This is the first of our 12-part series called What To Expect From Your Property Manager.
\n\nWhether you are your property manager, you are already in a property management relationship, or you are thinking about hiring a property manager, this series help you set expectations for performance that can only positively impact your profitability over time.
\n\nChris and Laci kick off this series with a discussion about getting clear in your mind about what you want in a property management relationship.
\n\nSpecifically, we cover the many hats a property manager wears in the course of a month, being able to articulate your reasons for investing in real estate in the first place, managing property remotely, the value of your time as a scarce resource, and the hidden and not so hidden costs of going it alone.
\n\nAs an extra bonus we are going to be joined for this series by Gretchen Mitchell, Director of Property Management for ROOST Real Estate Co.
\n\nI guarantee you will find tips tricks habit and mindsets you can you to make your real estate investments work for you – and not the other way around.
\n\nBe a guest on the Landlord Profitability Playbook Podcast
\n\n\n\n\n\nVisit Rental Property Registration to access the registration page and self-inspection form.\n
(AI transcript provided as supporting material and may contain errors)
\n\nChris: Hello Chris McAllister, here with the Landlord Profitability Playbook Podcast, where it's my job to create and coach business opportunities and strategies that support and add value to the lives of residential real estate investors. I am not only joined today by my good friend and podcast partner, Laci LeBlanc Good morning Laci Good morning Chris but also by our Director of Property Management at Roost Real Estate Company, Gretchen Mitchell. Hello, Gretchen Mitchell.
\n\nGretchen: Hello.
\n\nChris: This is our first in a 12-part series called what to Expect from your Property Manager.
\n\nSo, whether you are your own property manager or you are already in a property management relationship, or you're thinking about hiring a property manager, this series will help you set expectations for performance that can only positively impact your profitability over time.
\n\nSo we're going to kick this off with the discussion about getting clear in your mind about what you want as an owner in a perfect world property management relationship, and that's why we've titled part one of this series Get Clear on what you Want from the Property Management Relationship. So specifically, today we're going to cover the many hats a property manager wears in the course of a month, or, if you're your own property manager, the hats that you have to wear in the course of a month, but being able to articulate the reasons for investing in real estate in the first place, your reasons for investing in real estate, or, if you're managing properly remotely, the whole idea of the value of your time is a scarce resource, hidden costs, whatever. It's a lot, so we're going to get through all of that today. You know it's a lot, so we're going to get through all of that today and I guarantee you as always I know this is a heavy guarantee us a little information about who you are, what you do, what your background is and all that good stuff.
\n\nGretchen: So I have been with Ruth since it started in 2014. I got my real estate license in 2008, my broker's license in 2018. And I have been doing property management basically since right after high school.
\n\nLaci: Why is that? What's the connection there? I'm going to force this out of you guys. Yeah, is that?
\n\nGretchen: Mr Chris McAllister is my dad.
\n\nLaci: I've been joking this whole time.
\n\nI was like you know, I really want to get Gretchen on here because you're a wealth of information.
\n\nWe talked about how some of the searches for Roost Real Estate because I'm the marketing person, so I'm on the back end looking at search terms are Gretchen Mitchell, Because you network and you talk to people and you share and people know you and you've just been such a key for me to understanding how this property management side of things works.
\n\nBut I also want people to know that this is a family owned and operated kind of venture. I think that's really cool and, as somebody who has you know as part of a family who owns and operates their own ventures, I just think it's a really compelling story that you guys have. This is another one that Nana is going to need to listen to Chris for my dad and my brother's sake, as they are her de facto property managers, but really excited to have you with us, gretchen. I'm really excited to hear your expertise. I don't want the relationship to overshadow that by any means, but I do think that it's very cool that you guys are doing this and I get to see what people who are listening don't get to see is how well it works.
\n\nChris: We wouldn't have gotten this far at all if it wasn't for Gretchen. She's been doing property management since before we launched Roost, so she's got a few years under her belt and a thousand doors to look after these days. So she's done an amazing job. Before we dig in to the topic of the day, I want to give everybody a quick update on the Springfield Ohio Landlord Registration and Licensing Ordinance.
\n\nSo back in December seems like so long ago Lacey and I did a podcast on this subject and I am happy to report that the Springfield City Commission voted I believe was on might have been, I don't remember the date.
\n\nI think it might have been the 21st or maybe it was the 28th All those dates are running together but they voted to amend the ordinance by removing the self-inspection requirement.
\n\nSo that was what we were most concerned about was this whole idea that we as landlords who aren't qualified to do what they were asking us to do, would have to go in and do an inspection and then a test not to the best of my knowledge, but legally, a test with a signature that we knew what we were talking about. So this is a significant win for property owners and for property rights, and it's also a win for our tenants, quite frankly, because I don't know how we would have been able to manage on behalf of our many owners and still take care of them and take care of the tenants. So the whole thing was a mess, but at this point it looks like it's all gone away. No reason to worry about it, no reason to listen to that podcast, unless you happen to be in a city that's contemplating something similar. But that's. It's all good news for landlords with properties in Springfield Ohio, and we have begun the registration process for all of our Springfield owners. So, Gretchen, you've been working with Courtney on that, correct?
\n\nGretchen: Yes, I have.
\n\nChris: So we should be in good shape on that. I think our commitment was that we would have all of our owners and properties in Springfield city limits registered by the end of April. So good news there, all right. So as we dive into getting clear on what you want from a property management relationship even if that relationship is with yourself I want to just have a conversation here about the many hats of real estate investing. So you know, as we all know, you know, with Lacey having real estate and her family, gretchen growing up with it, owning rental properties, herself myself owning rental properties, you know it is a journey and it is filled with many opportunities and many challenges.
\n\nAnd you know, as an investor, you're not just putting money into a property. It's not that easy, right? You're stepping into a variety of rules that demand, you know, your time and attention and expertise. You know we've talked many times that. You know people think that investing in real estate creates passive income. It certainly doesn't. There's nothing passive about the income that you earn from real estate investing. So you know, when you think about all the things that you have to do, you know getting your properties leased and screening and counting and paying bills and so forth. I mean, there's a million different hats that we have to wear. So you know off the top of your heads what are some of the things that investors have to do for themselves. I guess that we do every day for our investors.
\n\nGretchen: I think a big one is maintenance Because, let's be honest, maintenance is probably the toughest part of property management. Owning a rental property, we have a whole team that is devoted every single day to just turns to get them rent ready and just maintenance and scheduling the maintenance people to go take care of those repairs. That is a big thing because it can be costly. So maintenance is a big one, like I mean even being a counselor, to be honest, to these tenants of you know you need to get along with your neighbor, keep your music down and we set up payment plans with them. So we hear all the stories, all the struggles they're going through and we try to be there for them, but at the end of the day we still want to help them get their rent paid and want to make sure they're living in a safe place.
\n\nLaci: That's a really interesting point. The emotional toll is not something that I was prepared to talk about today, but I feel like that has got to be huge now that I think about it. After living in one of my grandmother's rental properties for a decade, I had this neighbor who has been there for twice as long and we moved out, and the other day on Facebook he made a public post about his new neighbors which they just happen to be extended family members of of mine and how much he dislikes them and he is such a great renter. You know he's just the ideal relationship, but you know that's something that my Nana and my dad and my brother have to deal with. Every time they get a check from him is you know his emotion, like what's your emotional state? And counseling them. So I think that's a really interesting point. We think about finance, we think about maintenance. You know we think about just like the to-do list, but the emotional toll of being a landlord is actually huge, isn't it?
\n\nChris: It is, aside from being a plumber and a maintenance guy, you know you have to be your own tenant relations manager, you know, and that's that is a gigantic hat. And I would say that honestly, gretchen, I don't know if you'd agree with this or not, but I think that's one of the major reasons, if not the major reason that people, especially accidental landlords, ultimately hire us is that they just can't stand or they're just not emotionally equipped or have the bandwidth to deal with tenants and their issues.
\n\nGretchen: Yeah, I agree with that completely.
\n\nLaci: I don't think anybody in my family is any better equipped to do the emotional work. They're better equipped to do the plumbing and the maintenance, the finance, than they are the emotional work, for sure.
\n\nChris: Yeah, when you talk about finance, I mean you've got to be an accountant, right? I mean to some degree, and I guess you know for some people maybe it's just keeping a checkbook, but you know you've still got to get all your receivables in, you've got to get your payables out. The bank has to get paid, the tax authority has to get paid, the water bill has to get paid. So accounting is a hat. What other hats? What other hats?
\n\nGretchen: I guess leasing is a big one. If you don't do your homework there, you could end up with a real problem. So, like with Roost, we have a list of requirements that applicants need to meet, whether it be a credit score, income, previous landlord verification references, things like that. Screening tenants is a big one, along with then making sure your lease is correct. Make sure you have specific things in your lease. Another thing is unfortunately they happen, but you know we have done this long enough that we know the rules of a three-day notice. A lot of times individual landlords don't know that in certain counties you can't count holidays and you can't count weekends as part of the three day notice. So when you go to court it all falls apart because they didn't do the original paperwork correctly.
\n\nChris: Yeah.
\n\nGretchen: So you got to be a lawyer too. That's another thing.
\n\nChris: I didn't think about the paralegal hat, not that we're practicing law without a license I didn't think about the paralegal hat, but that's really good.
\n\nSo we've got leasing, we've got tenant relations and retention, we've got maintenance, we've got rehab, we've got. I guess that pretty well sums it up. That's a lot of hats. I'm sure if we sat here and thought about it we'd come up with a few more. But you know, I think the first thing that you have to do when you're considering, you know, a new property management relationship, or resetting an existing one, or trying to get clear what you expect from yourself. You know this is a multifaceted responsibility that you've taken on and again, there's just nothing passive about this on, and again, there's just nothing passive about this. But you know, recognizing that fact is the first step in understanding you know what you need and what you ultimately are going to want from a property management relationship. The other thing I think it's important that you be able to articulate for yourself and as well as for your you know potential property manager is what is your why behind real estate investments?
\n\nYou know people dive into real estate for a myriad of reasons. For some, again, it's the allure of passive income. For others, it's the stability and the appreciation potential, you know, compared to other types of investments, right, and you know, for others, it's a way to diversify their portfolio. Maybe, you know, they do stocks and bonds, and they also do real estate. I think the coolest thing that people see about it, though, is that it's a tangible asset. They can see it, they can touch it, and, you know, they feel like they have greater control over it because you know it's right there.
\n\nBut everybody's goals for owning real estate are unique, right, you know we've got owners that this is how they make a living. We've got other owners that maybe became what we call accidental landlords, you know, because they had a house that you know they didn't want to sell or couldn't sell, and then they need help managing it. And then other folks, you know they may be professionals doctors, lawyers, dentists, whatever who have decided to invest in some rental properties as a way to diversify their portfolio. Everybody's goals and reasons, to a huge degree, are unique, but at the end of the day, I think they're all seeking financial freedom, an opportunity to build wealth and secure a future. The only thing I would say, though, is you still have a lot of folks out there you know that we're dealing with that you know are getting into real estate because they watched a late night infomercial and they think they're going to get rich quick. And I'm guessing those are your favorite owners, right, gretchen?
\n\nGretchen: The ones that need a little bit of guidance, but that's what we're here for.
\n\nChris: But, Gretchen, your house. You tell us that your first house was just too good a deal to walk away from and that's why you initially became an accidental landlord, right?
\n\nGretchen: Yeah, I actually was. Even though I'm in the business, I am absolutely an accidental landlord. So I purchased a house my first house by myself little, two bedroom bank owned property, put some money into it, lived there for a few years before I got married and then we moved out to a bigger home and really the mortgage was low enough that I knew I could make money on it. So we rented it out and it's been solidly rented, truly ever since.
\n\nChris: So you still make your house payment every two weeks.
\n\nGretchen: I do.
\n\nChris: So you make 26 payments, so you end up making 13 months worth of payments in a year then. So how much do they take out every two weeks?
\n\nGretchen: I believe it's about 175.
\n\nChris: And I think that-.
\n\nGretchen: Too good to let it go.
\n\nChris: And that includes your taxes and insurance, because it's an FHA loan, right, so I don't think you paid. What did we get that for? Like 30 grand or something.
\n\nGretchen: Yeah, I think it was like 29, 30, 31, something like that.
\n\nChris: How much do you think you could sell it for today?
\n\nGretchen: Oh, I have people call about all the time for it.
\n\nChris: I tell them a million dollars.
\n\nGretchen: But what 80, 90?
\n\nChris: I bet you it's worth pretty close to a hundred grand right now. Yeah, you know, when I got into real estate and got my license, I think the primary motivation for me was to own real estate because, you know, I've told the story before on the podcast but I read Rich Dad, poor Dad when I was still working at Target in New York and I thought, well, that might be a cool thing to do, I can get rich and do it quickly. And it didn't work. We bought up a bunch of rental properties, had a bad partner, lost them all in the crash and then we started over. But I started over because at the time coming out into 2009 and 10, you were able to buy houses, just like you did, gretch, for very little money.
\n\nAnd over the course of 15, 16 years now I've built that portfolio up from nothing again to I don't know 30, 40 doors with some stuff, with board and so forth. So again for me, fortunately, there is some income that I get from those now. But the most exciting thing for me is that you know I'm going to wake up in another 10 to 15 years and all those properties are going to be 100% paid off. So you know, for me, being in the business, real estate is my primary means of creating wealth, which may be different for other people, but we all have different reasons. But at the end of the day, I think we're seeking financial freedom. It's the folks that are hoping for instant passive income that they can count on every month that tend to get disappointed, and, whatever your situation is, I really hope that you'll take the time to get clear on that for yourself so that you can share that with your property manager and they can kind of understand where you're coming from as well.
\n\nLaci: I really love that point. I love the. You know, I come from franchising and it's a very similar conversation where, if you're doing this for as a business right to create wealth, you a lot of people buy into a franchise. And why do you buy into a franchise? It's because they've already established the plan right, and part of that is they've already made the mistakes that have to be made in order to figure out how to make this work and work in the best way possible, and that can include financial mistakes or process mistakes or marketing mistakes or branding mistakes, whatever it is. And so you mentioning that you've done this poorly and then you figured out how to do it well, and some of that was circumstances and some of that was bad decisions or whatever the case may be.
\n\nAnd I think that's a really interesting point that when you think about doing property management yourself, it's kind of like doing mosquito control yourself right, Like anybody can do it theoretically. Now can anybody do it Well? Like, will you actually get rid of the mosquitoes? That's the franchise I come from. You know, will you? How long will it take you to figure out how to really legitimately break the lifecycle and give clients the experience that they want and need to keep you coming back and paying you right, and how much is that going to cost you, both in time and money and pride, your emotional well-being. So I think that's a really interesting point, too, about choosing to property manage yourself versus using a property management company or a professional.
\n\nThe other thing is we always talk about professionalism on this podcast. Usually it's on the agent side of things, but I think that we talk about professionalism being the ground level of being a successful real estate agent, and it's the same for a real estate investor. Professionalism and having a process and a system and playing by the rules and making sure you're doing it right every single time and doing it the same way every single time is the most efficient way to be successful at this too. So two really great points.
\n\nChris: And when you don't approach it as a business or you don't approach it as a professional, you also run the risk of running afoul of fair housing. So there's some pitfalls in this that some people don't think about. So that's an awesome perspective. So let's say so, it's interesting. So we have owners that actually live in the towns where we manage and we have other owners that live out of town but maybe they can drive in and drive past their properties whatever they want. And then we have other folks that are investing in real estate out of state. And you know, if you're an out of state investor with an interest say, you're in California and you're interested in buying houses in Columbus, ohio there's a that remote control challenge, right, that extra layer of complexity is a big deal and you know, maybe you're experiencing that stress now. Maybe you haven't bought anything yet and you haven't thought about that stress. But the whole thing of what you're going to expect from your property manager when you have zero direct control, influence or eyes on the ground is it's a big deal and it's something to consider.
\n\nAnd a lot of times, you know, we've dealt with a lot of owners who have made mistakes buying out of state, and we've talked about this before that you know we had a lot of folks, especially during COVID, that wanted to buy up properties because they just look so cheap and, you know, like Dayton Ohio, and didn't realize that those properties hadn't been inhabited for decades in some cases, and had zero idea what it was going to take to get those properties back into service, which makes their life miserable and, quite frankly, gretchen's life miserable as well.
\n\nYou know, if you're going to be buying outside of where you are, you're going to have to find somebody that you can absolutely trust and be your eyes on the ground and look after your properties as if they were their own. And when I was thinking about this podcast today, gretchen, you can tell us how it's gone. But we got an inquiry for one of our market rate rent offers and it was interesting because the owner of a property that we currently manage in Springfield wants to sell them and somebody is interested in the properties and they reached out to us to do a market rate rent analysis. I don't know that they were aware that we already managed them or not, but this is what you tell us about the gentleman that contacted us over the weekend.
\n\nGretchen: So he did put in. I think he put in for property management services as well, but I think he might have known it was us that managed it. But he and I just had an honest conversation. He asked you know, do you know why this owner's selling it? You know we talked to him about what it could be to sell it, what not to sell. You know they're all rented right now. We like this property.
\n\nI told him personally that I hadn't walked it, but I would be happy to do that for him because he actually had to take a plane here from California to see it the first time and he'll probably never see it again, to be honest.
\n\nBut he and I just had an honest conversation about what was rented, what wasn't. That I hadn't actually seen it, but I would be happy to go walk it. And we just we clicked and I told him that I would be happy to go to the inspection for him, which is actually happening this morning. So I couldn't go, but I have someone else going. But they're going to go to the inspection and they're going to give me some pictures. We're going to look at everything for him, just to be an extra eyes and ears. And I think he really liked the conversation because we had already been familiar with the property and we want to keep doing it for him. We just got along really well and he's ready to sign the paperwork and get started as soon as he closes. He's very excited and he actually calls me every day to give me updates on what's going on with the sale.
\n\nChris: But I think that doesn't happen as often as we'd like it to happen. But when it does, it's just a gift, because we know at this point you're developing a personal relationship with him, you're getting a feel for why he's doing this, what he expects from the property, what he expects from us, and if it turns out that his expectations are out of line with what you know we can do for him, or how the property is going to perform, you're going to tell him and that may mean that we lose some business if we tell him something that doesn't align with his hopes and dreams, but still, that's the type of service that we just have to provide. So good on him for reaching out, and I don't know if he's interviewing other property managers my guess is at this point he's not but I don't think that he would get the same answers and responses he's gotten from you.
\n\nGretchen: I'm working with another lady that called and did one of the inquiries and she actually just signed up her two doubles, four units, and she's got a little bit of a mess on her hands, but we are being completely open and honest with her. We're going to have to clear house. We're going to have to clear house, we're going to have to turn this unit, we're going to have to evict these two tenants, and it's probably not the things that she wants to hear, but fortunately she's on board and she understands and she trusts us to do it, cause again, she's out of state as well.
\n\nChris: Yeah, that's fantastic, so that understood what a nightmare Like that's just like I just got.
\n\nLaci: I could have a panic attack right now thinking about having to do all those things and you just rattle them off like, oh, this is just on my to-do list today. We got to evict these people and turn this thing and left right, left right, and I'm over here hyper-thinking about just maybe how would I go about doing one of those things and I think that says a lot.
\n\nChris: And this whole thing of buying remote control. It's just the importance of having a property manager who's not just a service provider but a local partner. You want somebody who understands that market, that neighborhood intimately and connected your eyes and ears on the ground. So got to find that person. All right, let's touch on the time commitment.
\n\nYou know we have owners that put more time into their properties than others. Some people have a hard time letting go. Some people, you know, make it hard for us to get a hold of them when a decision needs to be made. But I want to talk a little bit about the balancing act and the time commitment. So you know, managing property it is time consuming, you know, and, as we've said, it involves tenant relations. It involves leasing, tenant inquiries, emergencies, tenant relations it involves leasing, tenant inquiries, emergencies. You know local laws. I mean, you know even the whole thing with the Springfield rental registration that we updated at the start of this podcast. I mean all of that takes time, mental bandwidth, knowledge, and I think it's safe to say that. You know our Springfield owners are happy that we were able to dig into that and try to get out the front of it as best they can. So you know, good job to Gretchen and the team doing that.
\n\nYou know from a time commitment as an owner.
\n\nChris: You know, if you do have a full time job, that pays the bills, the last thing, you know. I don't want to preach, but I think the last thing that you would want to do is end up having this new sideline, this new opportunity to diversify your investments, start to interfere with your primary means of making a living. You know so. The time commitment can be big, and it's not just about the hour spent. It's about the mental load, the bandwidth and the impact on your personal life and business, everything else. So, as we've said a billion times already today so forgive me, you know there's nothing passive about real estate income. So what, gretchen, do you have any owners that you work with that? It really feels like that they have more of a time issue than anything else.
\n\nGretchen: A lot of it is. There's a difference between, say, a seasoned landlord that has multiple units, say, a seasoned landlord that has multiple units, versus one that really depends on that rent coming in. They need a little more attention and we just make sure to tell them hey, it's the sixth, they didn't pay yet. We're going to post we walk them through every step of the way everyday updates. But there is a difference between owners that have the money from other units that can go toward a maintenance bill and there's owners that have to put from other units that can go toward a maintenance bill and there's owners that have to put in money through their account. That could be a struggle for them. I mean, they depend on that money. So there is quite a difference between seasoned and accidental, or they're really banking on needing that money for other bills to live their life.
\n\nChris: Yeah, and oftentimes that anxiety comes over, know, comes over on our side and we share that anxiety with them and that's just not fair. I have to tell myself a lot. I think we remind each other that you know we didn't sell them that house, we didn't overpay for that house, we didn't get them in financial trouble. And you know we can't it's not our fault, so to speak but we can certainly do everything we can to help them. But I think you're right, I think from a time commitment, if you know you bought that house with the expectation that you were never going to have to put a dollar in and hopefully you're going to get some dollars out every month you know their time and at least mental commitment is way bigger than it should be.
\n\nThat comes, you know, we feel that, but you know like. You know we feel that. But you know, like you know, we've got owners who own well over you know 100 units and multiple complexes and you know it's funny, we don't for most of them our best owners. I don't think you hear from them as much as you hear from the accidental landlord down the street who's just not quite comfortable with renting out their house 100%, 100%.
\n\nSo for professional investors, you know, the time commitment might actually be less than for people who own one or two houses or definitely for people who are looking for instant monthly income. I was thinking about our friend Gibran that we've been working with. He started out in Columbus. Now he's in Dallas and we've had some contact with him because he's got a house that he you know he had long term tenants and never had to lift a finger in that house and now he's got a huge rehab because both sides left at the same time and you know he my sense with Gibran is his stress is that he's got a big full time job and you know he'll ask me for something, he'll ask you for something, we'll respond, and then we don't hear from him for a few days and you know then we do. So it's a big deal. And you're right.
\n\nWhen things are going well and the rent's coming in every month and you don't have to worry, you know maybe the time commitment isn't there, but as soon as somebody moves out or you know something happens basement floods, whatever then you know the time commitment gets big. So you don't want to get sucked into. Every day's just going to be terrific like it is now. There's good times and there's bad, and my advice to everybody is, if you're thinking about you know getting a property manager, start doing your due diligence. While things are good, don't wait till you're up against the wall and you know the whole world feels like it's falling apart around you before you start interviewing somebody, because you'll run the risk of making a rash decision.
\n\nLaci: Yeah, that's Nana for you, right there. You don't get to choose when these things happen, right? Like you don't get to choose when somebody is going to move out or destroy a property. Or you know, you don't get to choose and maybe it's not for a battery, maybe they bought their own home, like, maybe they're moving out because they got to level up right there next roost, but you don't get to choose when these things happen.
\n\nSo in my family it doesn't matter what's going on at the car lot where my dad and my brother work full time, you know and are plenty busy, right, it doesn't matter what's going on, you know, health wise, or in your personal life.
\n\nOr it doesn't matter if the grandkids have a special event, or you know if that flooring needs to be replaced and that that unit needs to be turned. Or you know if something needs to be fixed overnight, then something needs to be fixed overnight and it just you don't get to pick it and you don't get to put it off either. So I think that's the when you and when I think about, about these like accidental landlords or people who are relying on this income, how much additional stress they're already under stress and how much additional stress that causes you and really cost too. It has to be like I just I think to myself all the time how much money my, my Nana, could save if she could just take this step to, like hire somebody Right, like it's. It really adds up in the end. It has to.
\n\nChris: Yeah, I think it does, and Gretchen deals with those owners every single day. You know, marcy and Brenda deal with the tenant stress, but Gretchen deals with all the owner stress.
\n\nGretchen: So yeah, I mean we had. I felt so bad for her. We had one owner and you know the worst thing happens. So she, there's water and sewage coming up in the front yard. The main line broke from the street to the house. It's on the owner to repair that. Dig up the street, dig up the yard. Permits have to be pulled, thousands of dollars. The next week it happened again on a different property. So no, you don't get to pick it. But unfortunately this owner had been hit hard a couple couple times and we felt it for her and we didn't want to call her and say, hey, this happened again.
\n\nI can't believe it, but we feel the stress for them.
\n\nChris: Yeah. So I'd be remiss if I didn't talk about or highlight the costs of going it alone, and I guess to some degree this seems self-serving. But I think it's important that if you're feeling any of these costs as you manage for yourself, that you'd be able to articulate exactly what you're feeling to your potential property managers to make sure they understand what's happening with you, because you're the one writing the checks. It is all about you. So you know going it alone independently, you know it's a cost saving strategy, but there's hidden costs and you know some of those costs. Like you, can't you wake up at 2 am and you can't go back to sleep because you're thinking about it. You know you get interrupted on date night. You know you get interrupted at the kid's soccer game. You know you get distracted when you're one-on-one with your boss or a client because some kid flushed a Barbie down the toilet, right it, barbie down the toilet, right it's.
\n\nThere's costs to going it alone that accumulate over time and it's like that whole story of you know you have to cook a frog slowly because otherwise he'll. If you just toss him in half hot water he'll jump out. So if you do all these things are going to happen. At the start you wouldn't have invested in rental property. But then, as you do invest in rental property and you get used to this stuff, you just don't realize what's happening, the stress and time command demands. They can and do affect your quality of life and your ability to focus on what you do best.
\n\nAnd you know even if it's not just you know taking care of baseline right. If you focus too much time on the day-to-day management, you're not going to have time or the headspace to identify new opportunities or, you know, even growing your portfolio. So forget about all that. If you're just trying to get the toilet plunged and you know the lack of professional management can lead to costly mistakes, whether it's tenant disputes, to delayed maintenance issues, and that's going to mess with your profitability and the ultimate value of that property over time.
\n\nSo, gretch, when you're well, one of the things that always, I guess what it comes down to is you know, if you're, if you decide that you're going to hire a property manager, you've got to be willing to commit and you've got to be willing to commit to the relationship, and to a huge degree it does mean giving up some control and you will be better able to do that if you can set expectations and really investigate the background of your potential property manager. So you know, gretch, what's it like to deal with an owner who's having trouble, I guess, letting you do your job. What's that like for you?
\n\nGretchen: Well, you can understand it. So you know they say you're dealing with a new owner that has been doing this for 30 years. It's all they've known. They love it, it's their babies. But you know they want to move on, they want to retire, they want to go move to Florida, but they really just can't let go. It is a little frustrating because sometimes it turns into kind of like divorced parents where it's mom said this, dad said I could do this with the tenants. They sometimes will tell tenants something that goes against what we told them, which can be frustrating and it can be a little bit exhausting. But we understand why. But it's just so much better for your own wellbeing, owners, If you just try to let it go and let us handle it.
\n\nChris: Yeah, and it's hard. And you know we've turned down owners I know you've turned down owners because we've talked about it who just aren't ready or they have so many rules for us, above and beyond the rules we have for ourselves, that we just can't do what they want. And you know I hate to turn away business, but you know we've had to do that more than once, that's for sure. I also think it's interesting when we were talking to we met with Don. He remembered the guy in Columbus that's got a lot of properties and this guy was interesting because we really want his business and we know he takes care of his properties and he's a super nice guy. But he's been investigating us, courting us, interviewing us for going on nine, 10 months now.
\n\nIt's one of those situations where he just retired, so he was in aviation, but he had like 30 rental properties and he's done really well, but he's done all of it himself. Pressure from the family that he needs to give up some of this too, but he is just not ready. You know I'm pretty confident that when he does decide to hire a property manager, I think it will be us, but until he's confident that he really is ready, willing and able to let go. He's not going to do it and I guess, at the end of the day, as much as I'd really like to have his business I think he's a great guy and he's got wonderful properties it's probably better for us that he takes his time, because it's just going to be harder to help him if he won't let us.
\n\nGretchen: So that's the keys. They have to be ready. And I remember Jeff Butterfield. I signed him on years ago and it was like the first full month that we collected rent, did everything for him. He tagged me on Facebook of him outside drinking a beer, smoking a cigar, just living his life, and it said thank you, gretchen and Roost Real Estate. I can do this now. He didn't have to worry and it just felt good for everybody.
\n\nChris: Yeah, we got a five-star review before we even knew how important that was.
\n\nLaci: Well, I've always known how important that is, so I'm happy to hear it. That's part of the reason that I enjoy working with you guys so much, but you're too modest. You always say, well, maybe this is a little self-serving to talk about the cost, but the bottom line is the bottom line. You're all in this to make money, we're all in this to make money. The owners and you guys right, everybody and you guys right, everybody has to profit or it doesn't work. So you know the fact that you guys are so tuned in to these and cost is the big thing, you know. That's why Nana doesn't want to give it up, and Nana's great at it.
\n\nYou know my dad and my brother are a great team for her. They make money doing it. They I mean deep down, if you ask them they really do enjoy it and that's why they haven't given it up. They're not ready. It works for them. And so you guys, being attuned to that and recognizing that you're all in this to ultimately create wealth and achieve your goals and knowing when to say no, I think is really a nice refreshing take on making money In a capitalist society where everything is you know, go now. You know. It's nice to hear that you guys are really thinking about the like, what is in it for your owners, your prospects, your clients, the tenants. You know you really do. It's important, I think, to look at the whole.
\n\nChris: You know you're in the we don't want to sign up an owner and lose them right. When we sign up an owner, you know we expect to sign that owner up for as long as they own that property. You know we want a relationship. That's a collaboration. We want them to be comfortable working with us, collaborating with us, and we have to be comfortable working with them and collaborating with them. You know.
\n\nLaci: But it's part of being in the shelter business, right? You guys aren't investing business or the agent business or the tenant business, or you're in the shelter business.
\n\nChris: So again, it comes back to the whole topic of this episode Get clear what you want from this relationship with a potential property manager so you can lay out your expectations right out there in front. Get them on the table ahead of time. So again, in conclusion, getting clear on what you want from a property management relationship starts with acknowledging the multifaceted, many hats role of a real estate investor, as well as the complexities of the market. It's about understanding your own goals, challenges of distance, commitment, potential impact on your life, on your investments, and then there's always that challenge of are you ready to let go? So, as you embark on a property management partnership or a collaboration, I really hope you'll seek a property manager who not only understands these personal relationship dynamics, but that they also understand, align with your vision, whatever that vision is, and that's going to make sure that your property management investment journey is going to be rewarding, profitable and sustainable for the long term. Anything else, gretch, that we should touch on today?
\n\nGretchen: I don't think so.
\n\nChris: Feeling pretty good.
\n\nLaci: Yeah.
\n\nChris: Laci Nailed it.
\n\nLaci: This was a fun one. This was fun. I enjoyed this very much. Thanks for having me. I felt not gonna lie. I felt a little bit like a third wheel, but you know I'll take it.
\n\nChris: All right, well, thanks guys, I appreciate it.
\n\nLaci: See you next time. Bye and there we have it.
\n\nChris: Thanks for listening in. If you want to continue the conversation, go to wwwlandlordprofitabilityplaybookpodcastcom. That's the landlordprofitabilityplaybookpodcastcom where we have additional information about the podcast and archived episodes. We'll be back next time with another episode of the Landlord Profitability Playbook Podcast.
