Jeri: Hi, my name is Jeri Frank and I'm co-founder and CEO of AssetRover, and we are here today
because we are starting a series of interviews on the team you need to assemble as a new
investor. I'm here today with Andy Petzold who is a broker/owner at EPIC Property Management.
Jeri:Hi, Andy.
Andy: Hello!
Jeri: How are you today?
Andy: Good, thanks. You?
Jeri: Wonderful. Okay, so I wanted to ask you a few questions about your business. The
first thing I wanted to find out a little bit more about is, just tell me a little bit
about your business, how long you've been in business for, and what do you do?
Andy: Okay, EPIC Property Management has been in business for 5 years as a publicly available
property management service. We offered management services as a private group for many years before that.
So, My team has been managing properties for a little more than 12 years total. EPIC
offers management services for residential properties, people have purchased as an investment.
Single family or multi-unit apartment buildings. Right now we handle about 80% single family
homes, but it's based on the portfolio of whatever the investors bring to us. We manage
apartment buildings as large as 120 units.
Jeri: So what drew you to prop mgmt, you personally?
Andy: Me personally, I've always looked at real estate as one of the vehicles for investment
that I felt the most comfortable with. I like the idea of a tangible object that I can invest
in, something I can drive by, I can look at, something I can get my hands on and do repairs.
So I think of all the different ways someone can invest their money, I think Real Estate is unique in what it offers
both for the investor and also what you can offer back to the community as part of your
investment, as making housing available for people who have a need to fill with your rental.
Jeri: So when an investor is out there trying to find a Property Manager, what should that
person be asking when they're looking for a property manager?
Andy: I think it's very important that you spend that time getting to know each of those property
managers so you can get to know them and know what their philosophy is and see how they
feel about what they do. They're going to be representing your properties to potential
tenants and it's important that they look at investing like you do. Whatever that is,
that they know your goals and that you're comfortable that they'll be able to handle
and execute your goals. I don't think people spend enough time evaluating who they're going
to use for their management, and then maybe have a negative result because they didn't spend the time
that they maybe should have. Really get to know who's going to be in charge of what is
a sizable investment.
Jeri: Do you have any words of advice that you'd give to a new investor who's just getting
started?
Andy: Yeah, I think the golden rule for real estate and probably any investment is to plan
for the worst case scenario. Plan for everything to go wrong and be patient to know that what
you're getting into is the right move. There will always be another deal...there's always
another house coming on the market...and sometimes, even if it's your first or second one, you
get so caught up that "this is my deal" that you forget that...maybe it's not. Maybe it's
not your deal and you just have to be willing to be patient enough to wait for the next
one--the right one.
Jeri: So, don't get caught up in the emotions of it, just watch the numbers.
Andy: Yes, definitely. You should be excited about investing, but when it's new, it's very
easy to get caught up in the process and forget that it's really about the numbers. Work it
backwards and make sure that you're buying it for the right place and if you're not,
walk away. It's okay to walk away.
Jeri: Are there any potential pitfalls and experiences you have seen with investments
or investors in the past?
Andy: I have seen a number of scenarios where investors, like I said, get too caught up
into one aspect of the entire process. I think that's where a good PM will come in and help
provide that larger view. Sometimes an investor will get so focused on their properties that
they forget to see some different sides of the entire process that they're working through.
I think a service that a good property manager can provide is to come along side the investor
and say "we know each other's goals, we've moved on past that point, and now here is
how I can take you from where you are to where you want to be," and we make a plan together
so that your manager's handling your day to day and as an investor you're focusing on
the goals of your investment.
Jeri: Do you have any thoughts on investing in the Cedar Rapids area, the Corridor right
now..what do you think the potential is there?
Andy: I think it's a great time. I know when you're in real estate, it's always a great
time (laughs), but I do believe it is right now. We're through the period of financial
turmoil we've been through a couple years ago, I think we're through that. Traditionally
this area does really well. We have a good combination--land value helps keep development
under control, we don't have huge expansions of develeopment unless the demand justifies it.
The prices stay very steady and I think nationally, if you look at what happens in
different markets, I think our market is very predictable. We're the tortoise--slow and steady
and we just do nice progress every year as far as property values and economic
influences. We've traditionally been a very steady place to do investing and I think
it's a great time right now to do that.
Jeri: I want to go back and unpack one of the things you mentioned before, that you
are a full service property manager. What does that mean to me as sommeone who's looking
for services? What does that come with?
Andy: Typically, a new investor tells his/her friends, "I'm going to invest in real estate."
