hey everybody's Ken macro here the Ken
McIlroy podcast is Leslie Bryce one of
our partners and emcee companies and so
for those that you don't know her she
runs all the operations and and all the
property management side and much much
more than that
but there's about 250 employees that we
have in our management company she
handles all the accounting all the
on-site the occupancy you name it we
have a big team here to pull off you
know the management all these
investments that we have and so her job
is never-ending there's never a day
that's the same the welcome thank you
yeah so once you tell everybody a little
bit about your experience so I've been
in the industry for over 30 years now I
and started off on-site like most people
in our industry and fell in love with it
like like you said no two days the same
I was hoping to go to college and and
decided that I would start in property
management while I was waiting to go
back to college and quickly moved around
into different departments at an
apartment property and before I knew it
I just had been there 10 15 20 30 years
now I love it it's such a great industry
I think it's a great industry it's a
tough industry to to make money and but
we get this question all the time which
is you know one we already went over how
do you hire a property management
company and that's we've already done an
episode on that so if you haven't seen
that one please do look at it but the
second one is is do we self manage and
so those are always the questions and so
what I always say the first thing I
always say to the person is why do you
want to self-manage
usually it's money right yeah two
hundred dollars a month I'm like really
like you know can you do all the
accounting and fly there and meet there
and meet with the manager and you know
interview tenants and you know deal with
vendors and all that kind of thing is
that worth $200 to you or you know what
I mean it's funny isn't it right so you
hear this a lot right absolutely so what
are the biggest pros and cons of self
managing there are not many pros I agree
I have to say I guess one pro would be
if you've got just one property you
might be able to manage it but you're on
24/7
Yeah right so I have a good friend that
just bought a $140 horde for $140,000
condo in Sun City and he's renting it on
a short-term basis you know which is
cool he bought it with furniture and but
he lives in Mesa so he drives 45 minutes
to clean it you know to do the
maintenance if somebody needs like I
remember they had a cable issue or you
know key issue you know so he's back and
forth or back and forth back and forth
and back and forth you know and because
you are the gatekeeper for the tenant or
the resident right well yeah and there's
no end to their requests so you gotta be
prepared for that if you're gonna manage
for yourself especially somebody who
just moves in oh for sure
yeah there's a right when you move in
you just trust me you just don't think
of everything and there's things that
come up when they move in and and so you
have to handle those and manage this you
do and the only way it makes sense is if
you've got enough units to be able to
support having a team around you you
know if you want to do it yourself you
got a finite number of hours in a day if
you want to get more deals done managing
the property is going to take you away
from that right I think what I found is
by the way we love self-managed
properties because typically they're you
know the best ones to buy right oh my
gosh we had multiple stories about
people management remember that one I
remember the one in Chandler where the
guys are flying in from Colorado and you
know and the manager was stealing yes
and and they weren't approving people
the way they should and all his
investors were pissed at him and so he
decided to hire us and you know so that
took gosh almost five six months to
clean up it does and you know it takes a
while you can't just evict people you
know the next day you know and and so
sometimes when you put bad residents in
a place it takes a while you know when
you started enforcing the rules and make
all kinds of things we've seen but not
all you I've seen good self managers -
well you have to have experience though
so jumping into it without having that
is going to be really difficult for
anyone just not knowing what you don't
know
that's right so well with that number
two is what are some of the things you
should consider before self-managing I
would say going to work for a management
company and learning the ropes
we've had several folks who wanted to
intern here to learn a lot more about it
and I you know I realized many years ago
how few people understand how to manage
on a day-to-day basis it only comes with
experience yeah it's so basic to me but
it isn't basic to a lot of people but
I'm like well okay so when you you know
fix the place clean the carpets or put
new stuff in paint it all that stuff why
would you rent it to somebody who can't
pay the rent you know but it's such a
basic thing that they do they you know
they don't run the criminal and credit
background checks and they don't do all
the little things that essentially weed
out you know people that can't pay
because why would you ever rent a place
tell somebody they can't it's better if
it's vacant because they're not doing
damage it is better if it's fake yeah
because and now think about it you had
to spend all the money to turn that unit
maybe market it move somebody in now you
have to actually Vic them perhaps and
you're spending money on the legal side
and you don't get rent for that whole
period of time it's just making you may
ever sit yeah right so that's probably
the biggest mistake we see in the
self-management is you know they they go
by a gut feeling or somebody has a lot
of cash or whatever right yes yeah you
gotta have criteria to follow and be
very strict yeah and be very strict
because you can get into discrimination
issues right so yeah your criteria has
to be sound no matter who it is oh you
have multiple units - it's gonna spoil
the rest of the property you'll have
your neighbors move oh that's my gosh
we've seen that remember remember that
one where the guy I got evicted from
once we kicked a hole in the wall I
moved in the other one literally two
units the guy got evicted so he kicked a
hole through the drywall into the unit
next door opened it up moved two stuff
in there that's a podcast oh my gosh
it's like a four-bedroom unit now two