","summary":"This is the first of our 12-part series called What To Expect From Your Property Manager.\r\n\r\nWhether you are your property manager, you are already in a property management relationship, or you are thinking about hiring a property manager, this series help you set expectations for performance that can only positively impact your profitability over time.\r\n\r\nChris and Laci kick off this series with a discussion about getting clear in your mind about what you want in a property management relationship.\r\n\r\nSpecifically, we cover the many hats a property manager wears in the course of a month, being able to articulate your reasons for investing in real estate in the first place, managing property remotely, the value of your time as a scarce resource, and the hidden and not so hidden costs of going it alone.\r\n\r\nAs an extra bonus we are going to be joined for this series by Gretchen Mitchell, Director of Property Management for ROOST Real Estate Co.\r\n\r\nI guarantee you will find tips tricks habit and mindsets you can you to make your real estate investments work for you – and not the other way around.","date_published":"2024-04-16T09:00:00.000-04:00","attachments":[{"url":"https://aphid.fireside.fm/d/1437767933/e6ae97de-6d4b-4344-8b9f-b62c4c887188/e54c1ef2-b3db-4d9a-b284-3dc33a014faa.mp3","mime_type":"audio/mpeg","size_in_bytes":29640940,"duration_in_seconds":2456}]},{"id":"3af36c09-a00e-47a8-9373-267172734992","title":"Ep007: Expand Your Empire With Rachael Schwalenberg","url":"https://www.landlordprofitabilityplaybookpodcast.com/007","content_text":"I’d like to introduce Rachael Schwalenberg to the Landlord Profitability Playbook Podcast.\n\nLast summer I was listening to the Evernest Real Estate Investor podcast while on the bike path and the guest that day was Rachael Schwalenberg of Columbus, Ohio.\n\nNow I listen to a lot of podcasts and I am not easily impressed but Rachael was amazing. She clearly knew the Columbus market inside and out. It was not a ‘rah-rah’ perspective either. It was nuanced, thoughtful, and in my opinion absolutely accurate.\n\nAs soon as I got home I got on the Google machine and tracked her down, sent her an email, and we have been friends and referral partners ever since.\n\nRachael’s years of experience in the Columbus market as a Realtor, property manager, broker owner, entrepreneur, and investor make her an invaluable resource to our listeners on The Landlord Profitability Playbook podcast as well as our listeners on our sister podcast Connect Practice Track & Grow for real estate professionals.\n\nWhen it's time to expand your empire, Rachael is the professional you want to work with.\n\n\nSHOW HIGHLIGHTS\n\n\n\nRachel shares her journey from property management to becoming a broker-owner, emphasizing her focus on working with investors to optimize their investments.\nWe explore the importance of maintaining a manageable business size, which Rachel believes is crucial for staying accessible to clients and building long-term trust.\nRachel discusses the significance of leveraging tools and spreadsheets for making profitable investment decisions, rather than doing the calculations manually.\nWe address the challenges that agents who entered the market in 2021 and 2022 faced when the market shifted, emphasizing the need for genuine commitment to succeed in real estate.\nRachel underscores the necessity of having supportive brokerage and proper training to grow and sustain a successful real estate practice.\n Rachel and I talk about the importance of building strong client relationships and being selective with the clients you work with, particularly in property management.\nWe delve into the strategies for expanding client portfolios in the Columbus market and discuss the long-term investment opportunities arising post-pandemic.\nRachel predicts a more stable real estate market in 2024 and discusses the impact of infrastructural developments, such as Intel's move to Columbus, on investment potential.\nWe highlight the value of networking and referral partnerships for building a real estate business, sharing insights into their successful collaboration.\nRachel conveys her approach to business growth, focusing on scaling her clients' portfolios and potentially growing Roost Real Estate with more agents and investors.\n\n\n\n\nLINKS\n\n Show Notes\n\n Be a guest on the Landlord Profitability Playbook Podcast \n\n Download your FREE copy of The Landlord Profitability Playbook and learn how to automate your property management. \n\n Visit ROOST Property Management and find out more about the ways we can help you create a more profitable portfolio. \n\n Visit Rental Property Registration to access the registration page and self-inspection form.\n\n\n\n\nTRANSCRIPT\n(AI transcript provided as supporting material and may contain errors)\n\n\nChris: Hi all Chris McAllister here with the Connect Practice Track Grow podcast and today the Landlord Profitability Playbook podcast, where it's my job to make your business better and your life easier. I'd like to introduce Rachel Schwallenberg to the dual podcast today. Last summer I was listening to the Evernest Real Estate Investor podcast while I was on the bike path and the guest that day was Rachel of Columbus, ohio. Now I listened to a ton of podcasts and I am not easily impressed, but I have to tell you Rachel was absolutely amazing. She clearly knew the Columbus market inside and out and what I liked about it. \n\nIt wasn't a rah-rah perspective either. It was nuanced, it was thoughtful and, in my opinion, absolutely accurate. So as soon as I got home I got on the Google machine and tracked her down and sent her an email and since then we've become friends and referral partners. So Rachel's years of experience in the Columbus market as a realtor, a property manager, a broker owner, entrepreneur, investor, you name it it just makes her an invaluable resource to our listeners on both podcasts. So I guarantee that you're going to find some inspiration, some lessons, some actionable tips, habits and mindsets you can use in your business to generate more leads, book more appointments, write more contracts, close more deals. Well, you know the drill. So, without further ado, I bring you my interview with Rachel Schwallenberg. \n\nRachel: Good morning. Good morning. \n\nChris: I'm OK. \n\nRachel: Nice to talk to you this morning. \n\nChris: Same to you. So you've done so much and you've been so active in the Columbus market and you've helped so many people. If it's OK, why don't you just tell us all about yourself and how you got started and all that good stuff? \n\nRachel: Sure, yeah, for those of you who don't know me, I have a background in property management. I started a very long time ago I won't put a year to it and age myself, but a very long time ago just doing property management, leasing, you know, large apartment complexes, and I kind of worked my way through that corporate system, ending up in a regional position running lots of different REITs, working with large owners and kind of burden myself out. So at some point I had gotten my real estate license in 2008. It was during you know the downfall, but there was lots of opportunity for first time home buyers, the $8,000 tax credit, and I found a niche. \n\nI built a business network and since I had decided to leave the corporate world, I took my broker's test in 2014 and opened my own brokerage. I had done some investing on my own. I had built, you know, a lot of good communications and different, you know connections. So I was lucky enough to start my own business in 2014 and grew that through networking small investors and, you know, lots of sales at that point and just kind of took off from there. So between property management, sales, investing, I've just kind of touched every level of real estate that I could, and that's the quick down-down version. But you know I've got a lot of history and I try and use that in my everyday business. \n\nChris: Specialized in working with investors, primarily correct, I mean, have you? \n\nRachel: My brokerage although I like to do some residential my brokerage, like the bread and butter of what I do, is working with investors on a daily basis. We help them identify properties. We'll help them sell their properties and reinvest. I'll work performance with them. We look at the property from a renovation standpoint, anything that we can do to get those dollars on their revenue. But yeah, we pretty much just work with investors on a daily basis. \n\nChris: That's what they like to do, they want to say, people grow. She does math. \n\nChris: She does math. No, I don't like math. \n\nRachel: I like using programs and spreadsheets that does it for me, because if I do that by brain, you're probably not going to be very profitable. \n\nChris: I mean it's amazing that you do it all and you do it well. I mean you know you're closing 20, 30 plus units every year and you've got I know you've got clients from all over the country. You're managing property for people, you're running your office and you've still got kids at home. I'm not quite sure how you pull all that off, but you know you make it look easy. \n\nRachel: We've stayed pretty small. In retrospect. We don't take on anything that we can't keep our hands on. I like to pride myself in the fact that I can really pick up the phone anytime an investor needs me. I think that our business could have been a whole lot bigger, but we've kind of chosen to stay relative and available. I think that's important. You and I have got a great job of being referral partners too, because that's important. \n\nChris: Do you have some long-term clients, people that you've worked with over the years? \n\nRachel: Yeah, I've got some people that I've had since I opened the brokerage and, like you said, I've got people from all over. I've had clients in Japan. A lot of my clients are in California, seattle, but, yeah, I've had some people that started out with me in 2014, 2015, and I still help them buy and sell their properties and manage their properties. We've developed really long-term trust and essentially, we can do a deal just by being over the phone, and it's great because we just have like an unspoken trust in each other where they know that I'm going to make sure I get the best deal for them. \n\nChris: Yeah, well, that's fantastic. So great agents connect right. So the podcast is Connect Practice, track and Grow. But again, you do so much with investors. We're going to run this on both podcasts, but so you sort of started this, but in a typical year, then where does your business come from? \n\nRachel: The majority of my business is actually referral based. A lot of investors talk to other investors and the word spreads. A lot of business comes from these podcasts, different YouTube videos People like to educate themselves and word kind of spreads that way. I do work with a lot of other agents, agents that are more residential agents, that don't do a lot of investments, and they will refer business to me. But I'd say the majority of it is word of mouth and investor referral. \n\nChris: So you to me, you light up a room in a good way and I don't want to say I'm envious of that, but I'm kind of envious of that. You invited me to a networking event. You recently did it at BrewDoc. Why don't you tell us about that? How did that come about, and is that something that you do on a regular basis? \n\nRachel: Yeah, so I don't usually hold a lot of them, as you know, but I like to attend them. I'm a very social person. I'm not afraid to talk with strangers, but the whole point of that was to try and get more investors to come out meet our hard money lender. A lot more people are going to hard money now. It's just a little easier with the interest rates and whatnot. So we really wanted to bring that lender out, have people meet them, meet our title agency, meet me. You know I want to be able to help more investors grow that word of mouth. \n\nBut yeah, I mean, networking is so easy to do. You can get people to refer you, you can get people to sponsor your event. It's just a very easy way to get your name and your face out there, and I'm not a shy person by any means, so I love being able to attend those to hold them even more fun. So, yeah, I just think it's a great way for people, especially agents, to be able to kind of build their book of business. But I had one recently and it was a lot of fun. We had a good time. \n\nChris: How do you keep track of all your relationships that you've built up since 2008 and probably before that? \n\nRachel: I'm very lucky to have a fantastic memory and I live off of my phone. So you know my phone has names in it with addresses attached and you know it's just used the tools that you've got. I have reports and I send Christmas cards every year to all of my clients and it's just keeping track with whatever works best for you. But yeah, I've got a lot of different ways that I kind of remember everyone. So, and then there's always the clients that you remember. \n\nChris: Clearly, your entire business is built on relationships and you know, I think you, I take that for granted, but it always strikes me as crazy when other agents are out there. You know, fighting, fighting and they're just going for the next transaction. I mean, why do you think there's so many agents out there that don't look at the business the way that you do? What do you think is I can't figure out another way to do it, but there's obviously other ways to do it why do you think other people don't take your approach? \n\nRachel: I think everybody's out there just for the dollar, especially newer. When talking to a newer agent especially, I told them it doesn't happen overnight. You know you've got to definitely work your network. You've got to plan on having a few years where maybe it's going to be a struggle. You've got to really be creative. \n\nIt's a hard business to get into. You can't just make a buck quickly and expect to be rich. You've got to really use your personality. You've got to use your tools. You've got to use your relationships and then build upon those relationships. You can't be a fly by night agent. You've got to do the nitty gritty and the hard work. \n\nIf somebody wants you to see 90 houses, you're going to have to show them 90 houses. As much as that's going to suck, they're going to remember you showed them 90 houses when they go to sell and look for another house. That's just how it works. You've got to be the good stand-up person to do that. My clients remember the things that I've done that went above and beyond. That's why they keep calling. I don't spend money on marketing. I do not have a marketing budget. I have spent my time with my clients doing everything I can for them within my fiduciary duty, going above and beyond and building my book of business. It's not easy, but that's what you've got to do in order to earn people's trust and be an respected agent. \n\nPut yourself out there go networking events, do all of those things that maybe you're not comfortable doing yeah, I think what you say is absolute gospel. \n\nChris: Quite frankly, there were so many people who got into the business to make a quick buck, you know, just after we knew we all weren't gonna die of COVID in 21, 22, and I think those people have really so many of them have just damaged the business because their motivation I don't want to sound sanctimonious, but their motivation wasn't pure, you know, I don't know that they were in it right they weren't in it to build a profession. \n\nThey weren't trying to build a you know a practice, a personal practice or a business that was going to take care of them for the long term. And the fact is you've got to look at this as a long-term Commitment and, yeah, we can teach people. You know how to work by referral and you know when we have agents come aboard, we, you know, everybody has to go through. You know, hundred days to greatness, that opinion, company training, and every single time somebody comes on and actually does the work, they do get that that first transaction in the first hundred days and usually they have something else under contract. So there, there are ways to get the ball rolling. You know, when you're focused on relationships, so working by referral, that when you get into the business in 21, 22 and you didn't have to do anything or you got sloppy, stick it aside in the yard and just waited for the, you know somebody else to sell it for you. \n\nRachel: It's a, it's a thing, but I think yeah here's the deal, and in 2022, people were making money without even trying. Yeah, deals were just being handed to them. They made a ton of money and they thought it was that easy. 2023 the second half, third and fourth quarters changed that and those agents are now looking at getting jobs. They're struggling, they don't understand why they're not making money and the end result of that is you've got to try a little harder. \n\nNow it's back to the norm of you've got to go out there and find your business and Sometimes that also means you've got a little. You've got to spend a little money to make money. I've resorted before to using the low leads, or realtor comm leads. Those are not dead-end leads. If you work them appropriately, you also need a broker that's going to support you and be available to you and answer questions. That's incredibly important. There's a lot of brokers that are just there to hang their license. If you have somebody that's going to push you and you know, chris, I know you've got a whole program that you use Somebody like that is going to be very valuable to an agent that maybe doesn't quite understand what they need to be doing. \n\nChris: Yeah? \n\nwell, I'd like to think so, yeah no, it is and it's funny, it's like you were talking about you know. You know I connect this practice, track and grow. You know when we talk about practice. You know what you just said. You know what my question always is what do you want, you know your future clients to know about you and you basically just Said it right. You know you do work hard, you are focused and I think one of the things that sets you apart is you're present in the moment, right? You know, when you're with the client, I think you're absolutely, absolutely with the client and you're not afraid to work. You're not afraid to do what you say you're gonna do. You show up. You know you've gotten a tremendous. You know it's one of those things where we meet so many agents. You know, not just new agents, but they've got 20 years of business. The problem is it's the same year 20 times. You know You're one of those unique individuals that learn something every year. You build on it. You know, and you get better. \n\nRachel: So yeah, and there's. There's so many examples of agents that I think Struggle, especially newer agents, and they don't want to put the work in. And I can tell you it's hard. I had an agent recently that was a newer agent and Struggled because they didn't want to do the extra work and said you know, it's just, it's too much, I don't want to spend my evenings doing this and I don't want to. You know, and I think my thing was you know, none of us really want to do that. You know, I was up last night late writing a contract and dealing with a sick child. If you're gonna post this video, I look tired, you know, but these are the things that we have to do. And you know, my thing was we don't necessarily want to do it, but we know that it's in the best interest of our client. We've got to get those things done and sometimes there's easy days and there's hard days and you got to do it both. You can't pick and choose if you want to be successful. That's what you got to do. \n\nChris: What else sets your practice apart from the competition? You've seen your agents come and go for years now. What else sets you apart? What makes your practice, especially when you're working with that, with investors what? What makes you special? \n\nRachel: You know I don't think we do anything particularly special. It's that I don't take on any more work that I can't handle. And I think a lot of brokerages and a lot of agents will take on anything and everything that comes through their door and it's very important to me that I Want the work. I respect every person that comes to me and appreciate it. But if I can't give you a hundred percent of my time and attention, then I know I'm not going to be the right person for you. I don't want to take on things that I'm not going to be able to. You know, run to the property quickly to look at it, take all of your phone calls. You know I can only handle so much. \n\nI'm a. I'm a person. I have other obligations and I want to make sure that I can give you all of the time and attention that I can't. I think that sets us apart. If you respectfully understand that, I can send you to Somebody that has the time. I can refer you to another property management company. We've been doing a lot of business back and forth, you and I. It's knowing your limitations. \n\nChris: I agree with you. But I would also say, you know, and as you know, we came off a really tough year last year and part of the reason was, you know, we were, we let COVID, you know COVID got to us too right. You know, we thought during those couple of boom years that we were just God's gift to real estate. And then when the tide came out and suddenly people didn't have all that extra cash in their pocket to pay the rent, they started moving again. Oh my God, we had the toughest year and a half, you know, we've ever had. \n\nBut one of the things that I realized was and I think you said this it's you have to be able to fully commit, you know, to the business you're going to take. But the other thing I think is critical is that you're very discerning about the business you choose to accept. And one of the things that you know we found last year was we signed up a lot of owners that had no business buying properties, you know, respect us, didn't know what they were doing, didn't want to learn, didn't want to listen and, quite frankly, had we just not taken everything that came through the front door there for a while, we wouldn't have had the same issues we had last year. So you know I always say we don't work with assholes. You know sometimes you make a mistake but you've got to be willing to let some people go and hold on to the people that you and you care most about and build those relationships. But you know you're going to commit to them. But you also need to expect and I know your clients commit to you as well and it goes both ways. \n\nRachel: Yeah, absolutely, it does go both ways, and I'm not afraid to turn around and fire a client. I need that client to understand that I'm very good at what I do. I respect your opinion and I definitely want to listen to it and I'll even give it a try. But when it's not working, you know we need to do what's tried and true and I can help you the best way. I know how and you know I need you to respect that and know that I can make you successful. But when that's not working and you're not listening yet, there's definitely a communication issue and I've fired many clients. You know. It's just knowing when to say when and throwing the towel. We all want to be productive and respectful of everyone's time. So, yeah, there's definitely those people that are maybe just not investing in the appropriate ways. \n\nChris: Yeah, Well, you know, my goal, you know, like yours, is I want to make sure our owners have the best representation and counsel that they can have, period. \n\nAnd that means they've got to. We've got to add more and more value to their lives and their businesses from a management perspective. But we also need to be able to help them, you know, expand their empire and that's why, you know, I used to talk about manage with Roost all the time and we're sort of transitioning to invest with Roost. And what's been great about working with you is, you know, I really feel like Gretchen and the team have the management piece down, but we don't have anybody, you know, at my company in Columbus at this point at all who is as immersed in the local investor market as you are, and the last thing I ever want to do is let any of our owners down, and that's why, you know, quite frankly, you're the only person that you know I'm referring any of our investors to go out and, you know, start looking for new properties to buy, because it's just not something I feel like we're equipped to do and do well, and you know, thank God I met you. \n\nRachel: Well, so far we've done a couple of really good things. I've been able to save owners from continuing and some poor investments. We've sold a couple of properties and we're going to be able to reinvest a few things. You know, I've sent some management in your way that I wasn't able to keep myself. So I think it's been a really great partnership and I think agents need to remember that they can't save the whole world. There's a lot of people that are like us that really want to make their, you know, real estate career success. But it is knowing your limitations and being able to really just focus on you know what you're good at and the clients that you can really help, one at a time. \n\nChris: So what's next for your practice? What do you? What does the next level look like for your clients? What are you hoping to, I guess, focus on this year? \n\nRachel: You know I haven't quite figured out the next level yet. You know I really enjoy what I do. You know trying to scale, you know partnering, merging, things like that. You know I want to be able to scale with. You know my, my clients, and you know, looking at the market, I think that it's going to open up more opportunity for more investing. So I'm really hoping that we can just take on some more investors here in the future, maybe some more agents, and really thinking maybe that we can grow Roost in a different way and build some agents there. And you know it's not that I'm going to be growing, maybe it's going to be I'm going to be growing Roost a little bit. \n\nWell, that'd be okay with me too, but the two-way street, so yeah, and you know what well, we'll just see where it takes us, because I'm only one person and I think that growing some of my clients portfolios is going to be the most important for me. I think so too, you know, I do my own investing and you know personal investing is always really important to me. But growing some of my clients portfolios is going to be really important over the next few years with the things that I think are coming in Columbus. \n\nChris: So tell me about what you think is coming in Columbus. So what's your take on the Columbus market now? Maybe a quick review of the 2023 and what you see happening in 2024. What do you think or what? \n\nRachel: are your thoughts? I think 23 is kind of our alert that we're going to be heading back to what I call the norm. You know, 2020 was outrageous. 2023 is kind of starting to head us back to what the reality of real estate is, and I think 2024 is going to be probably a little bit of a plateau, maybe not going back to the normal prices, but really starting to level out. We're not seeing highest and best on a lot of properties anymore unless they're just really pressed aggressively. We're not seeing taking properties as is anymore. We're going back to what normal standards are Healthy market, I think a healthier market, quite frankly. \n\nYeah, and I think, as 2024 continues, we're going to start to see more properties coming on the market that are bank-owned, more properties that are probates, more properties that are going to be at a much healthier price point, and that's going to continue for a while, because we're going to start seeing more of a normal real estate. People are going to start buying heavily again as far as investors are concerned, and I just think it's going to be more reasonable and that's what I call, you know, the norm. That's what we were doing for years. The market before was just completely saturated and although we've got a ton of growth in Columbus, I think we're going to start to kind of level out as far as our pricing is concerned. \n\nChris: Yeah, I don't think we're going to have the same continuous monthly increases. I think that's going to level out, I think, diesel markets already. \n\nRachel: Yeah, it's definitely plateaued but, with that being said, everything in Columbus has not. Columbus is continuing to grow. The development around Columbus is growing. The things that are happening in Columbus we're projecting to be still a great major city. So as far as investing, I think it's a fantastic time to do so. Things with Intel that are happening Everybody knows Intel is coming. \n\nThe truth about Intel is that you know we don't see the real result of that for five to 10 years. So buying real estate here is still a fantastic time. Columbus is a huge buy and hold market. I think buying now you're going to see massive results in five to 10 years. What investors need to know is that you're not going to have maybe a huge cash flow right now. You're going to break even, have a little bit of cash to put away not much but you've got to look at your five and 10 year projections. Don't let it scare you off from buying because you're going to have five and 10 year projections 20 year projections that are going to be. You can't beat it when looking at other markets. So I think there's just a lot of opportunity to buy here over the next 12, 24 months and have some really solid, valuable property. \n\nChris: Columbus has always been interesting because you know how state university is not going anywhere, the state capitol is not going anywhere, you know, and now you've got Intel coming and billions of dollars in investment. But I think people sometimes think that, oh, intel's coming, I need to go invest someplace. And it's not so much like that. I think you're right. I think it's making Columbus that much stronger and that more unique of a market. \n\nRachel: It's the fallout of what happens for. \n\nChris: Intel. \n\nRachel: It's the population growth. \n\nChris: that happens Exactly. \n\nRachel: Yeah, it's. If you look at other cities that Intel has come into and you look at the studies that have been done because I've really researched this it's five to 10 years out that those cities are so much stronger with their infrastructure and their growth that values are higher. That, I mean it's just, it's everything that happens after that happens. Amazon is coming in here. We've got two huge Amazon call centers being built Nationwide. Children's is still growing. We have huge things happening that, although it's happening right now, it's the projections from that are really going to give us that great investment opportunity. So for those investors that might be newer, they are a little afraid because they're not seeing 100 or 200 in revenue every month, but don't let that scare you, because you're going to see a huge cash flow down the road and I think that's what everybody really needs to consider is that you're looking at having multiple properties, retirement, all of those things, and Columbus is going to give you that because our infrastructure is going to be huge in the future. \n\nChris: That's the beautiful thing about Columbus is there's years that, especially when you buy a new property, the first couple of years cash flow isn't fabulous and God forbid, you may be a little negative even in the first couple of years, but the appreciation never stops. So you're right, I think, for the market we wake up. Five, 10 years, 15 years my gosh, we're all going to be thrilled. And again it goes back to taking the long view and making that commitment that this is what we do as professionals. And we've seen it happen more and it's going to happen again and we're thrilled to be here. \n\nRachel: I had a client. We closed on it just two weeks ago. He bought a fantastic little house but he bought it knowing that he was negative, starting out $211 a month. But we pulled all of his numbers, we looked at everything, we did worst case scenarios and we pulled his projections and I think it was like year eight he was going to be making about 750 month and so on and so forth. So he was willing to take that short term loss in order to get to the point where he was going to be making. He was going to be making up for it within two years and then three years and four years. \n\nall those things. He saw the long-term potential. So it's just, I guess the message is 2024 is it's going to really start to turn around, and I think 2020, just remember, you're going to start making money and it's buy now, don't wait. \n\nChris: I think that's a the property's right on it. I think that's a fabulous message, and the fact that you know your numbers like you do is just such a refreshing thing, and that's why I want every one of our owners and future owners and investor clients to listen to this podcast, because you're the person they need to be working with. It's just the way it is. So anything else you'd like to add before we close out today? This has been great. Thank you very much. \n\nRachel: I mean, I could talk for like hours. \n\nChris: I'm just-, we'll do it again, I'll do that. \n\nRachel: Let's talk again, but there's just so much I could say to agents. I would say you know, hang in there, it's going to get better. There's so many people out there struggling, but use your network, especially other agents, because there's so many people that can give you tips and tricks and people like Chris that you know can support you, and I'm always available to I love to meet and talk and help and to investors don't be afraid to spend a dollar. And, you know, hang in there too, and I think that there's just lots of opportunity here. Yeah, and trust your gut. \n\nChris: Yes. \n\nRachel: And the plus side is it's not right, it's not right. \n\nChris: You know I want them to know that. You know we're going to take care of you on the buy process. You know Rachel's got that covered and she's going to treat that like she was buying her own property and we're going to help you make money on the management side and treat that asset as if it were our own. \n\nRachel: So I think together we can help a lot of people here, always like we were going to live in it and own it ourselves. So if there's ever something that you don't feel good about, trust your gut. Your gut is never wrong. If you have a bad gut feeling about an agent, if you ever have a bad gut feeling about a contractor, a bad gut feeling about a property, trust your gut and you'll be happy you did. \n\nChris: Well, thank you so much. This was fabulous and we'll do it again real soon. \n\nRachel: Look forward to it. \n\nChris: Thank you, Rachel. \n\nRachel: Bye guys. ","content_html":"I’d like to introduce Rachael Schwalenberg to the Landlord Profitability Playbook Podcast.
\n\nLast summer I was listening to the Evernest Real Estate Investor podcast while on the bike path and the guest that day was Rachael Schwalenberg of Columbus, Ohio.
\n\nNow I listen to a lot of podcasts and I am not easily impressed but Rachael was amazing. She clearly knew the Columbus market inside and out. It was not a ‘rah-rah’ perspective either. It was nuanced, thoughtful, and in my opinion absolutely accurate.
\n\nAs soon as I got home I got on the Google machine and tracked her down, sent her an email, and we have been friends and referral partners ever since.
\n\nRachael’s years of experience in the Columbus market as a Realtor, property manager, broker owner, entrepreneur, and investor make her an invaluable resource to our listeners on The Landlord Profitability Playbook podcast as well as our listeners on our sister podcast Connect Practice Track & Grow for real estate professionals.
\n\nWhen it's time to expand your empire, Rachael is the professional you want to work with.
\n\nBe a guest on the Landlord Profitability Playbook Podcast
\n\n\n\n\n\nVisit Rental Property Registration to access the registration page and self-inspection form.\n
(AI transcript provided as supporting material and may contain errors)
\n\nIt wasn't a rah-rah perspective either. It was nuanced, it was thoughtful and, in my opinion, absolutely accurate. So as soon as I got home I got on the Google machine and tracked her down and sent her an email and since then we've become friends and referral partners. So Rachel's years of experience in the Columbus market as a realtor, a property manager, a broker owner, entrepreneur, investor, you name it it just makes her an invaluable resource to our listeners on both podcasts. So I guarantee that you're going to find some inspiration, some lessons, some actionable tips, habits and mindsets you can use in your business to generate more leads, book more appointments, write more contracts, close more deals. Well, you know the drill. So, without further ado, I bring you my interview with Rachel Schwallenberg.
\n\nRachel: Good morning. Good morning.
\n\nChris: I'm OK.
\n\nRachel: Nice to talk to you this morning.
\n\nChris: Same to you. So you've done so much and you've been so active in the Columbus market and you've helped so many people. If it's OK, why don't you just tell us all about yourself and how you got started and all that good stuff?
\n\nRachel: Sure, yeah, for those of you who don't know me, I have a background in property management. I started a very long time ago I won't put a year to it and age myself, but a very long time ago just doing property management, leasing, you know, large apartment complexes, and I kind of worked my way through that corporate system, ending up in a regional position running lots of different REITs, working with large owners and kind of burden myself out. So at some point I had gotten my real estate license in 2008. It was during you know the downfall, but there was lots of opportunity for first time home buyers, the $8,000 tax credit, and I found a niche.
\n\nI built a business network and since I had decided to leave the corporate world, I took my broker's test in 2014 and opened my own brokerage. I had done some investing on my own. I had built, you know, a lot of good communications and different, you know connections. So I was lucky enough to start my own business in 2014 and grew that through networking small investors and, you know, lots of sales at that point and just kind of took off from there. So between property management, sales, investing, I've just kind of touched every level of real estate that I could, and that's the quick down-down version. But you know I've got a lot of history and I try and use that in my everyday business.
\n\nChris: Specialized in working with investors, primarily correct, I mean, have you?
\n\nRachel: My brokerage although I like to do some residential my brokerage, like the bread and butter of what I do, is working with investors on a daily basis. We help them identify properties. We'll help them sell their properties and reinvest. I'll work performance with them. We look at the property from a renovation standpoint, anything that we can do to get those dollars on their revenue. But yeah, we pretty much just work with investors on a daily basis.
\n\nChris: That's what they like to do, they want to say, people grow. She does math.
\n\nChris: She does math. No, I don't like math.
\n\nRachel: I like using programs and spreadsheets that does it for me, because if I do that by brain, you're probably not going to be very profitable.
\n\nChris: I mean it's amazing that you do it all and you do it well. I mean you know you're closing 20, 30 plus units every year and you've got I know you've got clients from all over the country. You're managing property for people, you're running your office and you've still got kids at home. I'm not quite sure how you pull all that off, but you know you make it look easy.
\n\nRachel: We've stayed pretty small. In retrospect. We don't take on anything that we can't keep our hands on. I like to pride myself in the fact that I can really pick up the phone anytime an investor needs me. I think that our business could have been a whole lot bigger, but we've kind of chosen to stay relative and available. I think that's important. You and I have got a great job of being referral partners too, because that's important.
\n\nChris: Do you have some long-term clients, people that you've worked with over the years?
\n\nRachel: Yeah, I've got some people that I've had since I opened the brokerage and, like you said, I've got people from all over. I've had clients in Japan. A lot of my clients are in California, seattle, but, yeah, I've had some people that started out with me in 2014, 2015, and I still help them buy and sell their properties and manage their properties. We've developed really long-term trust and essentially, we can do a deal just by being over the phone, and it's great because we just have like an unspoken trust in each other where they know that I'm going to make sure I get the best deal for them.
\n\nChris: Yeah, well, that's fantastic. So great agents connect right. So the podcast is Connect Practice, track and Grow. But again, you do so much with investors. We're going to run this on both podcasts, but so you sort of started this, but in a typical year, then where does your business come from?
\n\nRachel: The majority of my business is actually referral based. A lot of investors talk to other investors and the word spreads. A lot of business comes from these podcasts, different YouTube videos People like to educate themselves and word kind of spreads that way. I do work with a lot of other agents, agents that are more residential agents, that don't do a lot of investments, and they will refer business to me. But I'd say the majority of it is word of mouth and investor referral.
\n\nChris: So you to me, you light up a room in a good way and I don't want to say I'm envious of that, but I'm kind of envious of that. You invited me to a networking event. You recently did it at BrewDoc. Why don't you tell us about that? How did that come about, and is that something that you do on a regular basis?
\n\nRachel: Yeah, so I don't usually hold a lot of them, as you know, but I like to attend them. I'm a very social person. I'm not afraid to talk with strangers, but the whole point of that was to try and get more investors to come out meet our hard money lender. A lot more people are going to hard money now. It's just a little easier with the interest rates and whatnot. So we really wanted to bring that lender out, have people meet them, meet our title agency, meet me. You know I want to be able to help more investors grow that word of mouth.
\n\nBut yeah, I mean, networking is so easy to do. You can get people to refer you, you can get people to sponsor your event. It's just a very easy way to get your name and your face out there, and I'm not a shy person by any means, so I love being able to attend those to hold them even more fun. So, yeah, I just think it's a great way for people, especially agents, to be able to kind of build their book of business. But I had one recently and it was a lot of fun. We had a good time.
\n\nChris: How do you keep track of all your relationships that you've built up since 2008 and probably before that?
\n\nRachel: I'm very lucky to have a fantastic memory and I live off of my phone. So you know my phone has names in it with addresses attached and you know it's just used the tools that you've got. I have reports and I send Christmas cards every year to all of my clients and it's just keeping track with whatever works best for you. But yeah, I've got a lot of different ways that I kind of remember everyone. So, and then there's always the clients that you remember.
\n\nChris: Clearly, your entire business is built on relationships and you know, I think you, I take that for granted, but it always strikes me as crazy when other agents are out there. You know, fighting, fighting and they're just going for the next transaction. I mean, why do you think there's so many agents out there that don't look at the business the way that you do? What do you think is I can't figure out another way to do it, but there's obviously other ways to do it why do you think other people don't take your approach?