The first thing they all say is, "so that means at 3am you're unclogging someone
else's toilet?" A property manager takes care of that. We do provide a lot more, but that's
probably the first question is, "will you take care of that for me?" and certainly we
will. I think larger than that though, it really is about an end to end service. A property
manager should be able to step in from day one, begin advertising for you, begin the
marketing process of that property, attracting tenants that are well qualified and a good
suit for whatever your rental is, and then work the tenants through the process to make sure they've
been screened properly. All of the documentation is in place, their lease is in place, and
then do a check-in on the property to make sure that while they're occupying your investment,
they're treating it with respect and taking care of the property, that their needs are
also being met to make sure that you're fulfilling your duties as an investor, all the while
fulfilling fair housing rules, making sure that everyone's taken care of as far as state
and federal regulations as required.
Andy: When things go well, a lease comes to its end, the tenants decide to move on, a
good property manager will help with the exit of that tenant, up and out of the property, so that
the deposits are handled correctly and that the properties return to a rentable condition
right away. When things go bad, the property management company is there to handle evictions,
to handle significant damage when necessary and is documented. A property management company
knows the right steps to get ready to begin for an eviction, but also to begin the process
of helping defend your investment against continued loss, and also to maybe collect
damages, if necessary, from the tenant. Deposits don't go far enough, sometimes a small claims
suit is in order. Most property management companies can handle that for you as well.
Jeri: So can you tell me a little bit more about the process for selecting a tenant for
a property?
Andy: Yeah, it begins with the tenants contacting us interested in a property, and they should
go through a series of vetting steps. Different management companies will have different steps.
It's important as an investor to know what your company does to screen those tenants.
A good company will have several things in place. We do a national criminal background check.
We do a full credit check with a credit score, and you're looking for indicators in
their history that they may not be financially in a good place to be able to afford what
they're looking for. You want to make sure that their income matches with what their
rent payments will be. Along the criminal lines, you want to make sure you're not placing
someone in a rental that would have a potential for criminal activity in a property.
Jeri: Okay, what about the lease itself? What kind of process do you go through for that?
Andy: Uh, two things with a lease. The first thing would be that the leases are updated. Here
at EPIC, we spend thousands of dollars a year making sure our lease is up to date with current
law, that it's also up to date with anything that may have occurred that we didn't have
before. You should be reviewing that lease and a good company has a living document.
That lease gets updated anytime that there's a new change that arises--that lease is being
updated to address what's current.
Jeri: Right.
Andy: And the second part would be, it's important that the tenants understand the lease. We're
signing them up with a contract and it's important that we not just get them to sign it, but
the tenants understand the expectations that the landlord and the management company and
the investor have. It's important to have that foundation, I think, so we go through
the leases with our tenants and we take the time to read through the lease with them and
answer any questions that they have. We've found that it has made it much easier. When
problems arise, we both sit down with the lease and go through it and we look at it
and say, "If there's a problem, here's where the problem is and what we need to do to correct
it." If the tenants can do that, then things become a lot better. A management company
should be able to provide that to you. Not only do we have the document, we are also
able to go through it with tenants and really make sure that we have prepared for the worst
case scenario but hope for the best.
Jeri: How about setting a rent for a particular property? Is there a process that you use
or give guidance to for your clients?
Andy: There are. For the owners that we manage for, we provide an analysis of the property,
a market analysis, what rent rates are, both what we think the property would rent for
in its current condition and if there's anything an owner can do to increase the rent or increase
the attractiveness of the property in that price range. We like to provide that feedback
so that an owner can have a second opinion on "Do I change this or do I not?" I've had
owners that spend too much money and I've told them, "You don't need to do that today,
let's save that money because down the road, there's going to be something else we're going
to do." I think owners appreciate that kind of feedback because every dollar counts. Let's
work together to spend it as efficiently as possible so it goes the furthest.
Jeri: How about, do you see trends with people that don't use property managers and the rents
that they establish?
Andy: Generally. I see that the rents that are charged by individual operators tend to
be all over the board, but generally they're low. What we have found is that many times
when we take over management of a property, the amount that we charge as a management
fee, which is based on the rents collected in our case, generally we can actually collect
a little bit more rent for them. So the difference in our cost vs. what they are losing because
they didn't know they could charge a little more, we're able to usually account for our
fee just by what we're able to do for them as far as increased rents, or lowered maintenance
costs by providing some of the other services we offer that they're going and finding on
their own.
Jeri: Right. Do you have any final thoughts that you want to share with our viewers?
Andy: I would say, if anything that I could express to the viewers would be--each piece
of this process you're going through as an investor and looking for your team, it's important
to know the people you're working with. It's okay to go interview a property manager.
I have a lot of people come and interview me, not always like this, but I have a lot of
people who will interview me to get to know who I am and who we are as a management company.
I think that's a great thing. A lot of people will apologize for taking my time up, but
to me it's important that I know who you are. If I'm going to work for you as your property
manager, I want to know who I'm working for. Likewise, I would expect that you would want
to know who I am and who my team is and what we do, so that you're comfortable. You're
ultimately going to put me in charge of a pretty large investment and I think it's okay
to take your time and get to know every member of your team.
Jeri: Okay! Thank you so much Andy, I appreciate it.
Andy: Thank you!