to get everything paid And mm-hmm.

I was like, okay, we're doing it. And then, and then their communication dropped off and I was just like, oh my gosh, what is happening here?

Jessi: Yeah.

James: And um. And the owner was like super frustrated. Yeah. And I, and I'll admit like there were so many unknowns in the air that all my updates were like, I don't know.

Jessi: Yeah.

James: And I was like, oh, I felt so bad. I was like, this is totally on me. I did not put good people in here. Hmm. And, um, so good news is, uh, they did get approved by CSE, but it was by the person I hired, she was calling on their behalf. Wow. To help with the paperwork, make sure that things were settled. 'cause I don't think they would've done it on their own to be hon to be honest.

Yeah. And they're going to pay six months.

Jessi: Yeah.

James: So I'm like, cool. And in that time he is back outta jail. He's back working. Um, he had, they had some other financial stuff they had to catch up on, which I'm like, yeah, okay, I get it. Mm. And um, so I think it, and we kept going in just like, just checking on the unit.

'cause we found meeting 'em in person worked really well and we were willing to put in that time and effort. And honestly they were taking care of the house.

Jessi: Hmm.

James: Like, so it was like, you know, you had that, those three criteria of what's responsible.

Jessi: Sure.

James: I was like, alright. They're doing the middle one really, really well.

Mm. Obviously that first one, pay rent, they're not.

Jessi: Mm-hmm.

James: And I have concerns about that in the future. But I mean, he had an, he has an awesome job. He's a roofer. Hmm. He alone made plenty of money and then she was working. I was like, man, together, they're way over the three x.

Jessi: Yeah.

James: And so, anyways, uh, the communication at the beginning, they were great.

I think when things got hard, they dropped off. That's, yeah. But, you know, when we were applying and everything, like they were great on responding. It was funny. They were even like, and again, one could argue this should have been a red flag in retrospect, but when we set up a time to do the tour, they text me and said, Hey, we're running 20 minutes late, just so you know.

But I was like, okay. Like,

Jessi: yeah,

James: traffic happens, communicated. I get it. I've like, to me, I'm like, that's cool. That's all I want. Mm-hmm. And, uh. Uh, yeah, I don't know. It was, it's been weird. That's one where I think if I don't pull it out, um, the owner's gonna be upset and, and they'll move on to someone else.

But I'm also like, I, they're gonna get paid. Yeah. And it's a stinks. And, and I am already like, you know, I'm not charging a management fee for all of that stuff. Mm-hmm. I'm just, I'm just not, I'm gonna take the loss on that. We eventually had to file for an eviction mm-hmm. To kind of, to really just get everything moving.

Yeah. And I'm like, yeah, I'm just gonna eat those fees. I'm not charging Normally that would be a, I guess that would be a fee. Okay. Um, that the owner would pay. But it's more like, it's just a pass through expense. It's not a fee.

Jessi: Right.

James: But I'm like, nevermind, I'm gonna, I'm gonna eat it again. I'm not gonna charge any management fees for all of this stuff.

I will going forward, just like normal. Yeah. So there's things like that, that, and I'm gonna let them know, Hey, like this is on me. I get it.

Jessi: Mm.

James: And, and I'm not gonna charge, if we had to release, um, I wouldn't charge a, a new lease up fee. I'm actually not even gonna. I'm not gonna charge one for them. So anyways.

Jessi: Yeah. There's things like that you really, you really are trying to make it right.

James: Yeah. And I've been trying to overcommunicate more recently.

Jessi: Yeah.

James: Anytime we have a development, but, and they're the kind of owners, like they're really like, well, what's going on? Like, it's the same, like there's no update.

We're just waiting to hear back. So, um, I, I could see them leaving and if they wanted to, like, dude, I get it. You would understand. Like, this did not, this did not start the way that we wanted. Mm-hmm. And it's, it's technically my fault 'cause I didn't, they fell through my screening cracks. Yeah. It happens.

It was a bummer. It wasn't my property. Sure. But um, so that kinda stuff happens and, and if they decide to leave, like, cool, like here's everything that you need. Yeah. I will also say for this couple, uh, if something else comes up, like, my patience for, that's gonna be super low. Yeah. They're like, no, no, we're not.

They'd be the kind of one where once their caught up payments happen

Jessi: mm-hmm.

James: If they're not paying by the fifth, like Yeah. Yeah. The sixth

Jessi: they get,

James: here's the paperwork, we're moving on. Yeah. I don't even care if if they're, they're gonna be like, oh no, we're just running behind. Like, awesome. Here's the paperwork.

Jessi: We're gonna start the paperwork and go through the process.

James: Like, yeah. And so,

Jessi: Hmm.

James: So yeah. So we had that happen. That was, that was super lame.

Jessi: Interesting.

James: And, um, and I, those kind of things happen.

Jessi: Sure.

James: Which is a bummer. Um, and again, that was, I'll own it. That was my fault. I did not, I, I don't know, whatever, but I hired someone awesome.

Who, who, that was a situation where she had the spidey sense thing.

Jessi: Mm-hmm.

James: And I think had she been doing it from the very beginning, she prob probably wouldn't have read it to him. 'cause she would've found, she would've dug

Jessi: deeper.

James: I don't know what I

Jessi: is or something.

James: I, I, I still don't know what I missed.

Yeah. 'cause on paper, like he still has a good job and Yeah.

Jessi: Yeah.

James: Anyways, it's been

Jessi: something

James: that stuff happens.

Jessi: Yeah. Well, it's nice to know that transition would be smooth and.

James: That's, that's my goal. Yeah. Again, I, I want, that's what I would want.

Jessi: Mm.

James: If I was moving on, I've, I had that with, uh, with the department manager.

That didn't work out well, where it was just, oh my gosh. It was like pulling teeth to get the information. I was, this is super lame. Yeah. That's not what I want.

Jessi: Yeah.

James: You know, and I get like, I technically have 30 days to do a final accounting and stuff like that, but again, all my stuff's on demand. So like here it is.

Jessi: Cool.

James: Just take it.

Jessi: Well those are all the 20 questions

James: that I have. Sweet. So would you hire me rapid

Jessi: the fire? Yeah, I think so. Sure.

James: Why not? Sounds great.

Jessi: I kind of already did. Yeah,

James: exactly. But

Jessi: yeah.

James: Cool. Well thanks for doing that. I appreciate it. I know this was a little bit longer, but I just wanted to go through and like.

Those would be my answers. Yeah. And hopefully they give you clues if you decide not to go with me. Which is fine. 'cause maybe you live outta the area. Sure. Um, that kinda gives you a sense for the types of answers that you can expect from a property manager. Mm-hmm. And, and I do think there's also an overlap with, with an operator, um, or a sponsor who you're investing with as well.

Mm-hmm. Because they're gonna talk about those kind of things. They may not be doing the day to day. Sure. But they're gonna be looking for a property manager that kind of does those kind of things and they're gonna have a philosophy in the way that they want things done. So I think that's valuable. So thanks for listening with that.

Have a great day.