\n\nRachel: I think everybody's out there just for the dollar, especially newer. When talking to a newer agent especially, I told them it doesn't happen overnight. You know you've got to definitely work your network. You've got to plan on having a few years where maybe it's going to be a struggle. You've got to really be creative.
\n\nIt's a hard business to get into. You can't just make a buck quickly and expect to be rich. You've got to really use your personality. You've got to use your tools. You've got to use your relationships and then build upon those relationships. You can't be a fly by night agent. You've got to do the nitty gritty and the hard work.
\n\nIf somebody wants you to see 90 houses, you're going to have to show them 90 houses. As much as that's going to suck, they're going to remember you showed them 90 houses when they go to sell and look for another house. That's just how it works. You've got to be the good stand-up person to do that. My clients remember the things that I've done that went above and beyond. That's why they keep calling. I don't spend money on marketing. I do not have a marketing budget. I have spent my time with my clients doing everything I can for them within my fiduciary duty, going above and beyond and building my book of business. It's not easy, but that's what you've got to do in order to earn people's trust and be an respected agent.
\n\nPut yourself out there go networking events, do all of those things that maybe you're not comfortable doing yeah, I think what you say is absolute gospel.
\n\nChris: Quite frankly, there were so many people who got into the business to make a quick buck, you know, just after we knew we all weren't gonna die of COVID in 21, 22, and I think those people have really so many of them have just damaged the business because their motivation I don't want to sound sanctimonious, but their motivation wasn't pure, you know, I don't know that they were in it right they weren't in it to build a profession.
\n\nThey weren't trying to build a you know a practice, a personal practice or a business that was going to take care of them for the long term. And the fact is you've got to look at this as a long-term Commitment and, yeah, we can teach people. You know how to work by referral and you know when we have agents come aboard, we, you know, everybody has to go through. You know, hundred days to greatness, that opinion, company training, and every single time somebody comes on and actually does the work, they do get that that first transaction in the first hundred days and usually they have something else under contract. So there, there are ways to get the ball rolling. You know, when you're focused on relationships, so working by referral, that when you get into the business in 21, 22 and you didn't have to do anything or you got sloppy, stick it aside in the yard and just waited for the, you know somebody else to sell it for you.
\n\nRachel: It's a, it's a thing, but I think yeah here's the deal, and in 2022, people were making money without even trying. Yeah, deals were just being handed to them. They made a ton of money and they thought it was that easy. 2023 the second half, third and fourth quarters changed that and those agents are now looking at getting jobs. They're struggling, they don't understand why they're not making money and the end result of that is you've got to try a little harder.
\n\nNow it's back to the norm of you've got to go out there and find your business and Sometimes that also means you've got a little. You've got to spend a little money to make money. I've resorted before to using the low leads, or realtor comm leads. Those are not dead-end leads. If you work them appropriately, you also need a broker that's going to support you and be available to you and answer questions. That's incredibly important. There's a lot of brokers that are just there to hang their license. If you have somebody that's going to push you and you know, chris, I know you've got a whole program that you use Somebody like that is going to be very valuable to an agent that maybe doesn't quite understand what they need to be doing.
\n\nChris: Yeah?
\n\nwell, I'd like to think so, yeah no, it is and it's funny, it's like you were talking about you know. You know I connect this practice, track and grow. You know when we talk about practice. You know what you just said. You know what my question always is what do you want, you know your future clients to know about you and you basically just Said it right. You know you do work hard, you are focused and I think one of the things that sets you apart is you're present in the moment, right? You know, when you're with the client, I think you're absolutely, absolutely with the client and you're not afraid to work. You're not afraid to do what you say you're gonna do. You show up. You know you've gotten a tremendous. You know it's one of those things where we meet so many agents. You know, not just new agents, but they've got 20 years of business. The problem is it's the same year 20 times. You know You're one of those unique individuals that learn something every year. You build on it. You know, and you get better.
\n\nRachel: So yeah, and there's. There's so many examples of agents that I think Struggle, especially newer agents, and they don't want to put the work in. And I can tell you it's hard. I had an agent recently that was a newer agent and Struggled because they didn't want to do the extra work and said you know, it's just, it's too much, I don't want to spend my evenings doing this and I don't want to. You know, and I think my thing was you know, none of us really want to do that. You know, I was up last night late writing a contract and dealing with a sick child. If you're gonna post this video, I look tired, you know, but these are the things that we have to do. And you know, my thing was we don't necessarily want to do it, but we know that it's in the best interest of our client. We've got to get those things done and sometimes there's easy days and there's hard days and you got to do it both. You can't pick and choose if you want to be successful. That's what you got to do.
\n\nChris: What else sets your practice apart from the competition? You've seen your agents come and go for years now. What else sets you apart? What makes your practice, especially when you're working with that, with investors what? What makes you special?
\n\nRachel: You know I don't think we do anything particularly special. It's that I don't take on any more work that I can't handle. And I think a lot of brokerages and a lot of agents will take on anything and everything that comes through their door and it's very important to me that I Want the work. I respect every person that comes to me and appreciate it. But if I can't give you a hundred percent of my time and attention, then I know I'm not going to be the right person for you. I don't want to take on things that I'm not going to be able to. You know, run to the property quickly to look at it, take all of your phone calls. You know I can only handle so much.
\n\nI'm a. I'm a person. I have other obligations and I want to make sure that I can give you all of the time and attention that I can't. I think that sets us apart. If you respectfully understand that, I can send you to Somebody that has the time. I can refer you to another property management company. We've been doing a lot of business back and forth, you and I. It's knowing your limitations.
\n\nChris: I agree with you. But I would also say, you know, and as you know, we came off a really tough year last year and part of the reason was, you know, we were, we let COVID, you know COVID got to us too right. You know, we thought during those couple of boom years that we were just God's gift to real estate. And then when the tide came out and suddenly people didn't have all that extra cash in their pocket to pay the rent, they started moving again. Oh my God, we had the toughest year and a half, you know, we've ever had.
\n\nBut one of the things that I realized was and I think you said this it's you have to be able to fully commit, you know, to the business you're going to take. But the other thing I think is critical is that you're very discerning about the business you choose to accept. And one of the things that you know we found last year was we signed up a lot of owners that had no business buying properties, you know, respect us, didn't know what they were doing, didn't want to learn, didn't want to listen and, quite frankly, had we just not taken everything that came through the front door there for a while, we wouldn't have had the same issues we had last year. So you know I always say we don't work with assholes. You know sometimes you make a mistake but you've got to be willing to let some people go and hold on to the people that you and you care most about and build those relationships. But you know you're going to commit to them. But you also need to expect and I know your clients commit to you as well and it goes both ways.
\n\nRachel: Yeah, absolutely, it does go both ways, and I'm not afraid to turn around and fire a client. I need that client to understand that I'm very good at what I do. I respect your opinion and I definitely want to listen to it and I'll even give it a try. But when it's not working, you know we need to do what's tried and true and I can help you the best way. I know how and you know I need you to respect that and know that I can make you successful. But when that's not working and you're not listening yet, there's definitely a communication issue and I've fired many clients. You know. It's just knowing when to say when and throwing the towel. We all want to be productive and respectful of everyone's time. So, yeah, there's definitely those people that are maybe just not investing in the appropriate ways.
\n\nChris: Yeah, Well, you know, my goal, you know, like yours, is I want to make sure our owners have the best representation and counsel that they can have, period.
\n\nAnd that means they've got to. We've got to add more and more value to their lives and their businesses from a management perspective. But we also need to be able to help them, you know, expand their empire and that's why, you know, I used to talk about manage with Roost all the time and we're sort of transitioning to invest with Roost. And what's been great about working with you is, you know, I really feel like Gretchen and the team have the management piece down, but we don't have anybody, you know, at my company in Columbus at this point at all who is as immersed in the local investor market as you are, and the last thing I ever want to do is let any of our owners down, and that's why, you know, quite frankly, you're the only person that you know I'm referring any of our investors to go out and, you know, start looking for new properties to buy, because it's just not something I feel like we're equipped to do and do well, and you know, thank God I met you.
\n\nRachel: Well, so far we've done a couple of really good things. I've been able to save owners from continuing and some poor investments. We've sold a couple of properties and we're going to be able to reinvest a few things. You know, I've sent some management in your way that I wasn't able to keep myself. So I think it's been a really great partnership and I think agents need to remember that they can't save the whole world. There's a lot of people that are like us that really want to make their, you know, real estate career success. But it is knowing your limitations and being able to really just focus on you know what you're good at and the clients that you can really help, one at a time.
\n\nChris: So what's next for your practice? What do you? What does the next level look like for your clients? What are you hoping to, I guess, focus on this year?
\n\nRachel: You know I haven't quite figured out the next level yet. You know I really enjoy what I do. You know trying to scale, you know partnering, merging, things like that. You know I want to be able to scale with. You know my, my clients, and you know, looking at the market, I think that it's going to open up more opportunity for more investing. So I'm really hoping that we can just take on some more investors here in the future, maybe some more agents, and really thinking maybe that we can grow Roost in a different way and build some agents there. And you know it's not that I'm going to be growing, maybe it's going to be I'm going to be growing Roost a little bit.
\n\nWell, that'd be okay with me too, but the two-way street, so yeah, and you know what well, we'll just see where it takes us, because I'm only one person and I think that growing some of my clients portfolios is going to be the most important for me. I think so too, you know, I do my own investing and you know personal investing is always really important to me. But growing some of my clients portfolios is going to be really important over the next few years with the things that I think are coming in Columbus.
\n\nChris: So tell me about what you think is coming in Columbus. So what's your take on the Columbus market now? Maybe a quick review of the 2023 and what you see happening in 2024. What do you think or what?
\n\nRachel: are your thoughts? I think 23 is kind of our alert that we're going to be heading back to what I call the norm. You know, 2020 was outrageous. 2023 is kind of starting to head us back to what the reality of real estate is, and I think 2024 is going to be probably a little bit of a plateau, maybe not going back to the normal prices, but really starting to level out. We're not seeing highest and best on a lot of properties anymore unless they're just really pressed aggressively. We're not seeing taking properties as is anymore. We're going back to what normal standards are Healthy market, I think a healthier market, quite frankly.
\n\nYeah, and I think, as 2024 continues, we're going to start to see more properties coming on the market that are bank-owned, more properties that are probates, more properties that are going to be at a much healthier price point, and that's going to continue for a while, because we're going to start seeing more of a normal real estate. People are going to start buying heavily again as far as investors are concerned, and I just think it's going to be more reasonable and that's what I call, you know, the norm. That's what we were doing for years. The market before was just completely saturated and although we've got a ton of growth in Columbus, I think we're going to start to kind of level out as far as our pricing is concerned.
\n\nChris: Yeah, I don't think we're going to have the same continuous monthly increases. I think that's going to level out, I think, diesel markets already.
\n\nRachel: Yeah, it's definitely plateaued but, with that being said, everything in Columbus has not. Columbus is continuing to grow. The development around Columbus is growing. The things that are happening in Columbus we're projecting to be still a great major city. So as far as investing, I think it's a fantastic time to do so. Things with Intel that are happening Everybody knows Intel is coming.
\n\nThe truth about Intel is that you know we don't see the real result of that for five to 10 years. So buying real estate here is still a fantastic time. Columbus is a huge buy and hold market. I think buying now you're going to see massive results in five to 10 years. What investors need to know is that you're not going to have maybe a huge cash flow right now. You're going to break even, have a little bit of cash to put away not much but you've got to look at your five and 10 year projections. Don't let it scare you off from buying because you're going to have five and 10 year projections 20 year projections that are going to be. You can't beat it when looking at other markets. So I think there's just a lot of opportunity to buy here over the next 12, 24 months and have some really solid, valuable property.
\n\nChris: Columbus has always been interesting because you know how state university is not going anywhere, the state capitol is not going anywhere, you know, and now you've got Intel coming and billions of dollars in investment. But I think people sometimes think that, oh, intel's coming, I need to go invest someplace. And it's not so much like that. I think you're right. I think it's making Columbus that much stronger and that more unique of a market.
\n\nRachel: It's the fallout of what happens for.
\n\nChris: Intel.
\n\nRachel: It's the population growth.
\n\nChris: that happens Exactly.
\n\nRachel: Yeah, it's. If you look at other cities that Intel has come into and you look at the studies that have been done because I've really researched this it's five to 10 years out that those cities are so much stronger with their infrastructure and their growth that values are higher. That, I mean it's just, it's everything that happens after that happens. Amazon is coming in here. We've got two huge Amazon call centers being built Nationwide. Children's is still growing. We have huge things happening that, although it's happening right now, it's the projections from that are really going to give us that great investment opportunity. So for those investors that might be newer, they are a little afraid because they're not seeing 100 or 200 in revenue every month, but don't let that scare you, because you're going to see a huge cash flow down the road and I think that's what everybody really needs to consider is that you're looking at having multiple properties, retirement, all of those things, and Columbus is going to give you that because our infrastructure is going to be huge in the future.
\n\nChris: That's the beautiful thing about Columbus is there's years that, especially when you buy a new property, the first couple of years cash flow isn't fabulous and God forbid, you may be a little negative even in the first couple of years, but the appreciation never stops. So you're right, I think, for the market we wake up. Five, 10 years, 15 years my gosh, we're all going to be thrilled. And again it goes back to taking the long view and making that commitment that this is what we do as professionals. And we've seen it happen more and it's going to happen again and we're thrilled to be here.
\n\nRachel: I had a client. We closed on it just two weeks ago. He bought a fantastic little house but he bought it knowing that he was negative, starting out $211 a month. But we pulled all of his numbers, we looked at everything, we did worst case scenarios and we pulled his projections and I think it was like year eight he was going to be making about 750 month and so on and so forth. So he was willing to take that short term loss in order to get to the point where he was going to be making. He was going to be making up for it within two years and then three years and four years.
\n\nall those things. He saw the long-term potential. So it's just, I guess the message is 2024 is it's going to really start to turn around, and I think 2020, just remember, you're going to start making money and it's buy now, don't wait.
\n\nChris: I think that's a the property's right on it. I think that's a fabulous message, and the fact that you know your numbers like you do is just such a refreshing thing, and that's why I want every one of our owners and future owners and investor clients to listen to this podcast, because you're the person they need to be working with. It's just the way it is. So anything else you'd like to add before we close out today? This has been great. Thank you very much.
\n\nRachel: I mean, I could talk for like hours.
\n\nChris: I'm just-, we'll do it again, I'll do that.
\n\nRachel: Let's talk again, but there's just so much I could say to agents. I would say you know, hang in there, it's going to get better. There's so many people out there struggling, but use your network, especially other agents, because there's so many people that can give you tips and tricks and people like Chris that you know can support you, and I'm always available to I love to meet and talk and help and to investors don't be afraid to spend a dollar. And, you know, hang in there too, and I think that there's just lots of opportunity here. Yeah, and trust your gut.
\n\nChris: Yes.
\n\nRachel: And the plus side is it's not right, it's not right.
\n\nChris: You know I want them to know that. You know we're going to take care of you on the buy process. You know Rachel's got that covered and she's going to treat that like she was buying her own property and we're going to help you make money on the management side and treat that asset as if it were our own.
\n\nRachel: So I think together we can help a lot of people here, always like we were going to live in it and own it ourselves. So if there's ever something that you don't feel good about, trust your gut. Your gut is never wrong. If you have a bad gut feeling about an agent, if you ever have a bad gut feeling about a contractor, a bad gut feeling about a property, trust your gut and you'll be happy you did.
\n\nChris: Well, thank you so much. This was fabulous and we'll do it again real soon.
\n\nRachel: Look forward to it.
\n\nChris: Thank you, Rachel.
\n\nRachel: Bye guys.
","summary":"\tI’d like to introduce Rachael Schwalenberg to the Landlord Profitability Playbook Podcast.\r\n\r\nLast summer I was listening to the Evernest Real Estate Investor podcast while on the bike path and the guest that day was Rachael Schwalenberg of Columbus, Ohio.\r\n\r\nNow I listen to a lot of podcasts and I am not easily impressed but Rachael was amazing. She clearly knew the Columbus market inside and out. It was not a ‘rah-rah’ perspective either. It was nuanced, thoughtful, and in my opinion absolutely accurate.\r\n\r\nAs soon as I got home I got on the Google machine and tracked her down, sent her an email, and we have been friends and referral partners ever since.\r\n\r\nRachael’s years of experience in the Columbus market as a Realtor, property manager, broker owner, entrepreneur, and investor make her an invaluable resource to our listeners on The Landlord Profitability Playbook podcast as well as our listeners on our sister podcast Connect Practice Track & Grow for real estate professionals.\r\n\r\nWhen it's time to expand your empire, Rachael is the professional you want to work with","date_published":"2024-02-12T07:00:00.000-05:00","attachments":[{"url":"https://aphid.fireside.fm/d/1437767933/e6ae97de-6d4b-4344-8b9f-b62c4c887188/3af36c09-a00e-47a8-9373-267172734992.mp3","mime_type":"audio/mpeg","size_in_bytes":23088337,"duration_in_seconds":1820}]},{"id":"0b3bec2f-404f-4123-b0f7-a4bbf0fb20c4","title":"Ep006: Annual New Year Podcast 2024 ","url":"https://www.landlordprofitabilityplaybookpodcast.com/006","content_text":"This episode is extra special because it also falls on the occasion of the 10 year anniversary of ROOST Real Estate Co.\n\nListen as Laci and I recap 2023 and layout my key initiatives for 2024 and beyond.\n\n\nSHOW HIGHLIGHTS\n\n\n\nChris celebrates the 10-year anniversary of Roost, discussing the company's core values of being smart, passionate, supportive, and approachable, and how these have shaped the business's success.\nLacey and Chris talk about the importance of professionalism in real estate, emphasizing the need for knowledgeable people to surround investors, buyers, and sellers.\nWe navigate the challenges of trademarking and selecting a unique and legally available business name, sharing the story behind the naming of Roost Real Estate Co.\nChris reflects on Roost's commitment to serving a diverse clientele, including buyers, sellers, investors, and tenants, and the symbiotic relationship between property management and brokerage services.\nWe celebrate team accomplishments, recognizing individuals like Gretchen Mitchell for scaling the property portfolio and acknowledging the contributions of the marketing and education team during the pandemic.\nChris discusses the strategy to expand business through the initiative \"Have I Earned a Five-Star Review Today?\" and its impact on online reviews, particularly on Google.\nWe tackle the concept of streamlining the real estate listing process and redefining the role of a brokerage to support agents with innovative tools and strategies.\nChris outlines ambitious goals for Roost over the next five years, including scaling the agent network, doubling the door count, and amplifying the digital presence through content and book downloads.\nWe reflect on the challenges and rewards of the past year, embracing the philosophy of \"be here now\" and expressing gratitude for the team's efforts and the community's support.\nTranscript samples provide insights into Chris's thoughts on creating a welcoming business environment and the initiatives for Roost's growth and expansion, highlighting the human element in real estate.\n\n\n\n\nLINKS\n\n Show Notes\n\n Be a guest on the Landlord Profitability Playbook Podcast \n\n Download your FREE copy of The Landlord Profitability Playbook and learn how to automate your property management. \n\n Visit ROOST Property Management and find out more about the ways we can help you create a more profitable portfolio. \n\n Visit Rental Property Registration to access the registration page and self-inspection form.\n\n\n\n\nTRANSCRIPT\n(AI transcript provided as supporting material and may contain errors)\n\n\nChris: Hi, I'm Chris McAllister here with the Connect Practice Track and Grow podcast and the Landlord Profitability Playbook podcast. This is a special episode where we're going to put this conversation that I'm having here with Lacey on both podcasts. So really, for both of these podcasts, it's my job to make your business better and your life easier. And I'm here, as I said, with my podcast partner and digital marketing specialist, lacey LeBlanc. Good morning, lacey. \n\nLaci: Good morning Chris. \n\nChris: How are you? \n\nLaci: I'm good, I'm happy to be here, especially for this episode, this very rare double feature, if you will. \n\nChris: Well, this is the first of what I expect will be an annual podcast where we get a chance to reflect on last year and talk a little bit about our plans for the new year. And this year is kind of special because not only is this our first new year episode of the podcast's plural, but it also falls on the occasion of our 10-year anniversary. Okay, yeah, so Roost was officially licensed on January 7th 2014,. Being that, this is 2024. That makes us 10 years old, so happy anniversary to us. \n\nLaci: You know, my kid just turned 10 and I could just barely. He was born on January 3rd 2014. And I could just barely believe it. Is that how you feel? \n\nChris: Yeah, I mean the. You know, looking back, the 10 years have gone like lightning but my God, there was a lot of stuff that went on in those 10 years and certainly a lot of ups and downs and a lot of learning, but yeah, it went very quick. \n\nLaci: It is kind of your baby, I think right, Just like. Simon is mine, so yeah. \n\nChris: So you know, when we started Roost, I met this gentleman named Andy Hayes, who was a graphic designer and a logo expert in Springfield, ohio, and I had seen some marketing around town that the Chamber of Commerce had used, the city had used and a few other places had used, and it had a really cool feel to it. I don't even know how to describe it. What Andy does is very unique and you know he interviewed me. This would have been in early 2013, so 11 years ago and what came out of it was that I wanted to build a company, that the attributes were smart, passionate, supportive and approachable, and I think that those really have evolved into professionalism. You know to melt it down based on the things that we've been talking about the last year, but I think sometimes people forget that there is that real estate is an investment and it's not something that anybody should dabble in. It's not something that should not be taken seriously, and you know I truly believe that you know, as an investor, home buyer, home seller, that you want to surround yourself with smart people and, from a passionate standpoint, you know the very best realtors among us, the people that I worked with in the 10 or so years prior to starting Roost, as I had my license, they were absolutely passionate about real estate. This wasn't something that they were just going to try, it wasn't a part-time job, this was something that they had devoted their entire careers to, if not their entire lives, and they had a true passion for helping people buy and sell houses. And supportive came around because and I think that's more into collaboration and sort of us being a consultant and a coach to our clients, but that's where supportive came from, that we want to support whatever decision that our investors make, that our clients make, and help make that real for them. And that's kind of morphed into, you know, being the similar supportive nature to the agents that choose to, you know, associate with us. So supportive still matters. It's morphed a little bit. I may be gotten a bit more specific with collaboration and coaching, but it's all still there. \n\nAnd then approachable, I have to tell you, lacey, approachable was more probably about me and my personality, because you know people have always said that. You know I'm pretty analytical. I may not be, the thing I always remember when I was in the corporate world was Chris was an easy read and I don't know if that was a veiled insult or what. But you know, I always thought that I didn't want Roost to be the kind of company that people didn't feel welcome, that they couldn't ask questions of, that they couldn't approach comfortably and confidently. So that's where approachable came from so smart, passionate, supportive, approachable. And you know, to some degree those are aspirational, but I still stand by those and I'm, as we would say, ready to guess and bet on those for the next 10 years. \n\nLaci: Yeah, I don't know if something's happened in the last 10 years with the approachable portion, but I, you know, I've only known you for a couple of years and, you know, approachable is one of the top words I would use to describe both you and your business. I think that you've just made all of this so readily available and so sincerely helpful. Regardless of whether you're a buyer or a seller with Roost or you're, you know, an agent or a broker, or you're an owner or a tenant, I think that there's something here for everybody and it is maybe one of the most approachable business models and businesses in practice that I've ever come up with. So I don't know about Easy Read. Maybe you're hiding stuff from all of us, but it really. You know these four attributes are there. So I think that over the last 10 years you've maybe it's still aspirational and that's always a good thing, but I think you've achieved a lot of it. \n\nChris: Well, you're very kind and I appreciate those words, but I used to say, once again, you know, in public I want to thank Andy Hayes and Hucklebuck Design, because you know it was Andy that you know had those interviews with me and from those interviews we got it to still down to a few words, and four of those most important words were smart, passionate, supportive, approachable, and out of that came the name and logo for Roost, and we have this story on the website, on the about Roost section of the website that people ask me all the time. I would say, well, how'd you come up with the name Roost? And I would just sort of chuckle and say, well, zillow was taken. You know it's the thing about trademarks and names these days. There's nothing easy about it Because first of all, you've got to have a name that can be licensed in the state you're in, in the state of Ohio, as every state Although Ohio, I think, are far more strict than other states that I've been licensed in you know there are rules as to what words can and cannot be in your, your doing business as name, your DBA. So to find a name of the company that embodied smart, passionate, supportive, approachable and embodied and was not already in use just in Ohio and was licenseable in Ohio. Because I put forth a couple of different names and got knocked down. Part of it was I didn't understand the rules. You get to this point where, okay, you want your name to embody what you want to be. That's the whole thing about marketing. But you have to work within the framework that you're given and, being that we're licensed by the state, we can only have names that the state at that time Ohio only would allow us to have. \n\nThen the second thing is just because Ohio says that you can use it in Ohio doesn't mean that name isn't already in use someplace else in the country. You start doing Google searches for just about anything you can think of and pretty much you're going to find it. There's not a lot of new ideas under the sun anymore. That's a hard thing. Then the final step was I've had it in my head for 10 years that some day we're going to get this thing rolling so well that other people are going to want to buy in. Everything I've done the last 10 years was designed to make it repeatable and scalable Hopefully not my mistakes, but the good stuff is repeatable and scalable and to sell a franchise, whether it happens or not, but it's just good, business is to be able to have a trademark. \n\nBruce came around that it was the only name that we could come up with that met those four criteria. It certainly didn't argue against smart, passionate, supportive, approachable. I think it's absolutely approachable. It wasn't in use in Ohio. It fell within the guidelines that the state of Ohio would allow us to license it as a doing business ad. It wasn't in use in three or four other real estate teams or firms across the country, but none of those folks had gone to the trouble of trademarking it when I first approached an attorney. So that happened right, and then I'll try to make the stories getting a little long. \n\nBut by the time we got around, or I got around to actually speaking to a trademark attorney, somebody else really nice guy met and visited with him in North Carolina. Actually, no, that not the guy in North Carolina still has a company called Roost, but it's Roost Realty or Roost Real Estate, it's not Roost Real Estate Co. And he wasn't able to get a trademark. So by the time I went and got a trademark I found out why he wasn't able to and this was because there's a company in I think it's Philadelphia. It is. They're in other states now, but they had a furnished short-term rental apartment building which sounds suspiciously like a hotel. But they had a short-term rental apartment building which put it in the real estate category for which they had a trademark with the name Roost, and they got there first. So a couple of things happened. To make a long story short, we were able my attorney was able to make a deal with these people that they I forget what the legal term is, but we give them a, we give them money every year not a lot of money, but we give them money every year and we agreed that we would only use Roost in three states Ohio, florida and Tennessee and that we would never use it as branding for our own short-term rentals. Oh, that's how we have Roost. \n\nWell, of course, at the time I was looking, I was thinking big and it freaked me out that I couldn't get a trademark. And this is before we actually made that deal with those folks. So I started going crazy, trying to come up with alternate names and it must have been focused on it for a month and I started flipping through old records and CDs and books and all that. And one day I came across an old Springsteen record from the 90s called Lucky Town that's a name and I started thinking about it and I thought, well, you know, that's probably a smart, passionate, supportive and approachable than Roost. \n\nSo we actually have a trademark in all 50 states for the term Lucky Town. So Lucky Town Real Estate Company is a thing. We don't do business as Lucky Town Real Estate Company, but when we do get out of Ohio and Florida and Tennessee, one day Lucky Town is available to us. So we actually did an alternate logo which looks just like Roost but it says Lucky Town, and so someday you may see Lucky Town, but for now we're focused on Roost for the time being. Oh, and aside from Ohio, florida and Tennessee, we do have a trademark in all of Canada for Roost and Lucky Town. So that's the story of where Roost came from. For what that's for. \n\nLaci: You know as a well-rounded marketer who enjoys the graphic design portion of things and the copywriting portion and the brainstorming portion and the strategy. I think that's a testament to you know how you, when you choose your brand, when you choose, when you develop your branding initially, that's you know it's not necessarily the end all be all for who you are, but you can really make anything work Right If it's. You can be smart, passionate, supportive and approachable and the name not reflect that as well. Perhaps it's really all about you know how you function day to day, what value you bring and how you get that message out there. So you know, I think you hit on two very good options, but you know even so, even if you hadn't been able to trademark those or you had gone in a different direction, I think that the smart, passionate, supportive and approachable would have been clear. So just a note from you know, one marketing expert to anybody out there who's trying to name their business Well, I think that would have been the constant, you know for sure. \n\nChris: But the other thing I think that supports smart, passionate, supportive and approachable, are the colors Andy chose. You know, the whole trademark guideline package, the colors, the font, all of those things, I think, go a long way towards subconsciously conveying the message of what we want this to be about. And now, you know, 10 years later, you know, with Kylie doing the graphic design stuff and managing all the social media pages, my God, she's taken Andy's ideas and expanded them, you know, dramatically and really increased our reach so that it all came down to Andy and Hucklebuck. \n\nLaci: So he created something really timeless, and I think that's the number one thing as a marketer that I look for in a brand which is not just a logo but it's the whole. You know, your whole company is something that is timeless. And you know color theory. We could talk about it all day, but definitely created that and it's something that will no matter what's on trend, you know, no matter what fonts and kind of colors, whether it's farmhouse or whatever's trending right now. You know this brand is gonna stand that test of time. \n\nChris: So they. So we had the words, we had the brand, we had the name, we had the name. So the next thing we did was we did a short video. It's a two minute video and it was called All About Roost. And you can still see that on the About Roost page on our website, roostrealstatecocom. \n\nAnd, at the risk of putting everybody to sleep, I'm gonna run through this really fast. It's a very short script, but I think it's interesting because the ideas that I had honestly going on 11 years ago now are still the ideas that I believe in and the ideas that matter today. So what I said was early on, I said Roost is a different kind of brokerage and most brokerages have two lines of businesses. They work with buyers and they work with sellers, and at Roost, we work with buyers and sellers too, but we also work with investors and the people who rent from them. So when I started Roost, it was all about working with investors and, ultimately, property management on day one, and the reason was as we've talked about in other episodes is it was about being in the shelter business, so embracing 100% of all the people who need a home, not just the 60 to 65% of the people who own real estate creates a very different kind of company for our clients and for our agents. Many people who rent their homes will do so for their entire lives. Many do it's the right thing, and many rent their entire lives at different income levels. Others will only rent for a few years before buying a home of their own. \n\nWe help our tenant clients become homeowners we all work with. But let me phrase that I can tell you that we don't have a huge number of tenant clients buying houses, and if they do, as much as we would love them to buy them from us, it's not that often that they do, but it's not because they're going with somebody else. It's because there are many people who decide that renting is better for them, whether because they wanna be mobile or I guess in some cases it's because they can't. But when we do have them, it's wonderful and we love to teach people how to be fantastic tenants and we love to teach people how to set themselves up to purchase a house if they want to. So that's still valid. It just doesn't happen as much as you would think. We help our tenant clients become homeowners. \n\nWe also work closely with investors, and this has only gotten bigger. So my vision was that we would help tenants get into homes and it would be as great a part of the business as working with investors Hasn't turned out that way at all. So, working closely with investors, we help investors find, evaluate, purchase and manage investment properties. By offering property management services to our investor, they're more comfortable buying more property. And what's interesting is and we've talked about this in both podcasts this past year Lacey is property management is hard and it took up a lot of time and bandwidth the last 10 years too. Finally, after so many ups and downs, get that right, and it's funny that this year we've talked about changing manage with Roost to invest with Roost. It's to better articulate or advertise what our services are to investors. But I do think it's interesting going back and looking at this, that almost 11 years ago what I said with investors was we wanna help investors find, evaluate, purchase and manage investment property, and that's truly what invest with Roost has become today. And it's all in the Lamewood Profitability Playbook, the podcast. \n\nBecause we work in the property management business, we have relationships with skilled tradespeople that help all of our listings clients prepare and maintain their properties for sale. I can't tell you, when I was actively listing and selling homes, how many times I was able to take care of something at a far more reasonable price for an owner than that they would have been able to find for themselves because we had these skilled tradespeople and maintenance guys working for us. Because of the property management business, this is the kind of situation where the property management division supports the brokerage advice of Roost. It's hard to tell which one ever came first, should have come first or it doesn't matter anymore. There's a symbiosis there and that comes back to wanting to service 100% of the people who need a roof over their heads. \n\nRoost Real Estate is a referral-based business Still is. We believe that the very best clients are those that are recommended by our existing and past clients. We have a referral-based marketing system that keeps Roost Real Estate company top of mind with everyone we work with, and the best example of that is what has become Roost Rambling these past couple of years. So some of our tenants become buyers and if they don't become buyers, they also refer new tenants and new buyers to us. So it's interesting a lot of people who never ever become homeowners refer to a future of a homeowner to us. \n\nThat's come true. Our investors become repeat buyers. That's become incredibly true. That's happened in a far, far bigger way than I could have dreamed of 11 years ago, and they also refer new investors and new buyers and new sellers to Roost. Our buyers and sellers refer their friends, family and coworkers to again and again. We are the real estate company people turn to at every stage of their lives. Now I can grant it, we've only been here 10 years, so we haven't caught every stage of everybody's lives yet, but it's still aspirational, all right. So we wanna be there when our clients rent their first apartment by their first home, by their first investment property and, ultimately, by their retirement villa on the beach. So this is Roost Real Estate Company smart, passionate, supportive, approachable, meeting people where they are today and helping them get to where they want to be tomorrow. So I think that still adds up 99% of it. What do you think? \n\nLaci: Yeah, absolutely. The word you never mentioned I don't think I'm looking at this transcript right now is relationship, right, and that's really what all of this is kind of what you just say. We have relationships with skilled tradespeople, but this is a relationship with clients, partners. That's really the word that sticks out to me and that's really the emphasis that you guys have, no matter what you're doing, no matter what part of the business you can focus on and it goes both ways right. \n\nSo that's the shelter business at play. It's not just a relationship with one side of the story. It's a relationship with tenants and owners. It's a relationship with buyers and sellers. It's a relationship with your property management team and the tradespeople that you all use to get the work done. So I think it's just a really