kitchen
anyway so things happen on saying this
was a self-managed property and the guy
who's like clueless he's flying he's
parachuting in you know for a few hours
every two weeks or once a month or
whatever and but police was a disaster
yeah so unless you're close enough to
have you know the ability to get to the
property within an hour or so it's
really difficult to manage for yourself
I don't even manage for myself I have
condos out of state that I use a third
party interesting right yeah I do too I
mean you know you guys think we're crazy
we actually bought properties out of
state and hired third-party management
companies because we didn't have boots
on the ground there and people now of
course would we have loved those fees
yes but it wasn't the best thing for the
property you know so you know where we
are we manage our own stuff but the ones
that we feel like are maybe outside of
our circle come from a circle of comfort
we hire a third party right and we've
done it all the time it's very helpful
to have people who understand it better
plus you learned from them I mean that
that was one great way we learned in
Texas was by hiring a third party
management company to begin with yes
learning that way was the only way we
could have established ourselves in
Texas so on the continuing on the theme
of self management is it true that
repairs are more expensive if they self
managed versus hiring a management
company Oh oftentimes yes I know explain
why because I you know people don't
realize this I I think most of it
relates for from my standpoint is from
relationships that you build and you get
economies of scale when you have
multiple properties so property
management companies don't usually have
a company unless they manage multiple
units so I'll give you a great example
do you remember when we started taking a
look at Florrie yes so as we were
growing we were unit unit unit you know
we said hey let's cut one deal with one
flooring company so we had them come in
and look at all of it and in one year we
saved was a million for at least a
million for we saved by consolidating it
and negotiating one major deal and so
what happens is as you start stacking
deals on top of that you get that
economy scale that pre negotiated deal
that we already have for example we've
done that with insurer
I mean insurance is a big one you know
we do our property tax appeals you know
which is difficult and complicated we
negotiate all our marketing and all that
stuff so all that stuff's negotiated and
we also are very big around utility
management well for sure and it's
important to have a company a management
company that has multiple units to be
able to get those economies otherwise
you just won't that's right so you're
stepping into all that experience all
that negotiated stuff that's done and
I'm telling you I don't know how many
vendors do you know how many vendors do
we work oh gosh at least 500 yeah at
least 500 just our company and you know
we have multiple roofers and multiple
you know people who do the sealcoating
and multiple landscapers and multiple
lists and multiple that people can paint
buildings and paint the insides the
outsides you know those are all like
trust me there's a ton of work around
negotiating those those folks because as
you guys probably know from being in
your own home you know if you water
heater breaks you know you're gonna have
a $250 number and a $750 number right
just you know just so that happens at
the property management level too so if
you're self managing and you're you're
in some your out of state or maybe
you're not even out of state you know
you're just trying to get stuff done
because your tenants going hey I don't
have any hot water I need a water heater
well that's the kind of stuff that the
manage that's those are the hidden
things the benefits that are met that a
property management company can give you
I totally agree and I think the the
extra piece for a company that has
multiple units is they can have staff to
take care of a lot of this stuff on site
meaning in-house is what we call it and
then in-house repairs
come from our labor rather than vending
it out to a third party that is a huge
point in fact we do that now so we have
like we have a property that has a lot
of students and so of course as students
get out of school they leave for the
summer and then we have a lot of
vacancies in one month and so so what we
do is we utilize our company and our
maintenance folks to go up there and try
to help turn those units and get them
rentable again
because you know when you're when you're
hit with 50 or 75 vacancies in one month
you know you have to you you just don't
have the manpower to turn those okay and
you're not gonna rent them so that's one
example yeah yeah those companies those
those vendors have to make a profit so
it's built into that price yeah you
could do it yourself
right you should do that with your own
team if you can if you can right right
so the fourth one is if you're going to
self-managed what are the biggest
obstacles you have to overcome oh I
think unless you have enough units it's
gonna be just running your ragged you
got to have a team around you 100% I was
gonna say time time though because like
you have no idea the phone calls we get
here right yeah that the property's
total it's beyond belief I mean we have
10,000 tenants so you can imagine we
have everything from you know suicides -
you know maintenance requests like and
everything in between it's like you know
there's a lot that goes on when you have
managed 10,000 homes a lot right and no
two days are no two days are the same
and you know and they're all legitimate
good requests and they have to be
handled and so what happens is people
move out when there's they're not being
attended to exactly and and it takes a
lot of energy to to manage the property
but you have to start by bringing in the
right residents so I think one of the
most important things if you're gonna
manage for yourself is have a system for
approving people with strict criteria
like we were talking about before I
think that's an easy thing for a lot of
owner managers to fall into you know
though like somebody you know a strike
up a conversation with somebody and feel
comfortable with them well when they
move out you you may be surprised with
what you get unless you follow well I
you know I'm gonna throw a Robert under
the bus here for grumpiest sake but you
like you remember they had a property in