comprehensive kind of at the. I guess at the point you wrote it, it was goals, right. \n\nBut now it's, a mantra when I worked at Mosquito Authority, we did a mantra video and I can still recite it to you word for word because it was we make backyard worth mowing and front porch is worth twinging right. \n\nAnd it was because it was true, it was sincere, it was how everybody at that time and it was the franchisor who lived in my hometown in Hickory, north Carolina it started the whole thing. And then, I think, when I started, we had 20 franchises and then, when you fast forward to seven years later and we had more than 200 franchises, that mantra video still rang true. And when you looked back it was grainy looking because the technology wasn't brand new, right, and the owners in the video who were saying the lines they looked like different people, but the message was the exact same message we were taking to market, to clients, to employees, to everybody every single day. And I think that when you nail it, it doesn't matter how much time passes, it's still the truth. So that's what I see here. \n\nChris: We're gonna share this video again on Facebook because it's actually a very well done video. It doesn't feature me at all. It's me reading the copy in the background, but it's animated and some of the words pop up and stuff to make it more interesting to get through the two minutes. But I'm proud of the video. Let's say that After all this time I still feel great about it. So well, that's kind of summing up the last 10 years, I guess very quickly, but I have to tell you I was having a little bit of trouble getting some perspective on everything that had happened this past year and some clarity on what I want to accomplish both for me and for the company in 2024. \n\nAs usual, just in the nick of time, I got some help from Dan Sullivan and strategic coach. I got an email in my box I guess it was right before Christmas and they published a great last minute gift called the bigger future countdown, and we're gonna put the URL in the show notes so you can get to it if you'd like to download a copy. You don't have to be a strategic coach client, though I hardly recommend that you check into it to get this graphic. So the gist of this instrument of this worksheet was that his challenge is that you, as an entrepreneur, that you reflect and I think this is great for agents, obviously right, and it's also great for people who invest in real estate, even if you have a full-time profession and a stockter, lawyer or whatever and that you have that, but your investment business is still, at the end of the day, an entrepreneurial venture. So I think this applies to everybody. \n\nBut his challenge to all of us is to set a new path for the new year with these 10 mindsets in mind. And the first one is and we're not gonna, I'm just gonna run through these and as we go through the rest of this discussion, some things will come up, but these are great things to keep in mind all the time. But always make your questions bigger than your answers. Always make your purpose greater than your money. Always make your confidence greater than your comfort. Always make your cooperation greater than your status. Always make your enjoyment greater than your effort. Man, I feel like I try really hard, lacey, I want to work on that one. Always make your gratitude greater than your success. Always make your performance greater than your applause. Always make your contribution greater than your reward. Always make your learning greater than your experience and always make your future bigger than your past. \n\nAnd as I reflected on these mindsets, it really helped me out. And what became really clear is, as I kind of think through the wins for last year, was that every win, anything good that happened last year, any win I enjoyed last year, was in collaboration with another team member. It was a, whether they were somebody on the payroll or somebody outside of the payroll. And, lacey, you're at the top of my win list this year. I mean having Dean introduce us and what you've done helping me with the master classes, the Landlord, profitability Playbook, connect, practice, track and Grow has just been terrific. And there is no way we'd be doing this today if I hadn't met you and then Dean Jackson hadn't referred you to me. So thanks for being a key win this year. I appreciate it. \n\nLaci: Yeah, that feeling's mutual, and I don't just say that. I know that's probably what everybody expects me to say right now, but I think there's a point here where, if it can be mutual, then it's even more important. It answers your questions even more than so. I have very much enjoyed it and I think finding people you work well with and can align with and compliment is a huge part of some of these new key growth mindsets that Dean recommends. So, yeah, pleasure is all mine. \n\nChris: Second win is Gretchen Mitchell, who used to be Gretchen McAllister before she got married. Gretchen's my daughter and she's been. She actually started Property Management before we were even roost, as soon as she got her real estate license, and so she took us from zero doors 14, 15 years ago to the thousand or so that we look after as of this morning, and Gretchen has just done an amazing job working directly with the owners, working directly with the tenants. But what's really fun to watch is that Gretchen has become a leader and a fantastic manager team leader to her crew. God knows. We've had some ups and downs this past year, but to see Gretchen take the reins and grow and get us on a solid path to growth and property management has been fantastic. So property management are restructuring this year has been a giant win, but never would have happened without Gretchen Kylie I mentioned Kylie. \n\nShe came with us a year ago, december, as our graphic designer. She's just done a fantastic job expanding the brand. So if you haven't liked Roost Real Estate Company on Facebook or you haven't liked manage with Roost or career with Roost, please do and it'll give you a great chance to meet Kylie. A newer team member we have, taylor Cole. She just came on with us in October but Taylor is going to be working with as you've met Taylor with Lacey and Kylie and I to sort of build out this marketing and education and relationship team. And whereas Lacey's helping us get the marketing together, helping me get the message together, get product out there, kylie is helping us spread it out to the world, making it pretty, giving us the right words, the colors, the reach on social media, and then Taylor is bringing it all back home one on one to the people who receive that message, whether they be potential home buyers with Space Coast Condo Guide opt-ins, or whether it's potential agents who come to work for Roost from Connect Practice, track and Grow or its owners that come to work with us through the Landlord Profitability Playbook. So I'm excited about our future with Taylor and just in the last few weeks of this year, last year and this year, she's already made a massive contribution. \n\nBut that property management team, my gosh. We went through so much and I've said this before. But COVID was interesting. We picked up so many doors and it was one of those situations where tenants never moved because and they always paid the rent. I know people say during COVID they had trouble collecting rent. We had no trouble collecting rent during COVID not at all, and it was because people had the extra cash in their pocket from the government. But when that cash started to dry up and interest rates went up and owners stopped buying new houses or it became more discerning about buying new properties and tenants suddenly either had to move or could move and then suddenly we had vacancies. The property management business just got ugly and the last two years were really hard and Gretchen got through that with me the past two years. \n\nBut the team that she's put together in Columbus Mercy, our tenant relations specialist she's just amazing with tenants. Brenda's our leasing specialist. She does leasing for both of our offices. Jade, working with Heather and our rehab and maintenance department. She's done a wonderful job making sure that our maintenance guys are dispatched where the tenants need them at the time. The tenants need them and the feedback we're getting from tenants because of Jade's work has been so much better than what we had in months and years prior. \n\nDana in Springfield she does the team relations function just like Mercy does. She does in Springfield, and Josie and Angela are accounting people. Holy crap, if it wasn't for them I don't know what we would do. One thing and all the ups and downs we've had over the past 10 years is we have never had to worry about trust accounts or accounting or that piece of it, and one of the reasons brokers don't like to get into property management is that the trust accounting is hard. There's laws you have to stay within. It's other people's money. It's a tricky business, but Josie and Angela and my wife Kelly, who look after that in our accounting, jill and McGregor they have just done a fabulous job on that and if there's anything that keeps me up at night, it's never been accounting and that continues to be a win. \n\nI mentioned Heather. We started a technically a division called Roost Rehab and Maintenance, and Roost Rehab and Maintenance, I think, is something that we're going to be talking more and more about as we go. I think it's the thing that's going to become such a force in and of itself that we can market directly to our agents and be able to help sellers who need to get some things done before they sell or after an inspection, and the service that Heather and her team her and Jade have provided to our owners when it comes to rehabs and so forth has been phenomenal. So big win is the Rehab and Maintenance Department. We've talked a lot. It's been a tough year in real estate and I think that's true across the country. But some of the very best agents in Ohio I mean we're talking people we're talking people who do half a million a year are down as much as 30, 40% through the year. But our agents they still came through with their heads held high. \n\nI think about Priscilla Mechnemi she's been with us for almost the entire 10 years as Roost and we were together. When I had remex franchises she still had a heck of a year and she's become a great team leader and a great mentor to many agents in the market. Josh Hufford he did property management with us for years and finally decided to go on and just focus on sales. He's had a hell of a year. Dg Quar she's been with us since 2003 when I had a remex franchise in Urbana, and DG is still with us and she's still had a phenomenal year, even as she starts to spend more time and take better care of herself. \n\nTina we can't discuss the agents without talking about Tina Blaving, who is not just a key agent but a key part of the PM team. So Tina is our property manager in Springfield and Dayton and her and Dana look after those owners and tenants in that area of the state and she has done a phenomenal job this year, just going through so much upheaval and stress and everything else. But you know she's come out that much stronger and she had a really good sales year. And I think you've all met Anne before on previous podcasts. She's a newer agent. She helped us out in property management this year and I believe her sales were pretty close to last year, which is saying a lot. Susan Elliott she's down in Florida, in Fort Myers Beach. You know they just came out of the hurricane a couple of years ago and she just had a massive closing in January to kick off the new year. So I think she's going to be able to put that hurricane behind her and become that force in the market that I know she will be. \n\nAlicia, newer agent, has a full-time job but her business keeps growing year after year. Great job, matt Conkling. He helped us skip the property management back on track. Great guy, skilled person. He's an investor, wonderful. \n\nI already mentioned Taylor, who's got her first sale under contract with Bruce. Congratulations, taylor and Rena. She's been with us for almost 20 years and she's down here in Melbourne where I am today. I mentioned Kelly, my wife. You know she's been, we've been at this for I guess we've been married not quite, what is it? 37, 38 years and she looks after all the money. \n\nAnd, like I said, we had a lot of wins, a lot of struggles, but there's not one thing that happened this year that didn't happen because of being in collaboration or being able to be introduced to fine leverage, whatever you want to call it, unique ability, anything. \n\nBut if it wasn't for these folks, we would not be the company we are today. The other big win and you mentioned early on or maybe that was you and I before we went live here today is that these podcasts are something that I actually look forward to now. You know they've gotten me out of my comfort zone. The prep work helps me and it helps me lead the business as I think. The prep work helps me think through things that improve the business. So that's great. You know the whole idea that you know you can be the best leader, manager, realtor in the world, but if you don't have a story to tell and you aren't able to tell it, it just doesn't matter, right? So which came first, marketing or the practice? And again that's sort of like sales and management, it just doesn't matter. \n\nLaci: So again thanks to my podcast partner here, lacey, once again, yeah, I mean so not a lot of people get to see the back end of a podcast, right, you just hear what comes through the microphone and I am fortunate enough to be privy to the note taking and the preparation to a certain degree. And that looks so different today than it did when we first started this in such a great way, because now the podcast notes that I get before the show A, they're not always a weekend advance. So that tells me that we're being a little more spontaneous, which translates to a more authentic conversation and a more authentic experience for the people listening, I think as well as you and I. And the other thing, they're not mapped out like the conversation, right? You don't think about when you're making these notes now, like you did before, where are you I'm going to interject, right, or what questions I might be able to ask. And some of that comes from some of the other campaigns that we do from a marketing perspective, but some of it is just you being more comfortable with the process and you never even do your introvert by listening to these. But I think that's a huge thing that I've noticed. \n\nThe other thing is and I think it's just worth pointing out, if you're listening to this and you hear you, chris, talk about individually every member, for the most part of the team that you're working with. \n\nI think that just speaks volumes to you know this mantra that you've put out there in your video and how you work day to day. You know it's just a team effort and it's something that everybody has their place and everybody is acknowledged for that and everybody has the autonomy they deserve to do the work and you hire the right people, which you know. If I'm investing in a property or if I'm buying a home with a car, I'm going to do that, and if I'm investing in a property or if I'm buying a home with y'all, that really gives me a lot of confidence and I think this is just an example of how you approach the business. So honored to be on that list, but I think it says a lot about Roost and you that you can go through at the you know, drop of a hat and just kind of mention and acknowledge every team member. \n\nChris: Well, I appreciate that and, again, a lot of this is aspirational and you know I'm ready to leave that behind, but we did turn through a lot of people that the team that we have right now today is, without a doubt, the best team that I've ever had, so I'm grateful for that. But let's look ahead to next year. So I wanted to kind of discuss some of the things that I am looking forward to seeing as a win 12 months from now, and part of the reason for putting this out there is if I say it out loud in front of all of you all, then maybe something will happen, maybe I'll do something about it Right? So the key things that you and I are going to be working on, but the entire company is going to be working on as an initiative that I'm calling, have I earned a five star review today? You know and I think this goes back to the conversation about, yes, you've got to do a good job. It's one thing to do a good job, but if you're going to expand the business, if you aspire to help more people, then somehow you've got to find a way to let the let those people know that you're somebody worth considering, that you exist in the world and one of the ways that happens in this 21st century is through, quite frankly, reviews and Google reviews and Facebook reviews and Yelp and all that which you know. I got mixed feelings about all of that, but the one thing that you can't turn off, that you can't stop that is very hard to manage our Google reviews, and you know we got to the point where. \n\nSo the Google reviews are tied to the Google place pages and the Google place pages are critical to managing those pages correctly and having the right information on it. Having current information on them, I think, is critical to people finding us organically right. You know, maybe you remember Lacey Yellow Pages phone books that used to show up in your front porch. I don't know, but we used to have this thing called the Yellow Pages and if you wanted a real tour, you would go to the Yellow Pages. You go to realtors and you go down the list and you look for an ad for a real tour and you'd find one that spoke to you and you would call that realtor Right. Today we don't have Yellow Pages, we have the internet, and Google place pages are the key to being visible and projecting the type of project yourself as the company you want to be and, quite frankly, our Google presence and our place page presence and our review presence didn't come close to lining up with the. You know the aspirations we talked about in that video. That we did 10 years ago, so have I earned a five star review? Today is our initiative to embrace Google reviews and ask for reviews when it's appropriate to ask for reviews, but to do it in as authentic a manner as possible. \n\nIn the property management business, you're always going to have people who don't get picked for a house I can't do anything about it and those people may lash out and they may do it unfairly or otherwise. On a Google review, the problem is when we had our worst times operationally, when we were really struggling to get our arms again around the business and the owners that we had and wanted to keep. Basically, that whole Google ecosystem ran without us even considering it or looking at it and I had no idea what damage it was doing. But our reviews were just crap. We weren't managing, we weren't going after them, we weren't doing anything about them. Right, and whether I like the Google review process or not, it doesn't matter. It is what it is. \n\nSo if you take the approach that, all right, all of us as a company whether we're agents working with buyers and sellers, whether we're tenant relations working with tenants, whether we're rehab and maintenance working with owners we want to be earning, going forward, five star reviews from every person we serve. Agents right. Could be agents we look after it. Could be owners we look after it. Could be tenants we look after it. Could be first time buyers. \n\nPeople when they're happy, they don't do a review right. They're only when they're really angry with you or they feel like they've been done wrong or you haven't done your job correctly. So have I earned a five star review today? The low hanging fruit here is you know, marcy and Dana and Brenda and Tina, you know they're just, you know, lovable people, right, they're professionals who get the job done. And to get to the point, where have I earned a five star review today? Rules tripping off the tongue, almost like when you're at McDonald's and would you have prize with that? Would you like prize with that? That's what we're trying to get to, and I think that I don't know that you and I have settled on the technology we're going to use, but it looks like podium is like the number one tool that companies who successfully not just manage their reviews, but leverage their reviews and respond to their reviews used. So this is something you and I will be focusing on, hopefully over the next 10 or 12 weeks, and really get a report card on how well we're doing. \n\nAnd if we mess up, right, we have to go online. We have to say look, we messed up, please get in touch with me, we're going to fix this right. So you know it's one thing to make a mistake and acknowledge it right. It's another thing to make a mistake and not know you made it. And then it's another thing when you have somebody who's just not being truthful or fair and in any case, we have to have our ducks in a row, we have to believe in how we're approaching the business and the people, the relationships, every single day, and we have to be prepared to ask for feedback. So this is the biggest and, I think, most important initiative of the year, because I think it absolutely affects the growth of the company in every everything we do. \n\nLaci: Yeah, I mean, I think it would. To reiterate your point, it would be ideal if the Google reviews accurately reflected the experiences of the people that you work with and for, right, but that just doesn't happen. My dad owns a Carla here in our small town and somebody very recently gave them a negative review, a one-star review, because they weren't happy with the purchasing process. It wasn't even my dad's Carla, it ended up that they purchased from. But you really have no recourse, right? So the only way to manage those reviews? They did respond and say we don't have record of you purchasing a car here. We'd love to talk to you about your experience anyway, but that one-star review is still there, taking that five-star down to a 4.6 or whatever the case may be. \n\nSo the only way to effectively manage the Google review process is to have enough and I'll say positive here, because that is an accurate review, I would say for most of the folks who work with you but to have enough accurate reviews to offset the inaccurate ones. \n\nNow, if that means you're a three-star business, then that's going to be what's there and that's going to be what offsets the one-stars or the five-stars, I guess, in that scenario. Right, but it's just to have enough to make sure that one or two that get put out there that aren't accurate don't really negatively impact your overall score. So it's just another thing. I don't know of any businesses at least any that I work with even the smallest of the small who can do nothing about Google and just have it not negatively impact their business. If they don't, Everybody is going to have to focus on this, moving forward and put forth some effort into maintaining what their actual experience is. So, yeah, I'm excited about it, because I'm excited to work with an organization where I don't have to worry about what the reviews will be when you ask the question have I earned a five-star review today? \n\nChris: Well, I appreciate your help with that because I absolutely believe that you've got to put to my point on it. But this could clearly break the company, but it could also really make the company if we do it right, and I expect we're going to do it right. So that's my first key initiative. The second thing I want to go back and revisit is the whole idea of List with Roost and we were talking the past gosh, it's been two months now about that National Association of Realtors lawsuit where the Realtors lost the lawsuit and what that might mean for our business going forward. And I do think and as unpopular as this is that we are going to see some commission compression and I think that somebody has to step up and look really hard at the entire process of putting a home on the market and getting it to the closing table, what that entails, where the bottlenecks are, where does it become unpredictable? Where does the service and support angle fall apart? What do we need to do to take a fresh look at that? \n\nAnd I think one of the things that is worth considering and I don't want to get too deep into this, but I've been toying with this idea of testing something called a Roost certified pre-home and it's almost like you know, we're a business too and people get concerned about how much. Commission usually has a percentage that they get charged by their real estate brokerage, and I'm sensitive to that. But you know, by the same token, if I am charging 6% and I can show where I'm delivering 6%, 7%, 8%, 10% worth of value to that transaction, I'm surely not going to apologize for that or run away from that. You know, as I said many times this year, I'm a professional and I have to get paid too, and it's the same with our agents. But having said that, how much of the listing process can be automated and if not automated, how much of it can be made routine? How do you get the listing process to be a lot more like getting the same hamburger every time at McDonald's? \n\nI don't know if that's the perfect analogy, because obviously hamburger is a hamburger and this is a service, but I think it starts with the idea of a certified pre-home and knowing exactly the condition, physical, legal, design, everything there is to know about your home upfront. Have it in a format that can be shared, have those things quantified so you know what that home is worth relative to other homes who have sold in the market and make that some sort of a package that is valuable for that seller in and of themselves, if that makes sense. So I know that sounds pretty cryptic, but the whole idea of a home that's designated as a certified pre-owned home with a big ol' roost check mark on it I think there's something to that and it may be that it becomes a product that includes some real value-added things, includes a lot of value-added consulting, a lot of knowledge, a lot of wisdom, but it may be something that stands in and of itself that the seller can choose to do with what they wish. And I know that's controversial but, as we've discussed with this whole NAR lawsuit, things are changing and things are going to start changing fast and the sooner we get out of the box, the better off we're going to be. So, anyway, I think the whole listing process needs to be rethought from top to bottom and, as I said to you, I'm pretty jazzed about this, even to the point where I'm never going to go without my team, but I'm kind of jazzed about doing a little bit of listing myself and testing this out. So you know, I've got to be pretty excited if I'm going to go back out there and do what got me here today, but this is something that I think I'm pretty passionate about. So List with Roost is something that we're definitely going to be working through this year and testing out there in the market, and I'm going to personally be behind that. \n\nThe other thing that is just critical to us going forward is, you know, recruiting agents and, as we've talked so many times and everything that's Connect Practice Track and Go podcast is about is career. \n\nWith Roost, we have focused on that relentlessly over the past couple of years and the whole thing has morphed into. You know, we want to be the brokerage for the new real estate profession. Right, we want to be the brokerage for the person who's going to be in this business for the next 25 years. We want to be the brokerage for the people who are questioning everything that came before, but also the brokerage where, with agents who count on things that they know aren't going to change for the next 25 years, whether that's the concept of home or there's a concept of relationship service or whatever but we're kind of flipping the whole thing on their head, you know, instead of looking for agents to join our team. I think we're done with that. So I think the initiative for career with Roost is what it really should be is we want to join your team. You know, I think the whole idea has been pretty well debunked that brokerages hire agents. It doesn't work that way. Agents hire brokerages, right. \n\nLaci: Or, if they don't, they should right Right. Well, that's true too. \n\nChris: The agents are the buyers here and you know we want to join your team, we want a job on your team. We think you should hire us to support you is where this goes. You know, just because we're the ones that has to write the checks, because we're the broker, doesn't mean that you're not paying the bills. So, and what's, what value do we have brokers have, or should we have? What should an agent pay for? You know, what should they get for their split or monthly fees or whatever? And our role on your team as a successful agent is we're here to help you get more referrals. We're here to help you turn every listing you take into model sales. We're here to help you convert more leads. We're going to find all the buyers you can handle and we're going to show you how to get listings in any area you want to get listings in. \n\nLaci: What would you do if you could count on yourself to do it right? \n\nChris: Yeah, well, yeah, exactly, and you know. So those are pretty key things, and we're putting together a new set of recruiting brochures that actually show the tools that we include, that we give to every single agent to make things happen right. So we're doing some marketing tools that show you point blank what tools we use to help you get more referrals. What is the process? What are the tools? What does the marketing look like to turn every listing into mobile sales? How are we converting these leads for you so that you have warm leads coming your way? You know, hopefully on a weekly basis at least. What are we doing to make sure that you find all the buyers you can handle? You know, how is your brokerage becoming a market maker? So we're going to be showing you exactly what these tools are. We're going to, you know, we're going to show our work on these and we're going to be showing some pretty significant results, and we've already started. So I'm excited about that. But you know, the whole thing comes back to just like you said we would do everything. We do everything you would do. If you can count on yourself to do it right. We want to be your assistant. The other thing that we're, you know, the other thing in this brochure is we do the setups. You get the six pack right, so you can count on us to get your Rooster Amblings out. You can count on us to get your Facebook page set up and managed for you. We can. You can count on us to have a website that's constantly up to date. You can count on us for your personal branding team. You know we're going to do it for you. We're going to help you identify your five star prospects. We're going to, we're going to get you listings and you know the subdivision you want or the. You know, just like Spacecos condos on the beach right, we're going to set that up for you, whatever your niche happens to be. So that's a huge initiative. \n\nAnd that's the third one. And the fourth one is Invest with Roost, and we've been working on this so much and I think this is more of just getting a little bit more dialed in on our value proposition and our job being to automate your collection and so you can get on with your life. And I want to expand our roster of agents who actually have great experience working with investors so that we can help people truly expand their portfolio. So Invest with Roost I think is going to be. It's not a new thing for this year, but I think we're really going to sharpen that message and I expect a lot of growth there. So those are the four key things I'm working on. Is it for people? \n\nLaci: Well, people have choices now, chris, that I mean with everything, right? If I want to order, you know, chapstick I'm looking at my Chapstick here on my desk I can get it on Amazon and get it in two days. I can run up to any of the CVS at any time of day. I can get a Walmart if I need it in the middle of the night, right? So, like, we just have so many choices, and that's the same thing is true now for agents and investors and every tenants, everybody you work with, right? \n\nIt doesn't matter which franchise is like operating in your specific area, or it doesn't matter, you know you're able to find the right brokerage, the right property management team, the right agent that fits your personality, because there's so many choices out there. So, you know, I think this is just really a next level kind of approach to signing up agents and tenants and owners, and you have to be really clear about what value you provide. And, on the other end of the conversation, people need to be really clear on how they work well and how to find what they need in their partnership. So you know, luckily you've got all these master classes out there about how to find the right broker and you know how to kind of determine what's right for you, but I think this is just the way of the future and I'm happy to see that you guys are the way forward. \n\nChris: Now the other thing that we're going to push out there this year is rent with roost, and we haven't done anything that really has been targeted to educate tenants. You know, and don't forget I don't want to sound overly paternal about this, but so many of our tenants are first-time renters. They don't know how to be a successful tenant. They don't know how to, you know, make sure that they're going to get a great what do you want to say report card from their previous landlord, right? They don't know how to make sure they get their deposit back, etc. \n\nSo we're going to be rolling out the first iteration of rent with roost this year also. So those are the five key areas that we're focused on, but the number one thing is have I earned a five-star review today? Because that cuts across everything we do? So I've been thinking about to you know, now that we've got this thing in place, you know, now that we're doing this, I have some key goals for the next five years that we're going to go ahead and tell the universe about today. Lice are you ready? \n\nLaci: oh, I'm ready. I was born ready for this one all right. \n\nChris: I think in the next five years my goal is that we will have 200 agents in the company between florida and ohio that see the world as we do, and I think that's doable. I think it's aggressive, but I think that we're already seeing more and more people, you know, listen to the podcast, download the books, open the emails every single week. So I do think that's possible. The other thing I'd like to see in the next five years is that we double our door count and I so I think 2000 doors under management in the next five years is very doable. We're currently at a thousand today and we have enough. We have enough staff and infrastructure to support to easily manage 1500 doors right now without missing a beat. As we get closer to that 1300 mark again, we'll have to start looking at where we're going to add staff, but I think in the next five years a minimum of 2000 doors is definitely going to happen. \n\nThe other thing and this may be a little bit conservative, but I think I've had, between the three main books that we've been promoting out there right the two agent books and the profitability playbook we've had maybe 800 total downloads, not quite a thousand. So 5000 book downloads is probably not the best goal. That seems pretty conservative, but I think what this goal needs to be is 5000 weekly email opens, right. So if we end up sending, if we have 10 thousand people in the database because 10 000 so really it should be 10 000 book downloads is what we need to be looking for over the next five years. That result in somewhere around four to five thousand individual agents and potential owners actually opening up the weekly emails and reading what's in them. That's, that's a hell of a goal, because if that happens over the next five years, the next 25 will take care of themselves yeah, absolutely. \n\nLaci: I mean, these are powerful numbers and I think that you know to dispel any sort of like number myths out there. Right, we know what 200 means to us, but that probably doesn't sound like a lot to other people. Necessarily, we could have 200 agents, maybe this year, but the thing is these are agents aligned with your values. Right, these are ideal. We talk about, you know, ideal target markets and targeting folks. \n\nWe want people who this information that we're sharing is going to mean something to them and help them sincerely, even if they never consider being an agent or never come on board. Ultimately same thing with doors under management. \n\nSame thing with the book downloads, right. So I think that those are definitely some aggressive goals and some admirable goals, but they're totally doable because you know, you have the system. What comes to mind is you know the tortoise and the hare, and slow and steady wins the race. These things are all happening simultaneously. If you were just a broker looking for agents, then these goals would probably not be big enough, right? If you were just a property management company looking for doors, if you were just a consultant looking for, you know, people to to coach and to help along the way, then none of these would be. I mean, there's still pretty big numbers, but none of them would be. You know, it'd be almost a given. But you're doing all of this. Bruce is doing all of this simultaneously, with the goal of each part of the business feeding into another part of the business and helping more people. So I think it's just a really it's worth noting that invest, career, you know, rent, buy, sell, buy, list, whatever is. They're all happening at the same time and that is something. \n\nChris: So to coordinate that just logistically is huge I just want to say this you know 200 agents. You could say it's an arbitrary number, and I guess it is. But let me tell you something if I can't find 200 agents of the exact same caliber, of at least caliber of gretchen persilla, josh d dritina and susan alisha mac taylor, rena, then we won't get 200 right. If I only get 50, and and they see the world the way the books we have now do, that would be a massive win. But I think putting something out there makes sense. So I think that hopefully, between the markets that we work in that there's 200 people who do see the world the way you know we do right now. So that's my goal. But and then why you know if I'm an agent. A natural question is why? What's in it for me? I you know when I think about this. I find it fun, I find it entertaining. It's what. I don't know how to stop right. So why do I want goals like this that feel pretty aggressive? As we said here today? Because I'm entertained by it, it's fun and no matter how you slice it, market share does matter to all of us. The more we can, the more reach we can achieve over the next five years, the better off every one of us is going to be, because that extra reach, that, that that extra opportunity to serve, that extra opportunity to create, you know, a raving fan. You know that generates profit, that I'm then able to reinvest in our agents and team members and future opportunities. And you can't do that if you're not a growing company. You can't do it if you're not profitable and profit has to come first. But you can't reinvest if you're not growing. It's growth that creates new opportunities, you know. It's growth that allows agents to decide that they want to hire an assistant or build a team or open their own team office, or open their own roost office or go to a new market or become a you know, a sales manager or a business development director or what have you. It's growth that creates those opportunities for all of us. And probably the most exciting thing is, you know you start doing what you say you're going to do. You start to have some success out there. Growth starts to attract new people with capabilities that we don't have yet, that are only going to make us stronger in the future. Right, you know you could argue weak companies attract weak people and strong companies attract strong people and for that reason alone, I want to be the the the strongest real estate brokerage that I could possibly be. \n\nSo, as we get close to the end, here's my new year's resolution. So my new year's resolution for this year, that I will never lacy. You watch me. I will never show up anywhere without my team. I may be going out there and then may start listing some houses with the certified pre-owned home designation, but I can tell you right now, taylor, you're coming with me, so never show up anywhere without my team. We're going to let the leaders we've hired do what we've hired them to do. We're not going to micromanage, we're not going to look over the shoulder, but we are going to coach, we are going to measure. You know we're going to be right there with them, but we're going to let them do what we hired them to do. \n\nOne of the other things that I want to do this year is, you know, I want to spend more time with our clients, and I think I've done a fairly good job of this, but I want to be even more intentional about one-on-one time, understandings the dangers, the opportunities and strengths that not just our agents, but our owners, our buyers and our sellers are facing, because if I don't know what those dangerous opportunities and strengths are, then I'm never going to be in a position to to know what value. I need to figure out how to add. So more time with clients one-on-one time with clients is on my list this year. I also want to spend more time in florida. We've got huge opportunity here and you know kelly and I love spending time here, so you know that's more personal. But you know the stuff we've been doing with you and dean and this whole space coast condo guide. I think there's something there and once we get that to the point where we can scale it disguised the limit here in florida. You know we talked a lot about in the last podcast we did about the part five of the n? \n\nA r and but guessing, embedding over the next 25 years, and you know I'm dead serious about the next 25 years. But I'm also interested in doing an experience, other things. You know I'm going to be 63 this year, so the whole option of taking care of myself it's not an option and me doing what's right for you know myself, that's got to be good for me and it's ultimately going to be good for the team. So you know, my goal is that I want to be doing this for the next 25 years, but I also need to find some moderation. I always hated that word maybe a little balance, always hated that word. But whatever I'm going to do whatever it takes to make sure that I am adding value for this company in this business for the 25 years, and that means it's time to be more intentional about taking care of myself. So those are my new year's resolutions for this year. I have to pull this out next january and how I did lacy. \n\nSo a couple of other things. Being a great real estate consultant means nothing if nobody knows what you do. My job and our job of roost is to do everything I can to promote our agents and their connections. That's why my focus will be more and more on marketing and less on operations. I spent the last 10 years building the perfect car like I think of roost as a race car, and now it's time to take it out and see what she can do. It's time to deliver and it's time to let people know what we do and how we do it. And and that means it's time to grow. And lacy, you know, obviously you're already a key part of that. This has been a challenging year, but I have to tell you it's been one of the most satisfying years I can remember. I'm super proud of the every single person we have at roost today and I'm super grateful and I thank you all yeah, same. \n\nLaci: I mean, I think that this is a real lesson in what you expect your business to look like and what it actually ends up looking like, and how to not find a silver lining, but really just to how to embrace. You know, be here now. That's what romdolph taught was be here now. Uh, where are we now and where are we going? And it's great to have goals and it's great to to remember that this is supposed to be fun, that life is not about just waking up and going to work and making money and paying off bills and then doing it all over again the next day. And I think that I mean, if I'm here to judge your first 10 years, then you get a resounding pass from me, but I'm so excited about what's to come. \n\nSo also grateful also, you know, thank you for letting me be a part of this, but I think this was a really cool insight for folks who maybe are just joining us. \n\nChris: I don't know the whole backstory or maybe people who are thinking about you know, you know, becoming part of the whole roost mindset well, if anybody's interested, we would be thrilled to talk to them, and there's a million ways you can get a hold of me directly, so please do all right thank you, see you next time. ","content_html":"This episode is extra special because it also falls on the occasion of the 10 year anniversary of ROOST Real Estate Co.
\n\nListen as Laci and I recap 2023 and layout my key initiatives for 2024 and beyond.
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(AI transcript provided as supporting material and may contain errors)
\n\nLaci: Good morning Chris.
\n\nChris: How are you?
\n\nLaci: I'm good, I'm happy to be here, especially for this episode, this very rare double feature, if you will.
\n\nChris: Well, this is the first of what I expect will be an annual podcast where we get a chance to reflect on last year and talk a little bit about our plans for the new year. And this year is kind of special because not only is this our first new year episode of the podcast's plural, but it also falls on the occasion of our 10-year anniversary. Okay, yeah, so Roost was officially licensed on January 7th 2014,. Being that, this is 2024. That makes us 10 years old, so happy anniversary to us.
\n\nLaci: You know, my kid just turned 10 and I could just barely. He was born on January 3rd 2014. And I could just barely believe it. Is that how you feel?
\n\nChris: Yeah, I mean the. You know, looking back, the 10 years have gone like lightning but my God, there was a lot of stuff that went on in those 10 years and certainly a lot of ups and downs and a lot of learning, but yeah, it went very quick.
\n\nLaci: It is kind of your baby, I think right, Just like. Simon is mine, so yeah.
\n\nChris: So you know, when we started Roost, I met this gentleman named Andy Hayes, who was a graphic designer and a logo expert in Springfield, ohio, and I had seen some marketing around town that the Chamber of Commerce had used, the city had used and a few other places had used, and it had a really cool feel to it. I don't even know how to describe it. What Andy does is very unique and you know he interviewed me. This would have been in early 2013, so 11 years ago and what came out of it was that I wanted to build a company, that the attributes were smart, passionate, supportive and approachable, and I think that those really have evolved into professionalism. You know to melt it down based on the things that we've been talking about the last year, but I think sometimes people forget that there is that real estate is an investment and it's not something that anybody should dabble in. It's not something that should not be taken seriously, and you know I truly believe that you know, as an investor, home buyer, home seller, that you want to surround yourself with smart people and, from a passionate standpoint, you know the very best realtors among us, the people that I worked with in the 10 or so years prior to starting Roost, as I had my license, they were absolutely passionate about real estate. This wasn't something that they were just going to try, it wasn't a part-time job, this was something that they had devoted their entire careers to, if not their entire lives, and they had a true passion for helping people buy and sell houses. And supportive came around because and I think that's more into collaboration and sort of us being a consultant and a coach to our clients, but that's where supportive came from, that we want to support whatever decision that our investors make, that our clients make, and help make that real for them. And that's kind of morphed into, you know, being the similar supportive nature to the agents that choose to, you know, associate with us. So supportive still matters. It's morphed a little bit. I may be gotten a bit more specific with collaboration and coaching, but it's all still there.
\n\nAnd then approachable, I have to tell you, lacey, approachable was more probably about me and my personality, because you know people have always said that. You know I'm pretty analytical. I may not be, the thing I always remember when I was in the corporate world was Chris was an easy read and I don't know if that was a veiled insult or what. But you know, I always thought that I didn't want Roost to be the kind of company that people didn't feel welcome, that they couldn't ask questions of, that they couldn't approach comfortably and confidently. So that's where approachable came from so smart, passionate, supportive, approachable. And you know, to some degree those are aspirational, but I still stand by those and I'm, as we would say, ready to guess and bet on those for the next 10 years.
\n\nLaci: Yeah, I don't know if something's happened in the last 10 years with the approachable portion, but I, you know, I've only known you for a couple of years and, you know, approachable is one of the top words I would use to describe both you and your business. I think that you've just made all of this so readily available and so sincerely helpful. Regardless of whether you're a buyer or a seller with Roost or you're, you know, an agent or a broker, or you're an owner or a tenant, I think that there's something here for everybody and it is maybe one of the most approachable business models and businesses in practice that I've ever come up with. So I don't know about Easy Read. Maybe you're hiding stuff from all of us, but it really. You know these four attributes are there. So I think that over the last 10 years you've maybe it's still aspirational and that's always a good thing, but I think you've achieved a lot of it.
\n\nChris: Well, you're very kind and I appreciate those words, but I used to say, once again, you know, in public I want to thank Andy Hayes and Hucklebuck Design, because you know it was Andy that you know had those interviews with me and from those interviews we got it to still down to a few words, and four of those most important words were smart, passionate, supportive, approachable, and out of that came the name and logo for Roost, and we have this story on the website, on the about Roost section of the website that people ask me all the time. I would say, well, how'd you come up with the name Roost? And I would just sort of chuckle and say, well, zillow was taken. You know it's the thing about trademarks and names these days. There's nothing easy about it Because first of all, you've got to have a name that can be licensed in the state you're in, in the state of Ohio, as every state Although Ohio, I think, are far more strict than other states that I've been licensed in you know there are rules as to what words can and cannot be in your, your doing business as name, your DBA. So to find a name of the company that embodied smart, passionate, supportive, approachable and embodied and was not already in use just in Ohio and was licenseable in Ohio. Because I put forth a couple of different names and got knocked down. Part of it was I didn't understand the rules. You get to this point where, okay, you want your name to embody what you want to be. That's the whole thing about marketing. But you have to work within the framework that you're given and, being that we're licensed by the state, we can only have names that the state at that time Ohio only would allow us to have.
\n\nThen the second thing is just because Ohio says that you can use it in Ohio doesn't mean that name isn't already in use someplace else in the country. You start doing Google searches for just about anything you can think of and pretty much you're going to find it. There's not a lot of new ideas under the sun anymore. That's a hard thing. Then the final step was I've had it in my head for 10 years that some day we're going to get this thing rolling so well that other people are going to want to buy in. Everything I've done the last 10 years was designed to make it repeatable and scalable Hopefully not my mistakes, but the good stuff is repeatable and scalable and to sell a franchise, whether it happens or not, but it's just good, business is to be able to have a trademark.
\n\nBruce came around that it was the only name that we could come up with that met those four criteria. It certainly didn't argue against smart, passionate, supportive, approachable. I think it's absolutely approachable. It wasn't in use in Ohio. It fell within the guidelines that the state of Ohio would allow us to license it as a doing business ad. It wasn't in use in three or four other real estate teams or firms across the country, but none of those folks had gone to the trouble of trademarking it when I first approached an attorney. So that happened right, and then I'll try to make the stories getting a little long.
\n\nBut by the time we got around, or I got around to actually speaking to a trademark attorney, somebody else really nice guy met and visited with him in North Carolina. Actually, no, that not the guy in North Carolina still has a company called Roost, but it's Roost Realty or Roost Real Estate, it's not Roost Real Estate Co. And he wasn't able to get a trademark. So by the time I went and got a trademark I found out why he wasn't able to and this was because there's a company in I think it's Philadelphia. It is. They're in other states now, but they had a furnished short-term rental apartment building which sounds suspiciously like a hotel. But they had a short-term rental apartment building which put it in the real estate category for which they had a trademark with the name Roost, and they got there first. So a couple of things happened. To make a long story short, we were able my attorney was able to make a deal with these people that they I forget what the legal term is, but we give them a, we give them money every year not a lot of money, but we give them money every year and we agreed that we would only use Roost in three states Ohio, florida and Tennessee and that we would never use it as branding for our own short-term rentals. Oh, that's how we have Roost.
\n\nWell, of course, at the time I was looking, I was thinking big and it freaked me out that I couldn't get a trademark. And this is before we actually made that deal with those folks. So I started going crazy, trying to come up with alternate names and it must have been focused on it for a month and I started flipping through old records and CDs and books and all that. And one day I came across an old Springsteen record from the 90s called Lucky Town that's a name and I started thinking about it and I thought, well, you know, that's probably a smart, passionate, supportive and approachable than Roost.
\n\nSo we actually have a trademark in all 50 states for the term Lucky Town. So Lucky Town Real Estate Company is a thing. We don't do business as Lucky Town Real Estate Company, but when we do get out of Ohio and Florida and Tennessee, one day Lucky Town is available to us. So we actually did an alternate logo which looks just like Roost but it says Lucky Town, and so someday you may see Lucky Town, but for now we're focused on Roost for the time being. Oh, and aside from Ohio, florida and Tennessee, we do have a trademark in all of Canada for Roost and Lucky Town. So that's the story of where Roost came from. For what that's for.
\n\nLaci: You know as a well-rounded marketer who enjoys the graphic design portion of things and the copywriting portion and the brainstorming portion and the strategy. I think that's a testament to you know how you, when you choose your brand, when you choose, when you develop your branding initially, that's you know it's not necessarily the end all be all for who you are, but you can really make anything work Right If it's. You can be smart, passionate, supportive and approachable and the name not reflect that as well. Perhaps it's really all about you know how you function day to day, what value you bring and how you get that message out there. So you know, I think you hit on two very good options, but you know even so, even if you hadn't been able to trademark those or you had gone in a different direction, I think that the smart, passionate, supportive and approachable would have been clear. So just a note from you know, one marketing expert to anybody out there who's trying to name their business Well, I think that would have been the constant, you know for sure.
\n\nChris: But the other thing I think that supports smart, passionate, supportive and approachable, are the colors Andy chose. You know, the whole trademark guideline package, the colors, the font, all of those things, I think, go a long way towards subconsciously conveying the message of what we want this to be about. And now, you know, 10 years later, you know, with Kylie doing the graphic design stuff and managing all the social media pages, my God, she's taken Andy's ideas and expanded them, you know, dramatically and really increased our reach so that it all came down to Andy and Hucklebuck.
\n\nLaci: So he created something really timeless, and I think that's the number one thing as a marketer that I look for in a brand which is not just a logo but it's the whole. You know, your whole company is something that is timeless. And you know color theory. We could talk about it all day, but definitely created that and it's something that will no matter what's on trend, you know, no matter what fonts and kind of colors, whether it's farmhouse or whatever's trending right now. You know this brand is gonna stand that test of time.
\n\nChris: So they. So we had the words, we had the brand, we had the name, we had the name. So the next thing we did was we did a short video. It's a two minute video and it was called All About Roost. And you can still see that on the About Roost page on our website, roostrealstatecocom.
\n\nAnd, at the risk of putting everybody to sleep, I'm gonna run through this really fast. It's a very short script, but I think it's interesting because the ideas that I had honestly going on 11 years ago now are still the ideas that I believe in and the ideas that matter today. So what I said was early on, I said Roost is a different kind of brokerage and most brokerages have two lines of businesses. They work with buyers and they work with sellers, and at Roost, we work with buyers and sellers too, but we also work with investors and the people who rent from them. So when I started Roost, it was all about working with investors and, ultimately, property management on day one, and the reason was as we've talked about in other episodes is it was about being in the shelter business, so embracing 100% of all the people who need a home, not just the 60 to 65% of the people who own real estate creates a very different kind of company for our clients and for our agents. Many people who rent their homes will do so for their entire lives. Many do it's the right thing, and many rent their entire lives at different income levels. Others will only rent for a few years before buying a home of their own.
\n\nWe help our tenant clients become homeowners we all work with. But let me phrase that I can tell you that we don't have a huge number of tenant clients buying houses, and if they do, as much as we would love them to buy them from us, it's not that often that they do, but it's not because they're going with somebody else. It's because there are many people who decide that renting is better for them, whether because they wanna be mobile or I guess in some cases it's because they can't. But when we do have them, it's wonderful and we love to teach people how to be fantastic tenants and we love to teach people how to set themselves up to purchase a house if they want to. So that's still valid. It just doesn't happen as much as you would think. We help our tenant clients become homeowners.
\n\nWe also work closely with investors, and this has only gotten bigger. So my vision was that we would help tenants get into homes and it would be as great a part of the business as working with investors Hasn't turned out that way at all. So, working closely with investors, we help investors find, evaluate, purchase and manage investment properties. By offering property management services to our investor, they're more comfortable buying more property. And what's interesting is and we've talked about this in both podcasts this past year Lacey is property management is hard and it took up a lot of time and bandwidth the last 10 years too. Finally, after so many ups and downs, get that right, and it's funny that this year we've talked about changing manage with Roost to invest with Roost. It's to better articulate or advertise what our services are to investors. But I do think it's interesting going back and looking at this, that almost 11 years ago what I said with investors was we wanna help investors find, evaluate, purchase and manage investment property, and that's truly what invest with Roost has become today. And it's all in the Lamewood Profitability Playbook, the podcast.
\n\nBecause we work in the property management business, we have relationships with skilled tradespeople that help all of our listings clients prepare and maintain their properties for sale. I can't tell you, when I was actively listing and selling homes, how many times I was able to take care of something at a far more reasonable price for an owner than that they would have been able to find for themselves because we had these skilled tradespeople and maintenance guys working for us. Because of the property management business, this is the kind of situation where the property management division supports the brokerage advice of Roost. It's hard to tell which one ever came first, should have come first or it doesn't matter anymore. There's a symbiosis there and that comes back to wanting to service 100% of the people who need a roof over their heads.
\n\nRoost Real Estate is a referral-based business Still is. We believe that the very best clients are those that are recommended by our existing and past clients. We have a referral-based marketing system that keeps Roost Real Estate company top of mind with everyone we work with, and the best example of that is what has become Roost Rambling these past couple of years. So some of our tenants become buyers and if they don't become buyers, they also refer new tenants and new buyers to us. So it's interesting a lot of people who never ever become homeowners refer to a future of a homeowner to us.
\n\nThat's come true. Our investors become repeat buyers. That's become incredibly true. That's happened in a far, far bigger way than I could have dreamed of 11 years ago, and they also refer new investors and new buyers and new sellers to Roost. Our buyers and sellers refer their friends, family and coworkers to again and again. We are the real estate company people turn to at every stage of their lives. Now I can grant it, we've only been here 10 years, so we haven't caught every stage of everybody's lives yet, but it's still aspirational, all right. So we wanna be there when our clients rent their first apartment by their first home, by their first investment property and, ultimately, by their retirement villa on the beach. So this is Roost Real Estate Company smart, passionate, supportive, approachable, meeting people where they are today and helping them get to where they want to be tomorrow. So I think that still adds up 99% of it. What do you think?
\n\nLaci: Yeah, absolutely. The word you never mentioned I don't think I'm looking at this transcript right now is relationship, right, and that's really what all of this is kind of what you just say. We have relationships with skilled tradespeople, but this is a relationship with clients, partners. That's really the word that sticks out to me and that's really the emphasis that you guys have, no matter what you're doing, no matter what part of the business you can focus on and it goes both ways right.
\n\nSo that's the shelter business at play. It's not just a relationship with one side of the story. It's a relationship with tenants and owners. It's a relationship with buyers and sellers. It's a relationship with your property management team and the tradespeople that you all use to get the work done. So I think it's just a really comprehensive kind of at the. I guess at the point you wrote it, it was goals, right.
\n\nBut now it's, a mantra when I worked at Mosquito Authority, we did a mantra video and I can still recite it to you word for word because it was we make backyard worth mowing and front porch is worth twinging right.
\n\nAnd it was because it was true, it was sincere, it was how everybody at that time and it was the franchisor who lived in my hometown in Hickory, north Carolina it started the whole thing. And then, I think, when I started, we had 20 franchises and then, when you fast forward to seven years later and we had more than 200 franchises, that mantra video still rang true. And when you looked back it was grainy looking because the technology wasn't brand new, right, and the owners in the video who were saying the lines they looked like different people, but the message was the exact same message we were taking to market, to clients, to employees, to everybody every single day. And I think that when you nail it, it doesn't matter how much time passes, it's still the truth. So that's what I see here.
\n\nChris: We're gonna share this video again on Facebook because it's actually a very well done video. It doesn't feature me at all. It's me reading the copy in the background, but it's animated and some of the words pop up and stuff to make it more interesting to get through the two minutes. But I'm proud of the video. Let's say that After all this time I still feel great about it. So well, that's kind of summing up the last 10 years, I guess very quickly, but I have to tell you I was having a little bit of trouble getting some perspective on everything that had happened this past year and some clarity on what I want to accomplish both for me and for the company in 2024.
\n\nAs usual, just in the nick of time, I got some help from Dan Sullivan and strategic coach. I got an email in my box I guess it was right before Christmas and they published a great last minute gift called the bigger future countdown, and we're gonna put the URL in the show notes so you can get to it if you'd like to download a copy. You don't have to be a strategic coach client, though I hardly recommend that you check into it to get this graphic. So the gist of this instrument of this worksheet was that his challenge is that you, as an entrepreneur, that you reflect and I think this is great for agents, obviously right, and it's also great for people who invest in real estate, even if you have a full-time profession and a stockter, lawyer or whatever and that you have that, but your investment business is still, at the end of the day, an entrepreneurial venture. So I think this applies to everybody.
\n\nBut his challenge to all of us is to set a new path for the new year with these 10 mindsets in mind. And the first one is and we're not gonna, I'm just gonna run through these and as we go through the rest of this discussion, some things will come up, but these are great things to keep in mind all the time. But always make your questions bigger than your answers. Always make your purpose greater than your money. Always make your confidence greater than your comfort. Always make your cooperation greater than your status. Always make your enjoyment greater than your effort. Man, I feel like I try really hard, lacey, I want to work on that one. Always make your gratitude greater than your success. Always make your performance greater than your applause. Always make your contribution greater than your reward. Always make your learning greater than your experience and always make your future bigger than your past.
\n\nAnd as I reflected on these mindsets, it really helped me out. And what became really clear is, as I kind of think through the wins for last year, was that every win, anything good that happened last year, any win I enjoyed last year, was in collaboration with another team member. It was a, whether they were somebody on the payroll or somebody outside of the payroll. And, lacey, you're at the top of my win list this year. I mean having Dean introduce us and what you've done helping me with the master classes, the Landlord, profitability Playbook, connect, practice, track and Grow has just been terrific. And there is no way we'd be doing this today if I hadn't met you and then Dean Jackson hadn't referred you to me. So thanks for being a key win this year. I appreciate it.
\n\nLaci: Yeah, that feeling's mutual, and I don't just say that. I know that's probably what everybody expects me to say right now, but I think there's a point here where, if it can be mutual, then it's even more important. It answers your questions even more than so. I have very much enjoyed it and I think finding people you work well with and can align with and compliment is a huge part of some of these new key growth mindsets that Dean recommends. So, yeah, pleasure is all mine.
\n\nChris: Second win is Gretchen Mitchell, who used to be Gretchen McAllister before she got married. Gretchen's my daughter and she's been. She actually started Property Management before we were even roost, as soon as she got her real estate license, and so she took us from zero doors 14, 15 years ago to the thousand or so that we look after as of this morning, and Gretchen has just done an amazing job working directly with the owners, working directly with the tenants. But what's really fun to watch is that Gretchen has become a leader and a fantastic manager team leader to her crew. God knows. We've had some ups and downs this past year, but to see Gretchen take the reins and grow and get us on a solid path to growth and property management has been fantastic. So property management are restructuring this year has been a giant win, but never would have happened without Gretchen Kylie I mentioned Kylie.
\n\nShe came with us a year ago, december, as our graphic designer. She's just done a fantastic job expanding the brand. So if you haven't liked Roost Real Estate Company on Facebook or you haven't liked manage with Roost or career with Roost, please do and it'll give you a great chance to meet Kylie. A newer team member we have, taylor Cole. She just came on with us in October but Taylor is going to be working with as you've met Taylor with Lacey and Kylie and I to sort of build out this marketing and education and relationship team. And whereas Lacey's helping us get the marketing together, helping me get the message together, get product out there, kylie is helping us spread it out to the world, making it pretty, giving us the right words, the colors, the reach on social media, and then Taylor is bringing it all back home one on one to the people who receive that message, whether they be potential home buyers with Space Coast Condo Guide opt-ins, or whether it's potential agents who come to work for Roost from Connect Practice, track and Grow or its owners that come to work with us through the Landlord Profitability Playbook. So I'm excited about our future with Taylor and just in the last few weeks of this year, last year and this year, she's already made a massive contribution.
\n\nBut that property management team, my gosh. We went through so much and I've said this before. But COVID was interesting. We picked up so many doors and it was one of those situations where tenants never moved because and they always paid the rent. I know people say during COVID they had trouble collecting rent. We had no trouble collecting rent during COVID not at all, and it was because people had the extra cash in their pocket from the government. But when that cash started to dry up and interest rates went up and owners stopped buying new houses or it became more discerning about buying new properties and tenants suddenly either had to move or could move and then suddenly we had vacancies. The property management business just got ugly and the last two years were really hard and Gretchen got through that with me the past two years.
\n\nBut the team that she's put together in Columbus Mercy, our tenant relations specialist she's just amazing with tenants. Brenda's our leasing specialist. She does leasing for both of our offices. Jade, working with Heather and our rehab and maintenance department. She's done a wonderful job making sure that our maintenance guys are dispatched where the tenants need them at the time. The tenants need them and the feedback we're getting from tenants because of Jade's work has been so much better than what we had in months and years prior.
\n\nDana in Springfield she does the team relations function just like Mercy does. She does in Springfield, and Josie and Angela are accounting people. Holy crap, if it wasn't for them I don't know what we would do. One thing and all the ups and downs we've had over the past 10 years is we have never had to worry about trust accounts or accounting or that piece of it, and one of the reasons brokers don't like to get into property management is that the trust accounting is hard. There's laws you have to stay within. It's other people's money. It's a tricky business, but Josie and Angela and my wife Kelly, who look after that in our accounting, jill and McGregor they have just done a fabulous job on that and if there's anything that keeps me up at night, it's never been accounting and that continues to be a win.
\n\nI mentioned Heather. We started a technically a division called Roost Rehab and Maintenance, and Roost Rehab and Maintenance, I think, is something that we're going to be talking more and more about as we go. I think it's the thing that's going to become such a force in and of itself that we can market directly to our agents and be able to help sellers who need to get some things done before they sell or after an inspection, and the service that Heather and her team her and Jade have provided to our owners when it comes to rehabs and so forth has been phenomenal. So big win is the Rehab and Maintenance Department. We've talked a lot. It's been a tough year in real estate and I think that's true across the country. But some of the very best agents in Ohio I mean we're talking people we're talking people who do half a million a year are down as much as 30, 40% through the year. But our agents they still came through with their heads held high.
\n\nI think about Priscilla Mechnemi she's been with us for almost the entire 10 years as Roost and we were together. When I had remex franchises she still had a heck of a year and she's become a great team leader and a great mentor to many agents in the market. Josh Hufford he did property management with us for years and finally decided to go on and just focus on sales. He's had a hell of a year. Dg Quar she's been with us since 2003 when I had a remex franchise in Urbana, and DG is still with us and she's still had a phenomenal year, even as she starts to spend more time and take better care of herself.
\n\nTina we can't discuss the agents without talking about Tina Blaving, who is not just a key agent but a key part of the PM team. So Tina is our property manager in Springfield and Dayton and her and Dana look after those owners and tenants in that area of the state and she has done a phenomenal job this year, just going through so much upheaval and stress and everything else. But you know she's come out that much stronger and she had a really good sales year. And I think you've all met Anne before on previous podcasts. She's a newer agent. She helped us out in property management this year and I believe her sales were pretty close to last year, which is saying a lot. Susan Elliott she's down in Florida, in Fort Myers Beach. You know they just came out of the hurricane a couple of years ago and she just had a massive closing in January to kick off the new year. So I think she's going to be able to put that hurricane behind her and become that force in the market that I know she will be.
\n\nAlicia, newer agent, has a full-time job but her business keeps growing year after year. Great job, matt Conkling. He helped us skip the property management back on track. Great guy, skilled person. He's an investor, wonderful.
\n\nI already mentioned Taylor, who's got her first sale under contract with Bruce. Congratulations, taylor and Rena. She's been with us for almost 20 years and she's down here in Melbourne where I am today. I mentioned Kelly, my wife. You know she's been, we've been at this for I guess we've been married not quite, what is it? 37, 38 years and she looks after all the money.
\n\nAnd, like I said, we had a lot of wins, a lot of struggles, but there's not one thing that happened this year that didn't happen because of being in collaboration or being able to be introduced to fine leverage, whatever you want to call it, unique ability, anything.
\n\nBut if it wasn't for these folks, we would not be the company we are today. The other big win and you mentioned early on or maybe that was you and I before we went live here today is that these podcasts are something that I actually look forward to now. You know they've gotten me out of my comfort zone. The prep work helps me and it helps me lead the business as I think. The prep work helps me think through things that improve the business. So that's great. You know the whole idea that you know you can be the best leader, manager, realtor in the world, but if you don't have a story to tell and you aren't able to tell it, it just doesn't matter, right? So which came first, marketing or the practice? And again that's sort of like sales and management, it just doesn't matter.
\n\nLaci: So again thanks to my podcast partner here, lacey, once again, yeah, I mean so not a lot of people get to see the back end of a podcast, right, you just hear what comes through the microphone and I am fortunate enough to be privy to the note taking and the preparation to a certain degree. And that looks so different today than it did when we first started this in such a great way, because now the podcast notes that I get before the show A, they're not always a weekend advance. So that tells me that we're being a little more spontaneous, which translates to a more authentic conversation and a more authentic experience for the people listening, I think as well as you and I. And the other thing, they're not mapped out like the conversation, right? You don't think about when you're making these notes now, like you did before, where are you I'm going to interject, right, or what questions I might be able to ask. And some of that comes from some of the other campaigns that we do from a marketing perspective, but some of it is just you being more comfortable with the process and you never even do your introvert by listening to these. But I think that's a huge thing that I've noticed.
\n\nThe other thing is and I think it's just worth pointing out, if you're listening to this and you hear you, chris, talk about individually every member, for the most part of the team that you're working with.
\n\nI think that just speaks volumes to you know this mantra that you've put out there in your video and how you work day to day. You know it's just a team effort and it's something that everybody has their place and everybody is acknowledged for that and everybody has the autonomy they deserve to do the work and you hire the right people, which you know. If I'm investing in a property or if I'm buying a home with a car, I'm going to do that, and if I'm investing in a property or if I'm buying a home with y'all, that really gives me a lot of confidence and I think this is just an example of how you approach the business. So honored to be on that list, but I think it says a lot about Roost and you that you can go through at the you know, drop of a hat and just kind of mention and acknowledge every team member.
\n\nChris: Well, I appreciate that and, again, a lot of this is aspirational and you know I'm ready to leave that behind, but we did turn through a lot of people that the team that we have right now today is, without a doubt, the best team that I've ever had, so I'm grateful for that. But let's look ahead to next year. So I wanted to kind of discuss some of the things that I am looking forward to seeing as a win 12 months from now, and part of the reason for putting this out there is if I say it out loud in front of all of you all, then maybe something will happen, maybe I'll do something about it Right? So the key things that you and I are going to be working on, but the entire company is going to be working on as an initiative that I'm calling, have I earned a five star review today? You know and I think this goes back to the conversation about, yes, you've got to do a good job. It's one thing to do a good job, but if you're going to expand the business, if you aspire to help more people, then somehow you've got to find a way to let the let those people know that you're somebody worth considering, that you exist in the world and one of the ways that happens in this 21st century is through, quite frankly, reviews and Google reviews and Facebook reviews and Yelp and all that which you know. I got mixed feelings about all of that, but the one thing that you can't turn off, that you can't stop that is very hard to manage our Google reviews, and you know we got to the point where.
\n\nSo the Google reviews are tied to the Google place pages and the Google place pages are critical to managing those pages correctly and having the right information on it. Having current information on them, I think, is critical to people finding us organically right. You know, maybe you remember Lacey Yellow Pages phone books that used to show up in your front porch. I don't know, but we used to have this thing called the Yellow Pages and if you wanted a real tour, you would go to the Yellow Pages. You go to realtors and you go down the list and you look for an ad for a real tour and you'd find one that spoke to you and you would call that realtor Right. Today we don't have Yellow Pages, we have the internet, and Google place pages are the key to being visible and projecting the type of project yourself as the company you want to be and, quite frankly, our Google presence and our place page presence and our review presence didn't come close to lining up with the. You know the aspirations we talked about in that video. That we did 10 years ago, so have I earned a five star review? Today is our initiative to embrace Google reviews and ask for reviews when it's appropriate to ask for reviews, but to do it in as authentic a manner as possible.
\n\nIn the property management business, you're always going to have people who don't get picked for a house I can't do anything about it and those people may lash out and they may do it unfairly or otherwise. On a Google review, the problem is when we had our worst times operationally, when we were really struggling to get our arms again around the business and the owners that we had and wanted to keep. Basically, that whole Google ecosystem ran without us even considering it or looking at it and I had no idea what damage it was doing. But our reviews were just crap. We weren't managing, we weren't going after them, we weren't doing anything about them. Right, and whether I like the Google review process or not, it doesn't matter. It is what it is.
\n\nSo if you take the approach that, all right, all of us as a company whether we're agents working with buyers and sellers, whether we're tenant relations working with tenants, whether we're rehab and maintenance working with owners we want to be earning, going forward, five star reviews from every person we serve. Agents right. Could be agents we look after it. Could be owners we look after it. Could be tenants we look after it. Could be first time buyers.
\n\nPeople when they're happy, they don't do a review right. They're only when they're really angry with you or they feel like they've been done wrong or you haven't done your job correctly. So have I earned a five star review today? The low hanging fruit here is you know, marcy and Dana and Brenda and Tina, you know they're just, you know, lovable people, right, they're professionals who get the job done. And to get to the point, where have I earned a five star review today? Rules tripping off the tongue, almost like when you're at McDonald's and would you have prize with that? Would you like prize with that? That's what we're trying to get to, and I think that I don't know that you and I have settled on the technology we're going to use, but it looks like podium is like the number one tool that companies who successfully not just manage their reviews, but leverage their reviews and respond to their reviews used. So this is something you and I will be focusing on, hopefully over the next 10 or 12 weeks, and really get a report card on how well we're doing.
\n\nAnd if we mess up, right, we have to go online. We have to say look, we messed up, please get in touch with me, we're going to fix this right. So you know it's one thing to make a mistake and acknowledge it right. It's another thing to make a mistake and not know you made it. And then it's another thing when you have somebody who's just not being truthful or fair and in any case, we have to have our ducks in a row, we have to believe in how we're approaching the business and the people, the relationships, every single day, and we have to be prepared to ask for feedback. So this is the biggest and, I think, most important initiative of the year, because I think it absolutely affects the growth of the company in every everything we do.
\n\nLaci: Yeah, I mean, I think it would. To reiterate your point, it would be ideal if the Google reviews accurately reflected the experiences of the people that you work with and for, right, but that just doesn't happen. My dad owns a Carla here in our small town and somebody very recently gave them a negative review, a one-star review, because they weren't happy with the purchasing process. It wasn't even my dad's Carla, it ended up that they purchased from. But you really have no recourse, right? So the only way to manage those reviews? They did respond and say we don't have record of you purchasing a car here. We'd love to talk to you about your experience anyway, but that one-star review is still there, taking that five-star down to a 4.6 or whatever the case may be.
\n\nSo the only way to effectively manage the Google review process is to have enough and I'll say positive here, because that is an accurate review, I would say for most of the folks who work with you but to have enough accurate reviews to offset the inaccurate ones.
\n\nNow, if that means you're a three-star business, then that's going to be what's there and that's going to be what offsets the one-stars or the five-stars, I guess, in that scenario. Right, but it's just to have enough to make sure that one or two that get put out there that aren't accurate don't really negatively impact your overall score. So it's just another thing. I don't know of any businesses at least any that I work with even the smallest of the small who can do nothing about Google and just have it not negatively impact their business. If they don't, Everybody is going to have to focus on this, moving forward and put forth some effort into maintaining what their actual experience is. So, yeah, I'm excited about it, because I'm excited to work with an organization where I don't have to worry about what the reviews will be when you ask the question have I earned a five-star review today?