and and it was a small property I can't
remember he's like hey would you help us
something no like it's too small I'm not
gonna we're not gonna manage that and so
finally after about a year
remember I'm like okay we'll go over
there we went over there and they loved
this manager I mean and she was sweet
but guess what her
son was stealing was doing renovations
and buying things and stick him in a
unit we walked into a unit and there
must have been about $100,000 with the
stuff in there like compressors and lats
and cabin plumbing supplies yeah he said
loaded up and and you know he'd all
through the property and Robert and Kim
were like why right so anyway we put our
own team in there we filled it up and
then you know helped them out but you
know this stuff can happen even with
seasoned investors and Robert and Kim
are definitely seasoned investors but
you know they they fell in love with the
manager there and she wasn't remember
she was awesome she was he was fine it
was her son and then she was relying on
her son and anyway it was just those
things happen all the time guys I'm
telling you they just happen all the
time and then the last thing is this is
an interesting edgy one but this one
came in this is one of the questions
from some of our listeners would you
personally invest in a property if the
syndicator is the individual and is
planning on self-managing personally I
would say no unless they've got a lot of
experience in multiple units and a team
around them but no right so right here's
the thing now we have a management
company we have 250 people in it and
it's a fully operational running thing
with collectively hundreds and hundreds
of years experience and that's why we
manage our own but what this particular
question tells me is that the syndicator
wants to make money on the management
company right
and they want to make money on the
syndication so now there's nothing wrong
with that if they know how to do it
right but but my experience has been
syndication is a deal to deal thing and
you get commissions basically you know I
call them it's just tips really it's a
good way to put it yeah they're tips the
management company revenue is a
reoccurring monthly revenue and so it's
a tough thing to walk from if you're
syndicating so nothing wrong with doing
that but if if you have 8 10 12 15
properties then it can start to make
sense
well it
good as long as you have some separation
of duties and you know how to do it yeah
you need to know how to do it and you
can't do all of it if you're if you're
syndicating and you want to manage you
need to have different departments
working on each side there's no way to
so I was just meeting with recently with
you know a friend of ours that has a
twenty five thousand units under fee
management and I was asking him I'm like
hey like you know what are you seeing
he's like oh my gosh like we are we are
getting these units these guys don't
know what they're doing you know they
they know how to raise capital they know
how to buy them but then they've tried
to manage them and their investors are
pissed and so then they bring them and
turn them over to us cuz it's one of the
bigger management companies in Arizona
and you know they have properties in
other states too I'm not exactly sure
where but I was talking to the principal
and he's like oh it's just horrible you
know so what happens is they try to do
it themselves and then the investors
aren't getting the returns that they
want and so then the pressure becomes
you have to fire themselves and go to a
third party this happens all the time
yes that is a rough situation I think
it's all the more reason to hire a
management company help you proof that
underwriting so if your syndicator what
you're gonna want to do is manage it to
what you've underwritten well that may
not be reality
you got understand more and that's a
really good price so if you don't have a
check you're gonna end up having a check
later on in the form of lack of cash
flow so what you're saying is probably
the biggest lesson in this podcast if a
syndicator is underwriting the deal and
saying these are the expenses ease of
the revenue this is the revenue and then
they're managing it it's tough for them
because now they don't have a scapegoat
it's the oh they have to perform so so
we've seen the other side of this where
the syndicators will say oh hey their
rents are gonna be really high and the
expenses are gonna be really low and
then they bring a third-party management
company in there like hey we had to fire
them because they haven't delivered then
they hire another one then they fire
them and then they hire another one they
fire them now the community property may
it's close enough to kind of know who
those guys are but they moved from
management company management company
never really accepting the fact that
they maybe did the original underwriting
incorrect right right right
or maybe the market changed in their
marketing now remember we had one
property the break-even now listen close
here the break-even on the property was
a hundred and four percent of
collections remember that that is the
worst a hundred and four percent
basically that means the expenses plus
the debt equaled one hundred and four
percent of the gross revenue which of
course doesn't wings it will never work
so if you're running let's say you're
collecting ninety percent your 14
percent off so it's basically a cash
call every month they didn't want a cash
call they don't want to cash call their
investors so they fired the management
company right so these things happen all
the time as people try to lever up their
deals they happen all the time as they
put the the bad debt on there or they're
running the high expenses or they're
running high vacancy and we see it time
and time and time again and I'll tell
you what don't scrimp on this if you're
going to self-manage you really need to
understand how to do it because you can
totally screw up all the hard work
you've done on raising all the money and
buying a property very very easy yeah
don't take don't take the brokers
opinion for for what it is you have to
do due diligence and get out there and
see for yourself there may be hidden
expenses in the form of regulatory
requirements maybe changes that are
coming in to the you know city or what
have you just you got to be eyes wide
open and no better way to see it then
through a third-party manager absolutely
another great podcast Leslie thank you
fun stuff