\n\nChris: Well, I appreciate your help with that because I absolutely believe that you've got to put to my point on it. But this could clearly break the company, but it could also really make the company if we do it right, and I expect we're going to do it right. So that's my first key initiative. The second thing I want to go back and revisit is the whole idea of List with Roost and we were talking the past gosh, it's been two months now about that National Association of Realtors lawsuit where the Realtors lost the lawsuit and what that might mean for our business going forward. And I do think and as unpopular as this is that we are going to see some commission compression and I think that somebody has to step up and look really hard at the entire process of putting a home on the market and getting it to the closing table, what that entails, where the bottlenecks are, where does it become unpredictable? Where does the service and support angle fall apart? What do we need to do to take a fresh look at that?
\n\nAnd I think one of the things that is worth considering and I don't want to get too deep into this, but I've been toying with this idea of testing something called a Roost certified pre-home and it's almost like you know, we're a business too and people get concerned about how much. Commission usually has a percentage that they get charged by their real estate brokerage, and I'm sensitive to that. But you know, by the same token, if I am charging 6% and I can show where I'm delivering 6%, 7%, 8%, 10% worth of value to that transaction, I'm surely not going to apologize for that or run away from that. You know, as I said many times this year, I'm a professional and I have to get paid too, and it's the same with our agents. But having said that, how much of the listing process can be automated and if not automated, how much of it can be made routine? How do you get the listing process to be a lot more like getting the same hamburger every time at McDonald's?
\n\nI don't know if that's the perfect analogy, because obviously hamburger is a hamburger and this is a service, but I think it starts with the idea of a certified pre-home and knowing exactly the condition, physical, legal, design, everything there is to know about your home upfront. Have it in a format that can be shared, have those things quantified so you know what that home is worth relative to other homes who have sold in the market and make that some sort of a package that is valuable for that seller in and of themselves, if that makes sense. So I know that sounds pretty cryptic, but the whole idea of a home that's designated as a certified pre-owned home with a big ol' roost check mark on it I think there's something to that and it may be that it becomes a product that includes some real value-added things, includes a lot of value-added consulting, a lot of knowledge, a lot of wisdom, but it may be something that stands in and of itself that the seller can choose to do with what they wish. And I know that's controversial but, as we've discussed with this whole NAR lawsuit, things are changing and things are going to start changing fast and the sooner we get out of the box, the better off we're going to be. So, anyway, I think the whole listing process needs to be rethought from top to bottom and, as I said to you, I'm pretty jazzed about this, even to the point where I'm never going to go without my team, but I'm kind of jazzed about doing a little bit of listing myself and testing this out. So you know, I've got to be pretty excited if I'm going to go back out there and do what got me here today, but this is something that I think I'm pretty passionate about. So List with Roost is something that we're definitely going to be working through this year and testing out there in the market, and I'm going to personally be behind that.
\n\nThe other thing that is just critical to us going forward is, you know, recruiting agents and, as we've talked so many times and everything that's Connect Practice Track and Go podcast is about is career.
\n\nWith Roost, we have focused on that relentlessly over the past couple of years and the whole thing has morphed into. You know, we want to be the brokerage for the new real estate profession. Right, we want to be the brokerage for the person who's going to be in this business for the next 25 years. We want to be the brokerage for the people who are questioning everything that came before, but also the brokerage where, with agents who count on things that they know aren't going to change for the next 25 years, whether that's the concept of home or there's a concept of relationship service or whatever but we're kind of flipping the whole thing on their head, you know, instead of looking for agents to join our team. I think we're done with that. So I think the initiative for career with Roost is what it really should be is we want to join your team. You know, I think the whole idea has been pretty well debunked that brokerages hire agents. It doesn't work that way. Agents hire brokerages, right.
\n\nLaci: Or, if they don't, they should right Right. Well, that's true too.
\n\nChris: The agents are the buyers here and you know we want to join your team, we want a job on your team. We think you should hire us to support you is where this goes. You know, just because we're the ones that has to write the checks, because we're the broker, doesn't mean that you're not paying the bills. So, and what's, what value do we have brokers have, or should we have? What should an agent pay for? You know, what should they get for their split or monthly fees or whatever? And our role on your team as a successful agent is we're here to help you get more referrals. We're here to help you turn every listing you take into model sales. We're here to help you convert more leads. We're going to find all the buyers you can handle and we're going to show you how to get listings in any area you want to get listings in.
\n\nLaci: What would you do if you could count on yourself to do it right?
\n\nChris: Yeah, well, yeah, exactly, and you know. So those are pretty key things, and we're putting together a new set of recruiting brochures that actually show the tools that we include, that we give to every single agent to make things happen right. So we're doing some marketing tools that show you point blank what tools we use to help you get more referrals. What is the process? What are the tools? What does the marketing look like to turn every listing into mobile sales? How are we converting these leads for you so that you have warm leads coming your way? You know, hopefully on a weekly basis at least. What are we doing to make sure that you find all the buyers you can handle? You know, how is your brokerage becoming a market maker? So we're going to be showing you exactly what these tools are. We're going to, you know, we're going to show our work on these and we're going to be showing some pretty significant results, and we've already started. So I'm excited about that. But you know, the whole thing comes back to just like you said we would do everything. We do everything you would do. If you can count on yourself to do it right. We want to be your assistant. The other thing that we're, you know, the other thing in this brochure is we do the setups. You get the six pack right, so you can count on us to get your Rooster Amblings out. You can count on us to get your Facebook page set up and managed for you. We can. You can count on us to have a website that's constantly up to date. You can count on us for your personal branding team. You know we're going to do it for you. We're going to help you identify your five star prospects. We're going to, we're going to get you listings and you know the subdivision you want or the. You know, just like Spacecos condos on the beach right, we're going to set that up for you, whatever your niche happens to be. So that's a huge initiative.
\n\nAnd that's the third one. And the fourth one is Invest with Roost, and we've been working on this so much and I think this is more of just getting a little bit more dialed in on our value proposition and our job being to automate your collection and so you can get on with your life. And I want to expand our roster of agents who actually have great experience working with investors so that we can help people truly expand their portfolio. So Invest with Roost I think is going to be. It's not a new thing for this year, but I think we're really going to sharpen that message and I expect a lot of growth there. So those are the four key things I'm working on. Is it for people?
\n\nLaci: Well, people have choices now, chris, that I mean with everything, right? If I want to order, you know, chapstick I'm looking at my Chapstick here on my desk I can get it on Amazon and get it in two days. I can run up to any of the CVS at any time of day. I can get a Walmart if I need it in the middle of the night, right? So, like, we just have so many choices, and that's the same thing is true now for agents and investors and every tenants, everybody you work with, right?
\n\nIt doesn't matter which franchise is like operating in your specific area, or it doesn't matter, you know you're able to find the right brokerage, the right property management team, the right agent that fits your personality, because there's so many choices out there. So, you know, I think this is just really a next level kind of approach to signing up agents and tenants and owners, and you have to be really clear about what value you provide. And, on the other end of the conversation, people need to be really clear on how they work well and how to find what they need in their partnership. So you know, luckily you've got all these master classes out there about how to find the right broker and you know how to kind of determine what's right for you, but I think this is just the way of the future and I'm happy to see that you guys are the way forward.
\n\nChris: Now the other thing that we're going to push out there this year is rent with roost, and we haven't done anything that really has been targeted to educate tenants. You know, and don't forget I don't want to sound overly paternal about this, but so many of our tenants are first-time renters. They don't know how to be a successful tenant. They don't know how to, you know, make sure that they're going to get a great what do you want to say report card from their previous landlord, right? They don't know how to make sure they get their deposit back, etc.
\n\nSo we're going to be rolling out the first iteration of rent with roost this year also. So those are the five key areas that we're focused on, but the number one thing is have I earned a five-star review today? Because that cuts across everything we do? So I've been thinking about to you know, now that we've got this thing in place, you know, now that we're doing this, I have some key goals for the next five years that we're going to go ahead and tell the universe about today. Lice are you ready?
\n\nLaci: oh, I'm ready. I was born ready for this one all right.
\n\nChris: I think in the next five years my goal is that we will have 200 agents in the company between florida and ohio that see the world as we do, and I think that's doable. I think it's aggressive, but I think that we're already seeing more and more people, you know, listen to the podcast, download the books, open the emails every single week. So I do think that's possible. The other thing I'd like to see in the next five years is that we double our door count and I so I think 2000 doors under management in the next five years is very doable. We're currently at a thousand today and we have enough. We have enough staff and infrastructure to support to easily manage 1500 doors right now without missing a beat. As we get closer to that 1300 mark again, we'll have to start looking at where we're going to add staff, but I think in the next five years a minimum of 2000 doors is definitely going to happen.
\n\nThe other thing and this may be a little bit conservative, but I think I've had, between the three main books that we've been promoting out there right the two agent books and the profitability playbook we've had maybe 800 total downloads, not quite a thousand. So 5000 book downloads is probably not the best goal. That seems pretty conservative, but I think what this goal needs to be is 5000 weekly email opens, right. So if we end up sending, if we have 10 thousand people in the database because 10 000 so really it should be 10 000 book downloads is what we need to be looking for over the next five years. That result in somewhere around four to five thousand individual agents and potential owners actually opening up the weekly emails and reading what's in them. That's, that's a hell of a goal, because if that happens over the next five years, the next 25 will take care of themselves yeah, absolutely.
\n\nLaci: I mean, these are powerful numbers and I think that you know to dispel any sort of like number myths out there. Right, we know what 200 means to us, but that probably doesn't sound like a lot to other people. Necessarily, we could have 200 agents, maybe this year, but the thing is these are agents aligned with your values. Right, these are ideal. We talk about, you know, ideal target markets and targeting folks.
\n\nWe want people who this information that we're sharing is going to mean something to them and help them sincerely, even if they never consider being an agent or never come on board. Ultimately same thing with doors under management.
\n\nSame thing with the book downloads, right. So I think that those are definitely some aggressive goals and some admirable goals, but they're totally doable because you know, you have the system. What comes to mind is you know the tortoise and the hare, and slow and steady wins the race. These things are all happening simultaneously. If you were just a broker looking for agents, then these goals would probably not be big enough, right? If you were just a property management company looking for doors, if you were just a consultant looking for, you know, people to to coach and to help along the way, then none of these would be. I mean, there's still pretty big numbers, but none of them would be. You know, it'd be almost a given. But you're doing all of this. Bruce is doing all of this simultaneously, with the goal of each part of the business feeding into another part of the business and helping more people. So I think it's just a really it's worth noting that invest, career, you know, rent, buy, sell, buy, list, whatever is. They're all happening at the same time and that is something.
\n\nChris: So to coordinate that just logistically is huge I just want to say this you know 200 agents. You could say it's an arbitrary number, and I guess it is. But let me tell you something if I can't find 200 agents of the exact same caliber, of at least caliber of gretchen persilla, josh d dritina and susan alisha mac taylor, rena, then we won't get 200 right. If I only get 50, and and they see the world the way the books we have now do, that would be a massive win. But I think putting something out there makes sense. So I think that hopefully, between the markets that we work in that there's 200 people who do see the world the way you know we do right now. So that's my goal. But and then why you know if I'm an agent. A natural question is why? What's in it for me? I you know when I think about this. I find it fun, I find it entertaining. It's what. I don't know how to stop right. So why do I want goals like this that feel pretty aggressive? As we said here today? Because I'm entertained by it, it's fun and no matter how you slice it, market share does matter to all of us. The more we can, the more reach we can achieve over the next five years, the better off every one of us is going to be, because that extra reach, that, that that extra opportunity to serve, that extra opportunity to create, you know, a raving fan. You know that generates profit, that I'm then able to reinvest in our agents and team members and future opportunities. And you can't do that if you're not a growing company. You can't do it if you're not profitable and profit has to come first. But you can't reinvest if you're not growing. It's growth that creates new opportunities, you know. It's growth that allows agents to decide that they want to hire an assistant or build a team or open their own team office, or open their own roost office or go to a new market or become a you know, a sales manager or a business development director or what have you. It's growth that creates those opportunities for all of us. And probably the most exciting thing is, you know you start doing what you say you're going to do. You start to have some success out there. Growth starts to attract new people with capabilities that we don't have yet, that are only going to make us stronger in the future. Right, you know you could argue weak companies attract weak people and strong companies attract strong people and for that reason alone, I want to be the the the strongest real estate brokerage that I could possibly be.
\n\nSo, as we get close to the end, here's my new year's resolution. So my new year's resolution for this year, that I will never lacy. You watch me. I will never show up anywhere without my team. I may be going out there and then may start listing some houses with the certified pre-owned home designation, but I can tell you right now, taylor, you're coming with me, so never show up anywhere without my team. We're going to let the leaders we've hired do what we've hired them to do. We're not going to micromanage, we're not going to look over the shoulder, but we are going to coach, we are going to measure. You know we're going to be right there with them, but we're going to let them do what we hired them to do.
\n\nOne of the other things that I want to do this year is, you know, I want to spend more time with our clients, and I think I've done a fairly good job of this, but I want to be even more intentional about one-on-one time, understandings the dangers, the opportunities and strengths that not just our agents, but our owners, our buyers and our sellers are facing, because if I don't know what those dangerous opportunities and strengths are, then I'm never going to be in a position to to know what value. I need to figure out how to add. So more time with clients one-on-one time with clients is on my list this year. I also want to spend more time in florida. We've got huge opportunity here and you know kelly and I love spending time here, so you know that's more personal. But you know the stuff we've been doing with you and dean and this whole space coast condo guide. I think there's something there and once we get that to the point where we can scale it disguised the limit here in florida. You know we talked a lot about in the last podcast we did about the part five of the n?
\n\nA r and but guessing, embedding over the next 25 years, and you know I'm dead serious about the next 25 years. But I'm also interested in doing an experience, other things. You know I'm going to be 63 this year, so the whole option of taking care of myself it's not an option and me doing what's right for you know myself, that's got to be good for me and it's ultimately going to be good for the team. So you know, my goal is that I want to be doing this for the next 25 years, but I also need to find some moderation. I always hated that word maybe a little balance, always hated that word. But whatever I'm going to do whatever it takes to make sure that I am adding value for this company in this business for the 25 years, and that means it's time to be more intentional about taking care of myself. So those are my new year's resolutions for this year. I have to pull this out next january and how I did lacy.
\n\nSo a couple of other things. Being a great real estate consultant means nothing if nobody knows what you do. My job and our job of roost is to do everything I can to promote our agents and their connections. That's why my focus will be more and more on marketing and less on operations. I spent the last 10 years building the perfect car like I think of roost as a race car, and now it's time to take it out and see what she can do. It's time to deliver and it's time to let people know what we do and how we do it. And and that means it's time to grow. And lacy, you know, obviously you're already a key part of that. This has been a challenging year, but I have to tell you it's been one of the most satisfying years I can remember. I'm super proud of the every single person we have at roost today and I'm super grateful and I thank you all yeah, same.
\n\nLaci: I mean, I think that this is a real lesson in what you expect your business to look like and what it actually ends up looking like, and how to not find a silver lining, but really just to how to embrace. You know, be here now. That's what romdolph taught was be here now. Uh, where are we now and where are we going? And it's great to have goals and it's great to to remember that this is supposed to be fun, that life is not about just waking up and going to work and making money and paying off bills and then doing it all over again the next day. And I think that I mean, if I'm here to judge your first 10 years, then you get a resounding pass from me, but I'm so excited about what's to come.
\n\nSo also grateful also, you know, thank you for letting me be a part of this, but I think this was a really cool insight for folks who maybe are just joining us.
\n\nChris: I don't know the whole backstory or maybe people who are thinking about you know, you know, becoming part of the whole roost mindset well, if anybody's interested, we would be thrilled to talk to them, and there's a million ways you can get a hold of me directly, so please do all right thank you, see you next time.
","summary":"This episode is extra special because it also falls on the occasion of the 10 year anniversary of ROOST Real Estate Co.\r\n\r\nListen as Laci and I recap 2023 and layout my key initiatives for 2024 and beyond.","date_published":"2024-01-29T09:00:00.000-05:00","attachments":[{"url":"https://aphid.fireside.fm/d/1437767933/e6ae97de-6d4b-4344-8b9f-b62c4c887188/0b3bec2f-404f-4123-b0f7-a4bbf0fb20c4.mp3","mime_type":"audio/mpeg","size_in_bytes":47746477,"duration_in_seconds":3908}]},{"id":"82147925-542b-4316-8037-1d7abe3cd91c","title":"Ep005: The Springfield Ohio Landlord Registration and Licensing Ordinance","url":"https://www.landlordprofitabilityplaybookpodcast.com/005","content_text":"In today’s episode Laci LeBlanc and I talk about The Landlord Registration and Licensing Ordinance 23-36 enacted by the City of Springfield Ohio on January 31, 2023.\n\nIn this episode we discuss the ordinance, the process by which it is being enforced, and the legal basis for pushing back on this infringement of property rights and ultimately tenant rights.\n\nI have serious concerns about this ordinance both as a residential real estate investor in the city, and as a licensed real estate broker managing investment property on behalf of our owner clients.\n\nThese types of initiatives are being enacted throughout Ohio and in other states as well. Whether you have investment property in the Springfield area or not, I think you will want to be aware of this trend across the country.\n\n\nSHOW HIGHLIGHTS\n\n\n\nLaci and I discuss the Landlord Registration and Licensing Ordinance 23-36 enacted by the City of Springfield, Ohio, focusing on its implications for residential real estate investors.\nWe share our experiences and conversations with local authorities regarding this ordinance, providing insights for investors to comply with it.\nWe explore unique aspects of Springfield, including the absence of public municipal trash service and the controversial self-inspection ordinance for rental properties.\nWe express our concerns about the self-inspection ordinance and how we've raised these issues with city officials.\nLaci and I about our commitment to maintaining safe and functional properties for our tenants and the potential for unknown issues to arise after the inspection.\nWe question the constitutionality of an ordinance requiring property owners to obtain a certificate of compliance before renting out their properties.\nWe discuss the balance between tenants' rights and property rights, and the potential impact on the real estate market.\nWe highlight the need for unity among realtors in creating regulations that support a thriving real estate business in Springfield.\nWe explore the process of creating ordinances and the importance of involving all relevant parties in the decision-making process.\nWe encourage listeners to reach out with any questions and to participate in building a better real estate community in Springfield.\n\n\n\n\nLINKS\n\n Show Notes\n\n Be a guest on the Landlord Profitability Playbook Podcast \n\n Download your FREE copy of The Landlord Profitability Playbook and learn how to automate your property management. \n\n Visit ROOST Property Management and find out more about the ways we can help you create a more profitable portfolio. \n\n Visit Rental Property Registration to access the registration page and self-inspection form.\n\n\n\n\nTRANSCRIPT\n(AI transcript provided as supporting material and may contain errors)\n\n\nChris: Hi, Chris McAllister, here with the Landlord Profitability Playbook, where it's my job to create and coach business opportunities and strategies that support net value to the lives of residential real estate investors. I'm here today with my good friend and podcast partner, lacey LeBlanc, and today we're going to talk about the Landlord Registration and Licensing Ordinance 23-36. That was enacted by the City of Springfield, Ohio, on January 31, 2023. Now I know this sounds like the most exciting podcast that you've ever listened to, but bear with me. Many of our clients have property in Springfield and that's why we're going to dive into this. \n\nThe ordinance is designed, according to the city, to promote health, safety and welfare in the rental housing market, and the reason this is applicable to almost every residential real estate investor. In Ohio. These ordinances are coming up all over the state and in several states these are already up and running. I don't know of any that's exactly like Springfield, but there's a lot of similarities, so I thought it was important that we get this out on a podcast. I also want to say right up front that I am not an attorney. I'm not here to offer legal advice, but I am happy to tell you my thoughts and plans personally for not just our property management company, but also for my personal investment company. So good morning, lacey. \n\nLaci: Good morning, another one where I am happy to kind of play devil's advocate and learn right alongside the folks listening, because this is not something I'm super well versed on. But what I immediately thought of was, if it's happening in Springfield, if it's happening in Ohio, it's happening everywhere, right? So you know, if you're listening and you're not from Ohio, that doesn't mean you should shut this one off. Actually, this is probably one of the ones you should listen to because to be prepared for these, to know what your kind of course of action might be If it is harming your business, I think that's valuable. \n\nChris: So what happened was last summer I think it was still July I got an email from Tina, our lead property manager in Springfield, and she had gotten an email from one of our longest clients that we've worked with one of the you know for years and he happens to be a local attorney and he also owns properties and we manage for him. He also handles our evictions. So you know, I've known Dennis for years and years. He's a friend and a great long-term client. He had an email that he sent to Tina and I didn't even know this existed. So he said he took some time and got a copy of this ordinance. He found out about it because one of his clients, who we don't manage with, had heard about this ordinance that had passed. And he said you know, there is no. I think there technically is a Springfield paper. I think it's based out of Dayton. You know there's no more. It's not like it goes to everybody's house every day. You know there's no real local radio station or anything. It's a smaller town. So many people don't know this ordinance was enacted and I certainly didn't. \n\nAnyway, dennis went down to the city building, he got a copy of the ordinance and he talked to the gentleman that's actually, I guess, managing the effort by the city to put this ordinance in action. And it was interesting because when he talked to the city, you know, the response was to Dennis well, they didn't think this was a big deal, right, this was just about livability issues. And Dennis dug into. The part that you know we're going to talk mostly about today is that it involves the self inspection. And the guy at the city basically said well, you could probably have the tenants do the self inspection, which you know was a non starter at the beginning. So and then. So the whole idea is that they have information about, you know, the owner and they have some testament from the owner that the property is in good condition. If the tenant has a problem, they're more likely to help get it fixed. \n\nThey also told Dennis that they weren't going to enforce this, at least until June of 2020. So after June 1, 2024, what he told Dennis was that if a property is not registered, the city could issue a penalty of $50 day for each unit that was not properly registered and that the penalty would be added to the real estate taxes if it wasn't paid and, as that builds up, the house could conceivably be sold at a tax sale for closure. So, like I said, I didn't really dig into this for several days. It's obviously something that doesn't make money for myself, it doesn't make money for our clients, it's nothing I want to spend time on and, to be honest, things like this have come up over the years and they've never gone anywhere, and it seems like this time I just had a sense that there was more to it, so it was a good thing that I dug in. So that make any sense at all Lacey so far. \n\nLaci: Yeah, I think it'll make more sense once we know what the ordinance is all about. But I do think that you know again, my life is very real estate adjacent in a lot of ways, and so I do hear about this stuff and that's exactly what my like, my nana and my family usually talk about as well. You know, this happens all the time. There's not really anything that we can do about it and there's not anything to it, you know, and they never enforce this stuff because they just don't have the manpower to do so. \n\nSo what makes this one different? What is this? \n\nChris: And there's already. There's already a vacant property registration form in place. You know, we don't feel like we're the bad guys because you know, I like to think I take good care of my properties and we're at the neighborhood standard and things like that, but we don't manage for people who don't take care of their properties, quite frankly. So you know, I always sort of felt that our values and business philosophy has always carried today and when something did go wrong code enforcement you know, has Gretchen cell phone. You know who was our you know our lead director of property management. They can get on the phone with her and she fixes it and we always had a great relationship with those people. And what I, what I ended up finding out, was that this wasn't just bad policy, but there's a. It's an infringement on property rights, but it's also ultimately an infringement on tenant rights and it also interferes with our legal obligations to our clients as licensed real estate brokers and property managers. So I'm trying to do a quick summary of the ordinance and then we're going to include the ordinance in the show notes so people can go ahead and download it and take a look if they wish. But the purpose of the ordinance is, and I'm going to read a lot of this, but the ordinance aims to increase transparency and accountability in the rental housing market in the city of Springfield. Seeks to protect the public health, safety and welfare, eliminating lighting conditions and enhanced property values. I think we could all get on board with that. Applicants, the ordinance applies to all rental dwellings within the city of Springfield, with certain exemptions. Now here's what's interesting Units buildings that have more than three units are exempt. So this ordinance is only for people who own rental property that are one to three unit buildings. So that is an interesting case that these buildings are the focus and not literally thousands of other units in town. \n\nEvery owner of a rental dwelling unit must register each unit with the Department of Community Development using the rental property registration form, and that's available online and we'll put that link in the show notes as well. In addition to that, a self-inspection form must be completed with the registration. This form will be included in the application material. So when you register your property, you pay 35 bucks, you fill out the self-inspection form and you're good for three years. As the program is currently structured, either the owner or the owner's representative which would be us with our property management business has to print the self-inspection form, fill it out, sign it and upload it back to the site. So it also includes contact information for the owner or agent, 24-hour emergency details, address of the unit, lease information, identification of trash service provider. \n\nIt's very intrusive and, as the you know, I understand the need to get to the ownership of, you know, like a zombie property, but obviously this already starts to be somewhat intrusive. And again, the registration fee is $35 per unit for single unit properties and $25 per unit for two or more units in the same building. It's not about the money. At this point, you know, if the city needs to raise funds, great. You know, if that was the end of it, we would move on. \n\nSo the license this isn't just a registration, they're terming it a license. So the license to rent your property is valid for three years from the date it's obtained. Once you sell or transfer the property, the license expires and it becomes invalid, and new owners must apply for a new rental license for each dwelling within five days after they close on the property. Violations will result in civil or class A civil offenses and subsequent violations will be deemed as such. An appeal process is available for owners or managers who wish to contest any order or decision related to the ordinance, and the effective date of this is legally 131-2023. And you have to apply to have your property removed from the registry if it's no longer a rental property. So that's not a very brief outline of what the ordinance says, but what are your initial thoughts on that, lacey? \n\nLaci: Yes, I'm trying to kind of back my way into it because everything they do is for a reason, right, the government. So you mentioned raising funds and I think this is a minimal amount of money, obviously. So if that's not the motivation, then what could be? And really I go back to what the registration must include. So the owner contact information, 24 hour emergency details, address of the unit, lease information, identification of trash, service provider really raised the red flag for me. \n\nSo what I feel like and you know, excuse me, I do have some experience in kind of working with the government on housing specific tasks and it seems as if maybe there are properties out there who are not up to the neighborhood standard, right, so not your properties, not your owner's properties that maybe are not following through with these basic services, and I'm just seeing trash piling up or I'm seeing, you know, illegal activity and not being able to contact the right people. So it really feels to me more like a yearbook of rental properties, right, they want to know what a rental property is. And then in the future, where this becomes a real problem is in the future. If you've got folks in a neighborhood or who are not taking care of it. \n\nthen I see additional kind of requirements imposed on people, even if they are right, so you're part of a whole at this point right, so they're going to use this catalog of rental properties to determine kind of what legislation or what rules they put in place for all rental properties, and so that's, I think, where we can kind of see where it's starting to impose. \n\nChris: And then there's another weird thing about Springfield Ohio. As far as I know, springfield Ohio is the only municipality of its size in the state, possibly the country, where we do not have public municipal trash service. So every place else I've ever lived my entire life the city picks up the trash and it gets billed on your water bill. Right, you know you get a bill every month. Like in Columbus, we get water, sewer and trash In Springfield they abolished that decades ago. So, yes, you still get a water bill and sewer bill from the city, but you have to contract with one of I think it's three approved private vendors to pick up your trash. And yes, there's an issue with tenants, you know, signing up right In the single family house. The tenant should sign up and pay for that, and that's problematic globally. Honestly, if the city wanted to fix almost everything, that's wrong is if we would just go back to a municipal garbage service. But that's me spouting opinions. The other thing that's problematic is, you know Springfield is not, you know, high economic status communities, so to speak, right, and the fact is you have just as many owner occupants in houses that aren't well taken care of, you know, as you do rental properties. So that it's hard because the inordinates assumes that all landlords are bad landlords and you know, the fact is that's just not true. So you know I start to get a little worked up about this as I talk about it, so forgive me. \n\nSo anyway, dennis has been an attorney in Springfield for years and years and he knows all the people at City Hall. So what I did was I asked Dennis if he could set up an appointment with the administrator of this program at the city. So on July 26th it was a Monday morning Dennis and I went down to City Hall in Springfield and we met with Jeremy who's in charge of the program, jeremy Least and Randall Stevenson, I believe. This title is assistant attorney for the city, but he's from the city legal department. So they were nice enough to sit down and it was very cordial. \n\nYou know they defended their right to pass this ordinance and to enforce it. You know they sort of defended the fact that their process and reason was above board. They also admitted that the owners had not been notified yet formally, but that they would be notified. They also said that, just like they told Dennis, enforcement would not begin until June of 2024. They also suggested I get in touch with the city commissioners and I did get in touch with two of them Mr O'Neill, who's no longer commissioner, and Mr Eastrop. Then Randall Stevenson. He asked that I send him a summary email with my concerns and I want to get to those details here in a second. \n\nBut I also want to make it clear I explained to Jeremy and Randall that my primary concern with this is with the self inspection, and I also want to see blight eliminated. I want to see slum lords out of business and I want to see tenants protected. You know we look after over 500 households in Springfield that we're responsible for and you know we're out of business if we don't take care of our tenants, and you know so I'm with them. And you know, like we just said, I have no problem with the 35 bucks and helping track down. You know LLCs holding. You know zombie properties. I'm down with that. \n\nThe issue is that the ordinance as it's written, especially the self inspection, has just gone too far. So here's some detail as to why this has taken up so much of my time. The biggest reason is when you download the inspection, the inspection has things on it that I don't even know if those things are perfect in the houses I live in. If that makes any sense and you know it's about, is the porch plumb. Well, you know, houses in Springfield are, you know, average, probably 100 years old. \n\nLaci: You know, I live in a 100 year old mill house. I guarantee you I haven't heard one thing other than is the porch plumb and I would not pass this inspection. \n\nChris: Yeah, and it goes deeper from there and we're putting it in the show notes as well, and the bigger issue is the way it's set up. And what we asked them to change was you fill out the form and your signature. You sign your name to a phrase that says I attest that my property is up to basic property management standards based on the checklist. I'm not qualified as a property owner and I am not a licensed property. Well, I'm not qualified as an owner or a licensed property manager to perform an inspection like this. Right, you know, as an owner, landlord and as a property manager, we improve and maintain our properties to the neighborhood standard and the market rental rate, but we also have minimum standards for any property that we look after. So we do hold ourselves, I want to believe, to a higher standard than, say, the rest. I don't want to sound holier than Val. We have issues once in a while, like everybody else, but the fact is we don't work for owners who lack the means or the desire to maintain safe, secure and functional properties. But again, we do work, by exception. We fix or replace what's broken when it breaks. We don't run cameras through drain lines, right? We don't check porches for plumb, we don't close gaps or rebuild floors and foundations and 100-plus-year-old homes, which is the bulk of our housing stock. And again it goes back to the phrase I attest. That's a legal term that carries great weight and to attest to something today, excuse me, doesn't mean that something's not going to change the next day. There's the very real crop of the possibility that something on that city checklist may exist and we do not know about it. It will not know until the tenant reports it or we find out after the tenant moves out. That's just common sense. \n\nThe suggestion and again these are the key points to the email that I sent to the city, the suggestion that the tenant would do a voluntary inspection on behalf of the owner is problematic as well. It's not the tenant's problem, right? It's not the responsibility, it's the owner. And there's a question of tenants' rights and there's also the practical issue of in many cases in Springfield there's a language barrier between the tenants and us and owners. So I spoke to Kevin O'Neill, one of the commissioners, after the meeting and he told me flat out that he understood that the inspection had the clause in the inspection said, to the best of my knowledge, not I attest, and I sent him a link to the site and I didn't hear back from him and he didn't win the last election. And Kevin also suggested I speak to Dr Eastrop, who's on the commission, and I did speak to him that night and I copied him on this email to the city and I express these same concerns. \n\nHere's the other thing that's deeper for me. So you have to be a licensed broker in Ohio to manage for another, which I am. It's a criminal offense to manage property for another for a fee without having a real estate brokers license. Now, family members can do things, obviously for an owner W2 employees but you can't hire a third party as an independent contractor to manage your properties unless they're licensed. So that means I have to follow state licensing law. Now here's the trick that makes the property management business hard for me with this ordinance, and that is property inspectors in Ohio House and home inspectors have to be licensed now with the state of Ohio. \n\nNow, I don't pretend to be a licensing law expert, but I know enough not to act as a licensed property inspector when I'm not. You know, just as I know enough not to coach a seller filling out a residential property disclosure form or, you know, insert myself in any capacity during a home inspection and honestly, I don't think the city was at all aware of those state laws that I see contradiction with. But if I were to do that, I'm exposed to to potential legal liability. Liability could result in the loss of my license, the loss of the business, my livelihood and everybody who works for us. So I can't just let this go. \n\nI also I checked in over the summer with the Ohio Realtor Association and at this point it does look like they are interested in helping us with this. So I'll get to that here in a minute. But again, my biggest issue is signing my name to a checklist. That is clearly understood to be, the best of my knowledge, is way more easier to get my mind around than signing something that says I attest. That could be legally used against me later when I told them I believe in what the city is trying to accomplish. I want to be a partner, but I can't support this. I can't hear you, lace. \n\nLaci: Sorry. I think this raises a much bigger kind of issue, a well known issue, and a non political one at that. Doesn't matter about politics, but at the city level, when they pass these types of laws and ordinances and regulations, you know, there's just not, in most cases, a lot of input from affected parties. So it's done, you know, by a board or by, you know, a room full of representatives and legal, but there's not a realtor in the room, there's not a broker in the room, there's not a property owner in the room or a manager in the room, and I think that's this is commonly what happens with this type of stuff is it goes out that you know they formulate it, it goes out, and then all of this feedback is given after the fact. And you know, typically there are some changes made to the original ordinance or law or whatever the case may be. So I'm interested to see how that happens, or, if that happens here, what's your plan? \n\nChris: Well. So they did have some owners, or a handful of owners that came to the public commission meeting, but they did not have they didn't have us, right, they didn't have Bruce Drill estate. Then they didn't have any other property managers either. I did receive an acknowledgement from Mr Stephenson a few days later that he got the email, and then in August I sent an email sort of outlining what I just talked about to all of our owners. So here's what's happened since then. In October, notice is starting to go out from the city and their title rental registration obligation and we'll put that in the show notes as well. And notice is here by given that your property is in violation of the codified ordinance of the city of Springfield, your order to rent a property in 30 days, unspecified legal remedies will be pursued and you know you have five days to appeal. \n\nLaci: So not so much a notice as a warning. Yeah, yeah On the hand already for something that you haven't even been notified about. \n\nChris: Correct and it's frustrating because we want to be able to help our owners with this and you know, practically we can't. I mean, I'd like to think I am helping by doing this and getting involved, but my original plan and I said this to our owners and that email last summer was the personal plan for my property was to download the inspection form, strike out any problematic language. I was going to disclose anything that I was working on at the time you know if it was in rehab or whatever and sign my name and say to the effect of to the best of my knowledge on this date, you know Chris McAllister and my LLC, and then I would upload the form back, I'd pay the 35 bucks and move on. That was my plan. That's what I shared with our owners. Again, I'm not an attorney, I'm not giving anybody advice, but that's what I was going to do for myself. But now that things have escalated, here's where we're at. I was hoping that, having a productive dialogue, we would have the opportunity to influence this ordinance right or how it was finalized or was going to be enforced. So I got two letters, one for two properties in an LLC I own, and what I've done is now that things have gotten to this point is I've chosen to appeal each of the notices I received and all I did was I took the one page what do we call it? The one page rental registration obligation and I simply, I simply wrote, hand wrote I choose to appeal, sign my name as a member of the LLC holding the property and then date, made a copy of it for myself, but the original back in an envelope, and send it to the city. I haven't heard anything. I have no idea what the appeal process will look like, but what where things have gone now is. I've and I hope it doesn't come to this but I have retained counsel and I am prepared to have my larger personal investment LLC sue the city and there's actually a couple of owners that are joining me, and then I'm the only property management company slash owner doing this. Now, I shouldn't have said property management company. So I want everybody to know that roost real estate company, the company that you know does property management, sales houses et cetera in town, is not a party to the suit, but I do hope that you know my personal involvement is seen as a meaningful step towards advocating, you know, for the rights and interests of our clients. So you know we're prepared to file a suit. \n\nThe grounds are that you know the suit is unconstitutional. The biggest piece of it is having to attest to something is something legally called compelled speech. So you know, again, I'm not going to get into the details, I don't understand them. That's why we have a great attorney. There's also issues with the technical side as to whether the city decided Springfield had the authority to do something like this and a couple of other things. But the key thing is compelled speech is it's unconstitutional. It's I don't know how it gets into the Fifth Amendment, rights or whatever. But again, to attest to something for which I'm not qualified to do so or have no knowledge of is a violation of all of our rights. So again, I don't understand. \n\nLaci: I mean, that's pretty basic at the outset and then you know. Also problematic are all these things you outlined about not knowing how to appeal, really, the unspecified legal remedies that happen if you don't do what. \n\nChris: You've been asked to do so in such a compelling manner, and I don't want to be overly dramatic about this, but this is, this hits home and you know I, you know, as we close this out today, I want to, I want to send a message to you know, all of my you know realtor friends and colleagues. You know I'm not doing this because you know I am trying to protect property rights and I'm trying to protect our clients. That's the main thing. But I think it's important that all of my realtor friends and colleagues take an interest in this, because you know this is about advocating for fair and effective regulation. Right, you know, I'm a realtor and I'm licensed right? Two different things. I'm committed to ethical and responsible real estate practices and we all have to advocate for regulations that are fair, effective and then the best interest of all stakeholders, and that includes the city, includes the owner, includes the manager and, most of all, includes the tenant. So I want an open and productive and collaborative dialogue. \n\nThis also is an undue burden of property owners. The current form it introduces administrative complexities and financial obligations that you know. We don't even know what those could be, but I guarantee you they could potentially hinder the ability of property owners to manage their investments effectively and, quite frankly, if they can't do it in Springfield, they're going to move on to other areas to invest their cash in, and that's only going to be bad news for tenants at the end of the day. We also have to balance right the idea of tenants rights versus owner property rights. You know, I understand the importance of safe and habitable living conditions for tenants, but it's also crucial to strike a balance that respects tenants rights and property rights, and this ordinance does not do that. There's no equilibrium there and there's also the potential impact on the real estate market. I'm not putting too fine a point on it. I know many owners that have liquidated several properties in Springfield over the last year, and I personally liquidated a handful of properties I still have. Most of my holdings are in Springfield, but it's not like this. The last six months that we've been looking at this has made me want to invest any more money in Springfield. That's but that way. \n\nMy analysis, you know the indicates the ordinance would have unintended consequences on the local market. You know it's going to affect property values. It's going to affect the attractiveness of Springfield, you know, for real estate investments and the overall dynamism of the real estate market. Instead of having choice, instead of having fair market competition instead of being able to, you know, take care of tenants one on one. That's going to be impacted, and so this is in the other thing. \n\nYou know, again, as realtors, as licensees, it is my intention to engage constructively with the city, right, but I am going to voice my concerns. I want to contribute to improving, refining the ordinance. I believe in proactive collaboration. I need the city to listen and, quite frankly, if they're not willing to talk to us, then you know we will have to file suit, and as much as I don't want to do that, spend the money or the time, I feel like this is a big enough deal that I don't have any choice. \n\nThe nice thing is, or potentially good thing is, I've been in contact with the legal department at the Ohio Association of realtors and we had a zoom call with them a few days ago. \n\nWe have another one coming up next Wednesday. So the Ohio Association of realtors has looked at the ordinance, they've looked at our draft of our lawsuit and it sounds like that they're willing to, if not formally engaged, to at least informally collaborate with us. But whatever way they can behind this, we will see where that goes. But again, my message to our realtor is you know, our collective voice is a powerful tool and I think we have to stand united and we have to get involved to contribute to the development of local and state regulations, quite frankly, that are going to foster a thriving you know real estate business in Springfield. Anyway, I get a little worked up, lacey, forgive me, but you know, to you and to our owners and anybody else listening, I'll continue to update everybody on how this plays out, and then we've got some stuff in the show notes that hopefully will clarify a lot of this. \n\nLaci: Yeah, well, I think it's. This is right in line with what you stand for and you know, I know this is a will say, a private venture or adventure, that you're going on with this but it's also right in line with what Ruth stands for, and it's that balancing of everybody's rights, wanting the best for everybody involved, being in the shelter business, if you will, and I do think that's how I mentioned it before. This is how this process works. There's a give and a take and sometimes you know, maybe it could be better if this involvement of all effective parties was done, you know, prior to creating these ordinances and all of these things. But you know, in so many cases it has to happen this way and it has to be done after. \n\nSo I apologize for standing up for yourself, for your. You know the people who are involved here and the fact that you know everybody that you've spoken with is really kind of is must be a nice indicator that this is a path worth pursuing. And you know there's a point where undue diligence can really hinder it's. You know there is a cost of doing business right and we have to expect that, but this is undue diligence, this is excessive and a lot of ways and you know the liability is just not. It's a big risk, so it will stay tuned. \n\nChris: Alright. Well, thanks for listening, and if anybody has any questions out there, feel free to get in touch with me and we'll put some good stuff in the show notes so you can see the detail if you'd like. \n\nLaci: Thank you, thanks, Chris. ","content_html":"In today’s episode Laci LeBlanc and I talk about The Landlord Registration and Licensing Ordinance 23-36 enacted by the City of Springfield Ohio on January 31, 2023.
\n\nIn this episode we discuss the ordinance, the process by which it is being enforced, and the legal basis for pushing back on this infringement of property rights and ultimately tenant rights.
\n\nI have serious concerns about this ordinance both as a residential real estate investor in the city, and as a licensed real estate broker managing investment property on behalf of our owner clients.
\n\nThese types of initiatives are being enacted throughout Ohio and in other states as well. Whether you have investment property in the Springfield area or not, I think you will want to be aware of this trend across the country.
\n\nBe a guest on the Landlord Profitability Playbook Podcast
\n\n\n\n\n\nVisit Rental Property Registration to access the registration page and self-inspection form.\n
(AI transcript provided as supporting material and may contain errors)
\n\nThe ordinance is designed, according to the city, to promote health, safety and welfare in the rental housing market, and the reason this is applicable to almost every residential real estate investor. In Ohio. These ordinances are coming up all over the state and in several states these are already up and running. I don't know of any that's exactly like Springfield, but there's a lot of similarities, so I thought it was important that we get this out on a podcast. I also want to say right up front that I am not an attorney. I'm not here to offer legal advice, but I am happy to tell you my thoughts and plans personally for not just our property management company, but also for my personal investment company. So good morning, lacey.
\n\nLaci: Good morning, another one where I am happy to kind of play devil's advocate and learn right alongside the folks listening, because this is not something I'm super well versed on. But what I immediately thought of was, if it's happening in Springfield, if it's happening in Ohio, it's happening everywhere, right? So you know, if you're listening and you're not from Ohio, that doesn't mean you should shut this one off. Actually, this is probably one of the ones you should listen to because to be prepared for these, to know what your kind of course of action might be If it is harming your business, I think that's valuable.
\n\nChris: So what happened was last summer I think it was still July I got an email from Tina, our lead property manager in Springfield, and she had gotten an email from one of our longest clients that we've worked with one of the you know for years and he happens to be a local attorney and he also owns properties and we manage for him. He also handles our evictions. So you know, I've known Dennis for years and years. He's a friend and a great long-term client. He had an email that he sent to Tina and I didn't even know this existed. So he said he took some time and got a copy of this ordinance. He found out about it because one of his clients, who we don't manage with, had heard about this ordinance that had passed. And he said you know, there is no. I think there technically is a Springfield paper. I think it's based out of Dayton. You know there's no more. It's not like it goes to everybody's house every day. You know there's no real local radio station or anything. It's a smaller town. So many people don't know this ordinance was enacted and I certainly didn't.
\n\nAnyway, dennis went down to the city building, he got a copy of the ordinance and he talked to the gentleman that's actually, I guess, managing the effort by the city to put this ordinance in action. And it was interesting because when he talked to the city, you know, the response was to Dennis well, they didn't think this was a big deal, right, this was just about livability issues. And Dennis dug into. The part that you know we're going to talk mostly about today is that it involves the self inspection. And the guy at the city basically said well, you could probably have the tenants do the self inspection, which you know was a non starter at the beginning. So and then. So the whole idea is that they have information about, you know, the owner and they have some testament from the owner that the property is in good condition. If the tenant has a problem, they're more likely to help get it fixed.
\n\nThey also told Dennis that they weren't going to enforce this, at least until June of 2020. So after June 1, 2024, what he told Dennis was that if a property is not registered, the city could issue a penalty of $50 day for each unit that was not properly registered and that the penalty would be added to the real estate taxes if it wasn't paid and, as that builds up, the house could conceivably be sold at a tax sale for closure. So, like I said, I didn't really dig into this for several days. It's obviously something that doesn't make money for myself, it doesn't make money for our clients, it's nothing I want to spend time on and, to be honest, things like this have come up over the years and they've never gone anywhere, and it seems like this time I just had a sense that there was more to it, so it was a good thing that I dug in. So that make any sense at all Lacey so far.
\n\nLaci: Yeah, I think it'll make more sense once we know what the ordinance is all about. But I do think that you know again, my life is very real estate adjacent in a lot of ways, and so I do hear about this stuff and that's exactly what my like, my nana and my family usually talk about as well. You know, this happens all the time. There's not really anything that we can do about it and there's not anything to it, you know, and they never enforce this stuff because they just don't have the manpower to do so.
\n\nSo what makes this one different? What is this?
\n\nChris: And there's already. There's already a vacant property registration form in place. You know, we don't feel like we're the bad guys because you know, I like to think I take good care of my properties and we're at the neighborhood standard and things like that, but we don't manage for people who don't take care of their properties, quite frankly. So you know, I always sort of felt that our values and business philosophy has always carried today and when something did go wrong code enforcement you know, has Gretchen cell phone. You know who was our you know our lead director of property management. They can get on the phone with her and she fixes it and we always had a great relationship with those people. And what I, what I ended up finding out, was that this wasn't just bad policy, but there's a. It's an infringement on property rights, but it's also ultimately an infringement on tenant rights and it also interferes with our legal obligations to our clients as licensed real estate brokers and property managers. So I'm trying to do a quick summary of the ordinance and then we're going to include the ordinance in the show notes so people can go ahead and download it and take a look if they wish. But the purpose of the ordinance is, and I'm going to read a lot of this, but the ordinance aims to increase transparency and accountability in the rental housing market in the city of Springfield. Seeks to protect the public health, safety and welfare, eliminating lighting conditions and enhanced property values. I think we could all get on board with that. Applicants, the ordinance applies to all rental dwellings within the city of Springfield, with certain exemptions. Now here's what's interesting Units buildings that have more than three units are exempt. So this ordinance is only for people who own rental property that are one to three unit buildings. So that is an interesting case that these buildings are the focus and not literally thousands of other units in town.
\n\nEvery owner of a rental dwelling unit must register each unit with the Department of Community Development using the rental property registration form, and that's available online and we'll put that link in the show notes as well. In addition to that, a self-inspection form must be completed with the registration. This form will be included in the application material. So when you register your property, you pay 35 bucks, you fill out the self-inspection form and you're good for three years. As the program is currently structured, either the owner or the owner's representative which would be us with our property management business has to print the self-inspection form, fill it out, sign it and upload it back to the site. So it also includes contact information for the owner or agent, 24-hour emergency details, address of the unit, lease information, identification of trash service provider.
\n\nIt's very intrusive and, as the you know, I understand the need to get to the ownership of, you know, like a zombie property, but obviously this already starts to be somewhat intrusive. And again, the registration fee is $35 per unit for single unit properties and $25 per unit for two or more units in the same building. It's not about the money. At this point, you know, if the city needs to raise funds, great. You know, if that was the end of it, we would move on.
\n\nSo the license this isn't just a registration, they're terming it a license. So the license to rent your property is valid for three years from the date it's obtained. Once you sell or transfer the property, the license expires and it becomes invalid, and new owners must apply for a new rental license for each dwelling within five days after they close on the property. Violations will result in civil or class A civil offenses and subsequent violations will be deemed as such. An appeal process is available for owners or managers who wish to contest any order or decision related to the ordinance, and the effective date of this is legally 131-2023. And you have to apply to have your property removed from the registry if it's no longer a rental property. So that's not a very brief outline of what the ordinance says, but what are your initial thoughts on that, lacey?
\n\nLaci: Yes, I'm trying to kind of back my way into it because everything they do is for a reason, right, the government. So you mentioned raising funds and I think this is a minimal amount of money, obviously. So if that's not the motivation, then what could be? And really I go back to what the registration must include. So the owner contact information, 24 hour emergency details, address of the unit, lease information, identification of trash, service provider really raised the red flag for me.
\n\nSo what I feel like and you know, excuse me, I do have some experience in kind of working with the government on housing specific tasks and it seems as if maybe there are properties out there who are not up to the neighborhood standard, right, so not your properties, not your owner's properties that maybe are not following through with these basic services, and I'm just seeing trash piling up or I'm seeing, you know, illegal activity and not being able to contact the right people. So it really feels to me more like a yearbook of rental properties, right, they want to know what a rental property is. And then in the future, where this becomes a real problem is in the future. If you've got folks in a neighborhood or who are not taking care of it.
\n\nthen I see additional kind of requirements imposed on people, even if they are right, so you're part of a whole at this point right, so they're going to use this catalog of rental properties to determine kind of what legislation or what rules they put in place for all rental properties, and so that's, I think, where we can kind of see where it's starting to impose.
\n\nChris: And then there's another weird thing about Springfield Ohio. As far as I know, springfield Ohio is the only municipality of its size in the state, possibly the country, where we do not have public municipal trash service. So every place else I've ever lived my entire life the city picks up the trash and it gets billed on your water bill. Right, you know you get a bill every month. Like in Columbus, we get water, sewer and trash In Springfield they abolished that decades ago. So, yes, you still get a water bill and sewer bill from the city, but you have to contract with one of I think it's three approved private vendors to pick up your trash. And yes, there's an issue with tenants, you know, signing up right In the single family house. The tenant should sign up and pay for that, and that's problematic globally. Honestly, if the city wanted to fix almost everything, that's wrong is if we would just go back to a municipal garbage service. But that's me spouting opinions. The other thing that's problematic is, you know Springfield is not, you know, high economic status communities, so to speak, right, and the fact is you have just as many owner occupants in houses that aren't well taken care of, you know, as you do rental properties. So that it's hard because the inordinates assumes that all landlords are bad landlords and you know, the fact is that's just not true. So you know I start to get a little worked up about this as I talk about it, so forgive me.
\n\nSo anyway, dennis has been an attorney in Springfield for years and years and he knows all the people at City Hall. So what I did was I asked Dennis if he could set up an appointment with the administrator of this program at the city. So on July 26th it was a Monday morning Dennis and I went down to City Hall in Springfield and we met with Jeremy who's in charge of the program, jeremy Least and Randall Stevenson, I believe. This title is assistant attorney for the city, but he's from the city legal department. So they were nice enough to sit down and it was very cordial.
\n\nYou know they defended their right to pass this ordinance and to enforce it. You know they sort of defended the fact that their process and reason was above board. They also admitted that the owners had not been notified yet formally, but that they would be notified. They also said that, just like they told Dennis, enforcement would not begin until June of 2024. They also suggested I get in touch with the city commissioners and I did get in touch with two of them Mr O'Neill, who's no longer commissioner, and Mr Eastrop. Then Randall Stevenson. He asked that I send him a summary email with my concerns and I want to get to those details here in a second.
\n\nBut I also want to make it clear I explained to Jeremy and Randall that my primary concern with this is with the self inspection, and I also want to see blight eliminated. I want to see slum lords out of business and I want to see tenants protected. You know we look after over 500 households in Springfield that we're responsible for and you know we're out of business if we don't take care of our tenants, and you know so I'm with them. And you know, like we just said, I have no problem with the 35 bucks and helping track down. You know LLCs holding. You know zombie properties. I'm down with that.
\n\nThe issue is that the ordinance as it's written, especially the self inspection, has just gone too far. So here's some detail as to why this has taken up so much of my time. The biggest reason is when you download the inspection, the inspection has things on it that I don't even know if those things are perfect in the houses I live in. If that makes any sense and you know it's about, is the porch plumb. Well, you know, houses in Springfield are, you know, average, probably 100 years old.
\n\nLaci: You know, I live in a 100 year old mill house. I guarantee you I haven't heard one thing other than is the porch plumb and I would not pass this inspection.
\n\nChris: Yeah, and it goes deeper from there and we're putting it in the show notes as well, and the bigger issue is the way it's set up. And what we asked them to change was you fill out the form and your signature. You sign your name to a phrase that says I attest that my property is up to basic property management standards based on the checklist. I'm not qualified as a property owner and I am not a licensed property. Well, I'm not qualified as an owner or a licensed property manager to perform an inspection like this. Right, you know, as an owner, landlord and as a property manager, we improve and maintain our properties to the neighborhood standard and the market rental rate, but we also have minimum standards for any property that we look after. So we do hold ourselves, I want to believe, to a higher standard than, say, the rest. I don't want to sound holier than Val. We have issues once in a while, like everybody else, but the fact is we don't work for owners who lack the means or the desire to maintain safe, secure and functional properties. But again, we do work, by exception. We fix or replace what's broken when it breaks. We don't run cameras through drain lines, right? We don't check porches for plumb, we don't close gaps or rebuild floors and foundations and 100-plus-year-old homes, which is the bulk of our housing stock. And again it goes back to the phrase I attest. That's a legal term that carries great weight and to attest to something today, excuse me, doesn't mean that something's not going to change the next day. There's the very real crop of the possibility that something on that city checklist may exist and we do not know about it. It will not know until the tenant reports it or we find out after the tenant moves out. That's just common sense.
\n\nThe suggestion and again these are the key points to the email that I sent to the city, the suggestion that the tenant would do a voluntary inspection on behalf of the owner is problematic as well. It's not the tenant's problem, right? It's not the responsibility, it's the owner. And there's a question of tenants' rights and there's also the practical issue of in many cases in Springfield there's a language barrier between the tenants and us and owners. So I spoke to Kevin O'Neill, one of the commissioners, after the meeting and he told me flat out that he understood that the inspection had the clause in the inspection said, to the best of my knowledge, not I attest, and I sent him a link to the site and I didn't hear back from him and he didn't win the last election. And Kevin also suggested I speak to Dr Eastrop, who's on the commission, and I did speak to him that night and I copied him on this email to the city and I express these same concerns.
\n\nHere's the other thing that's deeper for me. So you have to be a licensed broker in Ohio to manage for another, which I am. It's a criminal offense to manage property for another for a fee without having a real estate brokers license. Now, family members can do things, obviously for an owner W2 employees but you can't hire a third party as an independent contractor to manage your properties unless they're licensed. So that means I have to follow state licensing law. Now here's the trick that makes the property management business hard for me with this ordinance, and that is property inspectors in Ohio House and home inspectors have to be licensed now with the state of Ohio.
\n\nNow, I don't pretend to be a licensing law expert, but I know enough not to act as a licensed property inspector when I'm not. You know, just as I know enough not to coach a seller filling out a residential property disclosure form or, you know, insert myself in any capacity during a home inspection and honestly, I don't think the city was at all aware of those state laws that I see contradiction with. But if I were to do that, I'm exposed to to potential legal liability. Liability could result in the loss of my license, the loss of the business, my livelihood and everybody who works for us. So I can't just let this go.
\n\nI also I checked in over the summer with the Ohio Realtor Association and at this point it does look like they are interested in helping us with this. So I'll get to that here in a minute. But again, my biggest issue is signing my name to a checklist. That is clearly understood to be, the best of my knowledge, is way more easier to get my mind around than signing something that says I attest. That could be legally used against me later when I told them I believe in what the city is trying to accomplish. I want to be a partner, but I can't support this. I can't hear you, lace.
\n\nLaci: Sorry. I think this raises a much bigger kind of issue, a well known issue, and a non political one at that. Doesn't matter about politics, but at the city level, when they pass these types of laws and ordinances and regulations, you know, there's just not, in most cases, a lot of input from affected parties. So it's done, you know, by a board or by, you know, a room full of representatives and legal, but there's not a realtor in the room, there's not a broker in the room, there's not a property owner in the room or a manager in the room, and I think that's this is commonly what happens with this type of stuff is it goes out that you know they formulate it, it goes out, and then all of this feedback is given after the fact. And you know, typically there are some changes made to the original ordinance or law or whatever the case may be. So I'm interested to see how that happens, or, if that happens here, what's your plan?
\n\nChris: Well. So they did have some owners, or a handful of owners that came to the public commission meeting, but they did not have they didn't have us, right, they didn't have Bruce Drill estate. Then they didn't have any other property managers either. I did receive an acknowledgement from Mr Stephenson a few days later that he got the email, and then in August I sent an email sort of outlining what I just talked about to all of our owners. So here's what's happened since then. In October, notice is starting to go out from the city and their title rental registration obligation and we'll put that in the show notes as well. And notice is here by given that your property is in violation of the codified ordinance of the city of Springfield, your order to rent a property in 30 days, unspecified legal remedies will be pursued and you know you have five days to appeal.
\n\nLaci: So not so much a notice as a warning. Yeah, yeah On the hand already for something that you haven't even been notified about.
\n\nChris: Correct and it's frustrating because we want to be able to help our owners with this and you know, practically we can't. I mean, I'd like to think I am helping by doing this and getting involved, but my original plan and I said this to our owners and that email last summer was the personal plan for my property was to download the inspection form, strike out any problematic language. I was going to disclose anything that I was working on at the time you know if it was in rehab or whatever and sign my name and say to the effect of to the best of my knowledge on this date, you know Chris McAllister and my LLC, and then I would upload the form back, I'd pay the 35 bucks and move on. That was my plan. That's what I shared with our owners. Again, I'm not an attorney, I'm not giving anybody advice, but that's what I was going to do for myself. But now that things have escalated, here's where we're at. I was hoping that, having a productive dialogue, we would have the opportunity to influence this ordinance right or how it was finalized or was going to be enforced. So I got two letters, one for two properties in an LLC I own, and what I've done is now that things have gotten to this point is I've chosen to appeal each of the notices I received and all I did was I took the one page what do we call it? The one page rental registration obligation and I simply, I simply wrote, hand wrote I choose to appeal, sign my name as a member of the LLC holding the property and then date, made a copy of it for myself, but the original back in an envelope, and send it to the city. I haven't heard anything. I have no idea what the appeal process will look like, but what where things have gone now is. I've and I hope it doesn't come to this but I have retained counsel and I am prepared to have my larger personal investment LLC sue the city and there's actually a couple of owners that are joining me, and then I'm the only property management company slash owner doing this. Now, I shouldn't have said property management company. So I want everybody to know that roost real estate company, the company that you know does property management, sales houses et cetera in town, is not a party to the suit, but I do hope that you know my personal involvement is seen as a meaningful step towards advocating, you know, for the rights and interests of our clients. So you know we're prepared to file a suit.
\n\nThe grounds are that you know the suit is unconstitutional. The biggest piece of it is having to attest to something is something legally called compelled speech. So you know, again, I'm not going to get into the details, I don't understand them. That's why we have a great attorney. There's also issues with the technical side as to whether the city decided Springfield had the authority to do something like this and a couple of other things. But the key thing is compelled speech is it's unconstitutional. It's I don't know how it gets into the Fifth Amendment, rights or whatever. But again, to attest to something for which I'm not qualified to do so or have no knowledge of is a violation of all of our rights. So again, I don't understand.
\n\nLaci: I mean, that's pretty basic at the outset and then you know. Also problematic are all these things you outlined about not knowing how to appeal, really, the unspecified legal remedies that happen if you don't do what.
\n\nChris: You've been asked to do so in such a compelling manner, and I don't want to be overly dramatic about this, but this is, this hits home and you know I, you know, as we close this out today, I want to, I want to send a message to you know, all of my you know realtor friends and colleagues. You know I'm not doing this because you know I am trying to protect property rights and I'm trying to protect our clients. That's the main thing. But I think it's important that all of my realtor friends and colleagues take an interest in this, because you know this is about advocating for fair and effective regulation. Right, you know, I'm a realtor and I'm licensed right? Two different things. I'm committed to ethical and responsible real estate practices and we all have to advocate for regulations that are fair, effective and then the best interest of all stakeholders, and that includes the city, includes the owner, includes the manager and, most of all, includes the tenant. So I want an open and productive and collaborative dialogue.
\n\nThis also is an undue burden of property owners. The current form it introduces administrative complexities and financial obligations that you know. We don't even know what those could be, but I guarantee you they could potentially hinder the ability of property owners to manage their investments effectively and, quite frankly, if they can't do it in Springfield, they're going to move on to other areas to invest their cash in, and that's only going to be bad news for tenants at the end of the day. We also have to balance right the idea of tenants rights versus owner property rights. You know, I understand the importance of safe and habitable living conditions for tenants, but it's also crucial to strike a balance that respects tenants rights and property rights, and this ordinance does not do that. There's no equilibrium there and there's also the potential impact on the real estate market. I'm not putting too fine a point on it. I know many owners that have liquidated several properties in Springfield over the last year, and I personally liquidated a handful of properties I still have. Most of my holdings are in Springfield, but it's not like this. The last six months that we've been looking at this has made me want to invest any more money in Springfield. That's but that way.
\n\nMy analysis, you know the indicates the ordinance would have unintended consequences on the local market. You know it's going to affect property values. It's going to affect the attractiveness of Springfield, you know, for real estate investments and the overall dynamism of the real estate market. Instead of having choice, instead of having fair market competition instead of being able to, you know, take care of tenants one on one. That's going to be impacted, and so this is in the other thing.
\n\nYou know, again, as realtors, as licensees, it is my intention to engage constructively with the city, right, but I am going to voice my concerns. I want to contribute to improving, refining the ordinance. I believe in proactive collaboration. I need the city to listen and, quite frankly, if they're not willing to talk to us, then you know we will have to file suit, and as much as I don't want to do that, spend the money or the time, I feel like this is a big enough deal that I don't have any choice.
\n\nThe nice thing is, or potentially good thing is, I've been in contact with the legal department at the Ohio Association of realtors and we had a zoom call with them a few days ago.
\n\nWe have another one coming up next Wednesday. So the Ohio Association of realtors has looked at the ordinance, they've looked at our draft of our lawsuit and it sounds like that they're willing to, if not formally engaged, to at least informally collaborate with us. But whatever way they can behind this, we will see where that goes. But again, my message to our realtor is you know, our collective voice is a powerful tool and I think we have to stand united and we have to get involved to contribute to the development of local and state regulations, quite frankly, that are going to foster a thriving you know real estate business in Springfield. Anyway, I get a little worked up, lacey, forgive me, but you know, to you and to our owners and anybody else listening, I'll continue to update everybody on how this plays out, and then we've got some stuff in the show notes that hopefully will clarify a lot of this.
\n\nLaci: Yeah, well, I think it's. This is right in line with what you stand for and you know, I know this is a will say, a private venture or adventure, that you're going on with this but it's also right in line with what Ruth stands for, and it's that balancing of everybody's rights, wanting the best for everybody involved, being in the shelter business, if you will, and I do think that's how I mentioned it before. This is how this process works. There's a give and a take and sometimes you know, maybe it could be better if this involvement of all effective parties was done, you know, prior to creating these ordinances and all of these things. But you know, in so many cases it has to happen this way and it has to be done after.
\n\nSo I apologize for standing up for yourself, for your. You know the people who are involved here and the fact that you know everybody that you've spoken with is really kind of is must be a nice indicator that this is a path worth pursuing. And you know there's a point where undue diligence can really hinder it's. You know there is a cost of doing business right and we have to expect that, but this is undue diligence, this is excessive and a lot of ways and you know the liability is just not. It's a big risk, so it will stay tuned.
\n\nChris: Alright. Well, thanks for listening, and if anybody has any questions out there, feel free to get in touch with me and we'll put some good stuff in the show notes so you can see the detail if you'd like.
\n\nLaci: Thank you, thanks, Chris.
","summary":"In today’s episode Laci LeBlanc and I talk about The Landlord Registration and Licensing Ordinance 23-36 enacted by the City of Springfield Ohio on January 31, 2023.\r\n\r\nIn this episode we discuss the ordinance, the process by which it is being enforced, and the legal basis for pushing back on this infringement of property rights and ultimately tenant rights.\r\n\r\nI have serious concerns about this ordinance both as a residential real estate investor in the city, and as a licensed real estate broker managing investment property on behalf of our owner clients.\r\n\r\nThese types of initiatives are being enacted throughout Ohio and in other states as well. Whether you have investment property in the Springfield area or not, I think you will want to be aware of this trend across the country.","date_published":"2023-12-08T08:00:00.000-05:00","attachments":[{"url":"https://aphid.fireside.fm/d/1437767933/e6ae97de-6d4b-4344-8b9f-b62c4c887188/82147925-542b-4316-8037-1d7abe3cd91c.mp3","mime_type":"audio/mpeg","size_in_bytes":28962482,"duration_in_seconds":1977}]},{"id":"693c3ca9-23e2-4cd7-ae8d-5bcf67130ed5","title":"Ep004: How to Choose the Right Tenant for Your Rental Property","url":"https://www.landlordprofitabilityplaybookpodcast.com/004","content_text":"In today’s episode Laci LeBlanc and I talk about How To Choose The Right Tenant For Your Rental Property and the strategic, and tactical, steps you can take to ensure that your tenants not only pay the rent on time, but leave the property in as good or better condition than when they moved in.\n\nWhether you are an accidental landlord or a seasoned investor, I think you will find this episode thought-provoking and enlightening.\n\n\nSHOW HIGHLIGHTS\n\n\nIn this episode we discuss the art and science of selecting the best tenant for rental properties, emphasizing the need for strategic steps and criteria.\nLandlord-tenant relationships are critical and can significantly impact the landlord's bottom line. Good relationships can prevent costly repairs and maintenance.\nSetting and upholding minimum property standards are vital. Both landlords and tenants should be accountable to these standards.\nMaintaining positive landlord-tenant relations, especially when it comes to property repairs, is important. Prompt response to tenant requests is a must.\nThe pros and cons of in-house repairs versus outsourcing are discussed. Outsourcing may save time and money, but in-house repairs can give better control over quality.\nThe importance of managing the reputation of rental units is highlighted. Partnering with owners that appreciate this can result in win-win collaborations.\nLandlords should not just focus on whether a tenant can pay the rent but also on whether they can maintain the property in good condition.\nTenant screening should include verifying the tenant's income (at least three times the rent amount), job history, eviction history, address history, and landlord references.\nConsistency in the tenant screening process is essential. Every potential tenant should undergo the same process, such as running a credit report and criminal background check.\nWe end the episode with a discussion on maximizing profitability and maintaining property standards. It stresses the importance of consistent criteria and processes in tenant evaluation.\n\n\n\n\nLINKS\n\n Show Notes\n\n Be a guest on the Landlord Profitability Playbook Podcast \n\n Download your FREE copy of The Landlord Profitability Playbook and learn how to automate your property management. \n\n Visit ROOST Property Management and find out more about the ways we can help you create a more profitable portfolio. \n\n\n\n\nTRANSCRIPT\n(AI transcript provided as supporting material and may contain errors)\n\n\n\nChris: Chris McAllister, here with the Landlord Profitability Playbook, where it's my job to create and coach business opportunities and strategies that support and add value to the lives of residential real estate investors and their tenants. And I'm here today with my good friend, digital marketing expert and podcast partner, lacey LeBlanc. And today we're going to talk about how to choose the right tenant for your rental property and the strategic and tactical steps that you can take to ensure that your tenants not only pay the rent on time, but leave the property in as good or better condition than it was when they moved in. When it's time for them to move on. \n\nLaci: This is a big one, chris, the Lord's work that you're doing, the Holy Grail that you're chasing as we speak. In my Facebook inbox right now, there are 228 messages about one of my family's properties that's up for rent. I can't imagine how many phone calls Nana has gotten about it. On top of that, plus, it's the third time this year that this particular property has been vacated and needs to be re-rented. So if you can help landlords choose the right tenant, then you deserve a cape and a spandex suit and the whole nine, and I will buy it for you if you'll promise to wear it. But let's get right into it. So, in your experience, what is rule number one? What do landlords need to understand first and foremost when setting out to find a tenant? \n\nChris: I think the first thing that people have to keep top of mind, that landlords have to keep top of mind, is that there is a tenant for every property, and that tenant may not be you, and sometimes it's a certain mindset that we investors have to sort of get into to understand that it's okay that a property that you're renting out wouldn't necessarily be someplace that you would want to live. \n\nOkay. So just because some neighborhoods may not be ideal places where I want to live or you'd want to live, I can tell you that there are tenants out there who will be thrilled to rent your place, especially if it's priced right, it's clean and it's functional. So those things take a paramount to everybody. But those of us who are, I guess, more fortunate than others don't really have to be conscious of that. But if we can provide anytime, we can provide a property that is functional, you know works, etc. If the house is clean, you know, maintained to the neighborhood standard and so forth, then that is a great opportunity that you as a landlord are providing. And just because you wouldn't necessarily live there doesn't mean that somebody else wouldn't be thrilled to have it. \n\nLaci: And that's a really great point. Somebody else is going to be really proud of that property, proud of that space and finding that person that I think that goes back to them leaving it in better shape than they found it and paying their rent on time because they appreciate it, they're proud of it, they that's their spot right that there's a tenant for every property. I think that's a really great way to think about it. Can you provide us any examples maybe, of some neighborhoods where you have properties and and talk about maybe how you chose that neighborhood, because I feel like it's not where you would prefer to live? Obviously, if you're choosing your own home, you've got this set of criteria, but as an investor, if you're choosing a property, maybe in a neighborhood where you wouldn't live, what is, what's that criteria? How do you choose that? \n\nChris: You know, as investors we may have a personal lifestyle that we're accustomed to, right, maybe we wouldn't want to quote go down market and price or where we want to live, but by the same token, you could argue that we may not be able or maybe not want to afford to go upmarket right price either, and at the end of the day, I'm not sure it really matters. Right, you know, a good investment is a good investment regardless of the size of the investment or the target tenant. What counts is the return that you receive on that investment right. We have owners and I have properties you know that are, quote lower end properties that you know rent for you know, as little as five, six, $700 a month. And I have other properties that rent for 2000 plus a month. \n\nYou know, I feel like they're all good investments based on the rate of return I get. But obviously the dollar cost to get in to that investment, you know, was lower on some, higher on others. The return as a percentage tends to stay constant, you know, regardless of whether it's a higher end or a lower end property, and there's also times when you know a lower end property may not have a greater return but it's still appreciating right. Just like a higher end property may not have the same return versus another, as long but as long as it's still appreciating, you know, at the end of the life of that property it's all good. \n\nSo again, does it really matter where we choose to make an investment? I say it doesn't. The trick is that we bought it right, that we manage it right, we maintain it right and so forth, and the key is that when you do make a purchase, or when it's time to reevaluate a purchase, that you get really clear on who is going to rent that property, what's that avatar look like and what does that tenant for that property? What did they expect? So you know, despite any mental blocks or reservations we might have personally about living in one of our properties, tenants are going to be willing to rent that property as long as it's, again, reasonably priced, good condition, working utilities, amenities and so forth. \n\nLaci: Yeah, where I am, the housing market is just, it's a bear. It's hard for folks, especially folks on a budget, people who are kind of in this lower income. We just don't have a lot of housing available. So we've got tenants out there who are willing to forego good condition and has working utilities and amenities, as long as they got the reasonably priced part. But how does the condition of a property, how it's priced, how it kind of meets the needs, how does that influence the willingness of tenants to rent in a specific area? \n\nChris: Well, everything comes back. Like we talked about the last couple of episodes. Everything comes back to that concept of the neighborhood standard. Right, if your property meets the neighborhood standard, right, if it's as good, marginally better, but at least as good as every other property you know in the neighborhood, that's going to be more than acceptable. So if it meets that standard it's fairly priced, meets the tenants, basic needs, functional, etc. You know you're going to find somebody and not just someone. If you've hit the neighborhood standard, if it's fairly priced, you're not just going to have one qualified applicant, you're probably going to have more than one qualified applicant to choose from. You know the neighborhood standard. \n\nI just want to make this clear though right, we're talking about something priced right, and you know my philosophy is if the right price, say the average price or even the medium price of a given neighborhood is, you know, $1,000, you know a month for rent, if you can afford to comfortably rent that house for, say, 900 or 950 and it's the same house and you can afford to just be a little bit under what the average market value is, that is a great tactic to be able to attract more qualified applicants. So we're going to talk more about that in a few minutes. But the other thing I want to make clear about the neighborhood standard is not something that we get to command more rent for. The neighborhood standard is the basis for market rate rent as well as the value of that property in that neighborhood. We've talked about this before, but a common investor mistake when they purchase a property is not to account for the cost of initial repairs or the big ticket items that come up every 5, 10, 15, or 20 years. \n\nAnd, as successful investor has to have their numbers clear enough that they're able to accumulate reserves out of whatever rent they're collecting After they pay the mortgage, after they pay the taxes, insurance, etc. They have to be able to accumulate reserves over time. So when it comes time to replace the roof since it's a non-event, because just because you replace the roof doesn't mean that $1,000 rental property is suddenly worth $1,100, $1,200 a month. It doesn't matter. The market doesn't care, your tenant doesn't care, the tenant, you can't expect the tenant to overpay for a property just because you didn't set enough money aside to get a roof put on there. \n\nLaci: So your poor planning is not my emergency situation. \n\nChris: And that's why we love to help people manage their properties profitably. But we also are pretty darn good at helping and try to help to figure out exactly what the financials are going to look like, going forward and making sure that there's enough room in there to accumulate reserves over time. So when the big ticket items come up whether it's a sewer line, roof, whatever it is, new air conditioner, new heating system that it's a non-event Because, remember, a problem is never a problem if you've got the cash to fix it. \n\nLaci: And that prevents so many future problems. And I've seen it again my real estate experience is adjacent, right, my family's experience. But if you have to increase the rent to cover the cost of a repair you just made, then how is that going to impact repairs you have to make in the future? That's the start of the snowball, of kind of falling below the neighborhood standard. Not only that is your tenant going to call you when something's wrong, if they think that you're going to raise their rent if you come and fix it right, and so then you get stuck with a tenant who is scared to call and something could be minimally wrong on the outside, but it's really wrong on the inside. \n\nSo they see a little spot on their ceiling. But what does that really mean? It could really cost you a lot more in the long run. I guess is what I'm trying to say. \n\nChris: It's an interesting point because I hadn't really thought of that, but I ventured to say that your tenants especially tenants that tend to rent for their lifetimes versus owning I bet you they have a pretty good sense of whether or not their current landlord is financially fit, and what you said is a great example of what financial fitness looks like, right? I mean, if every time you have a legitimate issue, the rent goes up, that's a problem with your owner and that's not a problem with you as a tenant. \n\nLaci: But yeah, I mean as a recent renter, more recent in my history than other folks. I think that you're right. I think we do know about the financial fitness of our landlords based on the response to when we call. So it's nice to have. I think I've always thought my Nana would benefit from a property manager. Of course it was me calling my brother or my father who was busy with other things and that you know, if it wasn't the house falling apart, then I would be fine. So maybe I don't have the exact same experience, but I do think that it really impacts the overall relationship to which, when you think about things like are they going to refer to you if you have another house? Are they going to say, oh yeah, you know, definitely rent from them, it's a great experience, or, you know, it really can weigh long term, I think, on your reputation as an owner or manager. \n\nChris: Absolutely, and we've got you know we do. We manage for other people. We don't own the properties that we rent, but many times if it's time for somebody to move to a bigger place or maybe move to a different neighborhood, school district or whatever, they will ask us can I stay with John, for instance, can I stay with so and so you know, because they've enjoyed living there. So there is that referty and sometimes a long term tenant means a long term tenant amongst multiple properties, not just you know one of your properties. \n\nLaci: Yeah, that's a great point. That's a great point. So what other factors should landlords consider when they're screening tenants? So this is a big part of it, right. Like I said, we've got 228 tenants who are chomping at the bit to get to this one one apartment. So what other factors are there when you're screening tenants to ensure that they will take care of the property? Are there any from your experience? Is there anything specific expectation wise or their criteria that landlords should communicate during that process to kind of let people self select? I guess. \n\nChris: Yeah, I think you have to have some basic expectations for your tenants as much as you have basic expectations for yourself as a landlord. \n\nBut you know, once you've got a property that's move in ready, it's clean, it's secure, it's price straight, you're going to have more applications that you can handle maybe 200, right, and you're going to need to screen those tenants to make sure that you're choosing someone who isn't just going to pay the rent, but they're also let me rephrase that you want to rent to somebody that doesn't just have enough cash for the first month's rent security deposit. \n\nYou want somebody who will have the first month's rent security deposit and be able to pay the rent on time every month and take care of the property. Right, and sometimes I think we get so caught up in the moment, under so much pressure, that it's easy to forget excuse me, what we really what good tenant performance looks like. Now, I absolutely believe and you know I don't think it's magical thinking, but I do believe that if you take care of your tenants and you choose your tenant wisely, that you're more likely to end up in a situation where you're going to save a ton of money down the road because that tenant is going to care for and they're going to respect your property. So you can call it magical thinking if you will, but you know we've got years and years of success of us taking care of tenants and the tenants taking care of us by way of taking care of the property. So those basic expectations, they really do matter. \n\nLaci: Yeah, I think that's just the general psychology of reciprocity If someone is good to you, you want to be good back to them, and there's no, there's not necessarily a balance sheet for that, but I think you know we can all agree that if somebody's good to you, then you want to be good to them, barring extenuating circumstances. So the other issue that we have is you know when and this doesn't happen with a lot of our properties, so this is new to us and this is coming at a really great time but between tenants, right? So this property I'm talking about has been vacated now twice and will need to be rented for a third time this year. So what are the? What do you do between these tenants? What are the repairs that you need to make? What can you expect? I guess, are there unexpected repairs that could be avoided if you choose the right tenant next time? \n\nChris: Well, we've always we've all had horror stories, and sometimes horror stories happen when you've done everything right, you know. But you know we've always. We've all heard stories and landlords who you know a tenant moves out and they just discover a massive catastrophe. Right, I will tell you, though, that most of the time, you know, you can see a catastrophe coming just based on whether the rents paid on time and even quick drive buys, you know, by the property right, either by you or your property manager. But let me tell you what won't happen when it comes time to turn a property, you know, if you have a good tenant. So, first of all, a successful tenant is not going to let the lawn be overgrown right, you know we've had turns where the lawn is so overgrown that you know it takes a bush hog and a crew, you know, to get the backyard cleaned up and stuff. So a great tenant isn't going to let the lawn get overgrown. A great tenant isn't going to require insect or rodent treatment, right, you know, provided they moved in and the place was perfectly clean, great tenants aren't going to destroy the carpet, they're not going to put holes in the wall. They're not going to let garbage build up. You know they're not, they're going to pay the water bill, right? You know, water bill goes with the property. You can put it in the tenant's name, but if they don't pay it, it still stays with property and comes back to the landlord. \n\nYou could argue that successful tenants don't let their kids flush toys down the toilet. Right, there's certain things that a good tenant, a respectful tenant, a tenant who's respectable of the property is not going to do. That or going to directly translate the money that you're not going to have to spend when it is time for them to move out. You know, there's always something that has to be done between tenants. There's always basic wear and tear. You know, good, solid cleaning and nothing else but a tenant who simply lives up to the basic expectations. That alone is going to cut your maintenance and turn costs down the road dramatically, exponentially I would even say. \n\nLaci: Right. Yeah, it's like a chicken and an egg scenario. If you provide a crappy property, then the folks who are going to be willing to live there, you know, are probably not going to clean it up and make it better. Most times, if you provide a good, clean property that works, then the motivation to keep it that way is high, I imagine. So what I'm hearing, though, is that, you know, in order really for any of these things to happen to let the lawn get overgrown, to have insects or rodents everywhere, carpet destroyed, holes in walls, garbage buildup there's a kind of a lack of oversight, right, the lack of participation on behalf of the owner, of the property manager, because some of those things you can see literally from the road right. Other things you know. If you're in there doing basic maintenance, then you know on a regular basis. Then chances are you're going to notice some of that stuff before it becomes a really big problem. \n\nSo it sounds like kind of just being involved in a basic level of participation is necessary. \n\nChris: Yeah, and throughout the life of a tenant you know the life of police there are various red blacks that come up, whether it's the maintenance guy seeing something when they're in there, whether not to rinse late, whether or not the grass is being mowed, you know, and a good property manager is going to be, I guess, aware, conscious of those, receptive to those red flags, and be willing to practically do something about it before things get out of hand. So that's an excellent point. \n\nLaci: Yeah, just a basic level of involvement and not cutting corners, I think. I mean we're talking about landlord profitability here, right, so we're talking about the we want to be profitable above all, right, it's all. It's nice to talk about these touchy feeling like we want to provide a safe space and we want to, but really the bottom line is, how does it impact, you know, a property's condition, not only their condition, but the landlord's financial stability? How does it impact? How does choosing the wrong tenant kind of negatively impact your bottom line as a landlord? \n\nChris: You're right. We've talked about a lot of upstream things, we've talked a lot about strategic things, but now let's get down to the challenge of those 228 messages in Facebook about the vacant property that Nana's got right. I mean screening, attracting the right tenant to a property and properly screening them. That that is the challenge. You know, as you know almost every market right now, especially if it's an affordable property. You're going to get unundated with applications and the thing that is really tough and where it takes time but it's hard to sort through, is that many of those applications are going to be from people who are in the process of being evicted and have nowhere to go. Some are unemployed, some are just desperate, and there's probably a few of them that are, you know, basically criminals that have never, you know, finished out a lease in their life. That's a little harsh, I guess, but you've got a lot of people in that 228 that aren't acceptable applicants or qualified applicants, and it's your job to cast a wide enough net to capture not only the unqualified but that the qualified are in there as well. And again, if that's not enough, the unqualified are really good at getting your attention, because they're the ones that will tempt you with cash, and it's always cash right. I've got the cash right here, you know, for the first month's rent and security or whatever you're asking for. The problem is, you know that's the only cash you're likely to receive. So thinking about how to pick a good tenant or the right tenant for your property isn't about whether they can pay the rent and for or not. Of course that goes without saying. So there's screening that has to be done, you know, and we'll talk about what our process is. But you know you've got to make sure they're employed, we've got to see pay stubs, et cetera, et cetera. So the goal is, when we get through that process, that you feel confident that the person, or the handful of people that you narrow down to choose from that, every one of those folks, hopefully, will give you the confidence that they're not just going to pay the rent but they're going to again, at the end of that lease, leave it in better condition than when they found it. \n\nAnd let's talk about affordability one more time. You know it is important to choose a tenant that can not only pay the rent but, I daresay, can do so comfortably right. So again it goes back to the neighborhood standard and what market rate rent is. But you know, if you've got a property that everybody else is a thousand bucks and you can afford to rent that for 950, and that tenant is comfortable based on what you know their income and expenses are and so forth, you know that's that's going to help you in the long run. \n\nIt's not a good sign if your tenant is stretched too thin when trying to pay the rent. You know, mathematically, based on our standards, you know which are generally. You know tenants have to show that they make three times the rent amount minimum after taxes. But of course that can be variable based on what other obligations they have. But mathematically, based on our standards, tenants who are comfortable paying the rent are more likely to leave their properties in better shape than when they found it Because, quite frankly, tenants, tenants, know if they're overpaying. They usually know when they sign the lease and they sign the lease because they don't have any choice. But I guarantee you, you know anybody who feels like they're being taken advantage of they're going to resent it. And I can tell you, more often than not the people who resent overpaying for a property take it out on the property. \n\nLaci: Yeah, I think that's another really great point, and I think you know nobody's making a list of all their tenants and saying, and has a checkbox next to them did they leave it in better shape than they found it? Yes, yes, yes, no, yes, yes, yes, no. You know, chances are people aren't running pivot tables on all the different factors that come into play when you're screening a tenant or when they're leaving, or but. So the best way to figure this out, especially for folks who only own one or two properties, maybe, or a handful of properties, is to take it from experts who manage a bunch of properties like you guys. Right, you guys can see the patterns. You can look at a wide variety of properties in a wide variety of areas you know, owned by a wide variety of people and rented by a wide variety of people, and see the patterns about. You know what a good tenant looks like before they sign the lease, while they're in the property and, honestly, you know when they leave. \n\nSo I think it's really, it's really exciting to have this resource in a property management organization like yours, who is sharing this information. So I just think I think that's great, because people just don't have access to it and it's not like you can just Google it. \n\nChris: So what we should probably do. Well, we don't use paper applications anymore, but we can certainly share the paper applications that we've used in the past and get them out on the blog so people could take a look. But all of our applicants at this point apply, you know, via the web or the app on their phone, but you know when we're talking about. So let's assume for the moment that you have a comprehensive application that people can fill out, right? So what is it? What is it that we look for? What is it Do I suggest that you look for? So you know, you've got 228 people that you need to get through in Facebook. So the first thing that you need is to verify that these people make and this is just a basic standard. It could be different for you, sometimes it's different for us, depending on the owner but that they make. The tenant makes at least three times the rent amount, including any pet fees. I would even add in if you're having a pay for water or any additional utilities, it's three times the total rent amount after taxes. And the only way you can verify that is, if you have them, bring you at least 60 days worth of pay stubs. So, first thing, out of the box. We need to see pay stubs and then you can go back and do the math. You know, do they make? If it's $1,000 a month after taxes, are they making $3,000 a month based on the pay stubs? Second thing you need to look at is job history, and you know if you're not using a credit bureau to run credit reports on your applicants. One, I urge you to do so. But two, what is their job history? Right, you know. And if they build out their job history in the application and the numbers look like they pan out, you owe it to yourself to verify employment. You know that they show, because if they're jumping around from job to job every three months, I guarantee you there's a gap between jobs, which means a gap in rent. So what is their job history? Is it stable, you know, or are they unable to hold down the job? What's their eviction history? You know, if there's some, you will find people. \n\nI'm sorry to say this, but it's getting worse and worse. Now the COVID-19 has started to end, you know, people are being evicted for not paying the rent now, more so than they were in the last three years. What is their recent eviction history? You know we're not talking about somebody that was evicted five, six, seven years ago and has had, you know, great land word references ever since. We're talking about people that are either currently in eviction or have been evicted at any time in the last, say, one, two, three years. You know what's their stable, what's their address, history. Just because evictions don't show up on county records, are they showing that they're moving from place to place? That usually indicates that they were able to pay the rent. They had a three-day notice and fortunately for the landlord they left. Unfortunately for the landlord they didn't pay. So ask for landlord references, get phone numbers. Also, I urge you to verify the phone numbers on the internet, because we have situations where people have tried to scam us and the number that they gave us for a past landlord was a family member and then it was all a ruse, right. So that stuff does happen and it happens a lot when people are, you know, under the gun, feeling desperate or whatever. \n\nThe other thing I absolutely suggest everybody do is charge an application fee. You know, an application fee is that first hurdle. That implies I wouldn't even say it implies it makes it explicit that you're serious about the application program If it's free to apply, anybody's going to waste your time. But if there's a charge, then charge it, and our application fee at this point is $65 in all markets, so it should be enough that it covers whatever costs you have, but it also should be enough that it shows you're serious, but not so much that it's going to drive potential great applicants away. And I can tell you, at least in the markets we serve $65 as average, or a little bit less. The other thing that you've got to keep in mind, especially if you're doing this yourself, is you have to be consistent. Whatever your process is, you have to run it for every single person you consider. Otherwise you run the risk of running a foul of fair housing laws and so forth. \n\nLaci: Yeah, do you have to document it? Do you have to document it that it's the same for everybody, or is that? \n\nChris: Well, I would say that if you've got, if you're an accidental landlord with one property or a couple of properties, it's not likely that a HUD enforcement specialist is going to be knocking on your door. But first, if you're going to do something stupid, they will knock on your door. Especially everybody's going to know, especially at the age of Facebook. Many times people do end up being investigated owners with multiple properties because somebody was turned down. And you are absolutely allowed to turn somebody down who isn't qualified to take the property, pay the rent based on financials, but if it turns out that person didn't get the same, you didn't run everybody through the same process. You have to make a determination, right. So you have to have criteria. This is what screens people in, this is what screens people out. \n\nIf you didn't run somebody through the process and you deny them or you short-cut the process, you could run into trouble whether you did anything that was in fact, discriminatory or not. So you know it's a situation where perception equals reality. So, whatever your process is, be consistent with every single applicant, right. If everybody gets a credit report, run. Everybody gets credit report, run. Everybody gets eviction checks Everybody gets eviction checks. And I got to tell you friends and family sign twice. So if you're going to take a chance on running to somebody, you know, some family member, somebody that refers you know, referred to you, you know, hey, this person needs a break. You know, I got to tell you you've got to run them through the process and if you don't think that this is going to be a good fit for you and your property, it's a hard thing but you got to say no. So friends and family sign twice. And I would say friends and family go through the application process twice. How's that? \n\nLaci: Yeah, that's. I mean, it makes sense and just some of the. So our screening process is I run the ads for Nana because Nana doesn't run Facebook ads. The first I don't know. You can rest easy, because I don't have to reply to any of these. In the ad it says call this number. Messages will not be replied to, which is maybe not, you know, great for those people, but so but they have to make the call and if they're serious. \n\nChris: they have to make the call, they have to show that they there's a commitment to this on your terms. \n\nLaci: So I don't think that's the number of sob stories that I get on the Facebook messages is a whole. Nother you know the number of. I just need a break the number and I'm a bleeding heart. So it's good that I'm not the one who's making these decisions. \n\nBut you know, if you don't have some sort of solid criteria, then how do you choose between the single mom who you know needs a place for her and her six kids, or the person who has, you know, a terminal illness in the family and really needs a place because they can no longer afford this place, or so? I think that's a really especially if you're a small, small business with just a couple of properties, but it doesn't mean that you have an obligation to. \n\nChris: You know, destroy yourself financially trying to be nice to somebody who may or may not appreciate it. Right, I know it sounds coarse but this is. It is a business and you know there's many times, you know, people come through the office, you know, and we'll, you know especially, you know we're really fortunate to have some great tenant relations folks and if they don't qualify, we do try to point them in the direction where they can seek some, you know, help or assistance and you know we help existing tenants who hit a tough patch get over the hump with different forms of assistance and obviously, somebody who gets into trouble it's been a great tenant. You know our landlords aren't going to just boot them the first time that they're, you know, a couple of days late on rent. But it is hard and that's why not everybody should be a landlord or not everybody should manage their own properties. There's a couple of next level things that you know. I think what we just ran through checking evictions, stable address, history, landlord references and so forth you know if you're going to use a service and our credit service is built in with our application app that we use with a company we just called FindDigs that runs credit checks and so forth for us. But if you're really going to get to the next level, run a credit check Right, and we don't necessarily use a credit check as the final decision. \n\nIf anything, it's just another data point. You know, a lot of times people may have a bad credit score but everything else plays out just fine and that's the reason why they rent and they don't own Right. But you may find other people when you run a credit report that you know have a ton of collections. You know, maybe there's the bankruptcies we don't worry too much about because most of the people who file bankruptcy I mean there are some serial people who file every seven years, but usually somebody who runs into a bad batch and files bankruptcy are some of the best tenants that you can put into a property, provided everything else is in place there. So run a credit report. We don't. You know we don't set. You know you have to have a 600 or this or that. We don't play it that way. We look at it as another data point and see what else we can learn. \n\nThe other thing you can do is run a criminal background and you can pay for it, or you can go on your local county court site and you could find out if somebody has been evicted or what other criminal backgrounds they have. Right, obviously, it's going to show up if you're paying for a service which you know is paid for by the application fee that the tenant pays you for your costs and your time. But what is their criminal background? You know, if it's, you know something that happened when they were kids, 10, 15 years ago. You know, maybe it doesn't matter, right, if it's something more recent or if it's drug dealing and you know that corresponds with, you know, terrible landlord references or rent history and so forth. \n\nYou know you have to use it. You can't especially if you're well for all of us you can't just say, even from a fair housing standpoint, that somebody did something at X amount of time and that's the sole reason for not selecting them as a tenant. You know it's another data point, but you want to look at it. The other thing that you got to do and this has happened to us recently you've got to make sure that the person you're talking to is the person that they say they are yeah, I'm going to stand on that, yeah, yeah, so we this sounds terrible and thank God it was one of my properties, but we had just started. \n\nyou know we use tenant Turner and it's pretty cool because it asks a lot of qualified questions. You have to jump through who she has to pay an application fee and so forth, and you know we had an application come in for a property that I have in Columbus. Everything looked just absolutely great, hey Stubbs, everything. You know it was too good to be true. It wasn't. It was just super solid, right, and we moved them in to the apartment. We also allowed them to pay their first month's rent and security online through the app. It was a couple thousand dollars. Everything looked great, it was fine. They paid the money. \n\nLike six, seven, eight days later, after they had moved in, the bank reversed the payment to us. So you know we go knocking on the door to see what's going on and the people who were in there clearly weren't the people that we approved. So we got 100%, totally and completely scammed. You know trying to make the application process as friction-free as possible, as good for everybody as possible and again, thank God this was my property and I didn't have to explain that to an owner or pay that out of my pocket. \n\nBut anyway, what it did was, you know, all the technology in the world is great, but we went back to the old school way that, yes, you could apply online, yes, we're going to do all of our due diligence and so forth online, we communicate online, but at the end of the day, they have to come to the office, they have to have a driver's license, they have to have a certified check or a money order for first month and security and that person has to be has to match the name of the driver's license, has to match the face and match the people that we've been working with. So, anyway, that shouldn't air a dirty laundry, but that's one of the things. \n\nLaci: No, that's crazy. I think it proves a good point, though, where, even if it hadn't been your property, then it's you, the property management company, who has taken the responsibility for that, because that can happen to anybody. \n\nYou know, like, especially if you guys have all the checks and balances in place. And it happened, then right, and it's rare, but it could happen to Nana, and if Nana is doing it on her own, then she's the one that yeah and there's nothing you can do about it, right, we have to post a three-day notice and then we have to wait until we can file the eviction. \n\nChris: So they sat in that property 45 days and the sheriff ultimately had to come and set them out. So it was just a catastrophe all around. So do as I say, not as I do, right? \n\nLaci: Well, what you've done. Is there anything else that I'm skipping ahead on anything, Because I do have another question. \n\nChris: Oh no, you go ahead. \n\nLaci: I think that covers the whole criteria for what you need to be looking at Well because what I'm sitting over here thinking is like how complicated this sounds and how terrifying it must be to be an individual and have to do this yourself. So this is like a I think it's I absolutely think it's terrifying. \n\nChris: I mean, when I first bought rental properties, it was back when we had newspapers, right. I put it in the newspaper with my cell phone like an idiot and that phone ring off the hook for weeks. It was a nightmare. And then, you know, we move into Craigslist and that's a whole other set of scams. But I can't imagine what you and Nana are going through right now. \n\nSo here's what we do, right? First of all, we have some standards as to who we work with and so forth. So once we decide to work with an owner, we walk the property, make sure it's ready to rent to our standards, make sure that there's no surprises for us or the owner, because oftentimes the owner might have been told that somebody cleaned up the property and maybe they didn't do a great job. So you know, first of all we make sure that we've got a good property. We also divide everything up that happens in property management. We basically, you know, we divide it up between what are sort of front stage activities and what are backstage activities and, coincidentally, the backstage activities tend to be more involved with working directly with the owners and the front stage activities tend to be involved in working directly with the tenants, right? So quote backstage you know we have tenant who, heather, who runs our Roost Rehab and Maintenance Department. You know she has an office with a maintenance coordinator and we've got somebody that goes out and inspects properties, does estimates for repairs and so forth. Those are backstage. Gretchen essentially works backstage. She's a property management director and she's responsible for everything that happens in all of the offices and everybody in property management reports to you, to her. So that whole backstage thing, the other backstage things are accounting, right. You know, these people are someplace else, they're not disturbed, they take care of the money, they get the owners paid the bills and so forth. Running applications is backstage, right. You need to be focused on running those applications, doing the underwriting, making sure that we follow all the rules consistently every single time. So anything that requires somebody to sit, be still undisturbed and do quality work on behalf of the owners tends to be backstage. \n\nSo what's front stage? Well, front stage is almost all tenant interactions, right? So our property managers, tina and Faisal in Columbus and Springfield, for instance, or Susan and Rena in Florida, they have sort of a bivocative responsibility. They do talk directly to owners and they are the owner's property managers, but they are also out there on stage meeting tenants and supporting the tenant relations staff. \n\nSo we have Marcy, for instance, who's our tenant relations specialist, columbus, and Marcy is just amazing person because she just has a way of talking to tenants and setting them straight and saying things that I don't know how I would ever say them, but she does it appropriately and she gets away with it. \n\nShe just is so good working one-on-one with tenants, helping tenants who have a problem, helping new applicants, and saying, well, this is how it is, this is how it is, and you know she's been a godsend and you know we finally got a place where our front stage activities are what I like to call five-star review worthy. \n\nSo it's critical that you know that we have this front stage interaction with people that take anything that they're able to do online, whether it's an application or renewal or whatever but we bring it into the real world. So, yeah, we use Tenet Turner for marketing properties and getting people into properties and we use Findix for underwriting applicants and so forth, but at the end of the day, it's Brenda who does the actual leasing and it's Marcy and Dana and Springfield that really make the experience real for the tenants, and you know, I know it sounds like that we're going on and on about tenants, but I can tell you there is nothing more important to long-term owner profitability than superior tenant relations and you know, thank God, right now we've got a fantastic team of place that understands that as well. \n\nLaci: Yeah, another important point, you know this is, as property managers, you are the middleman, right, so you know there's. You work for the owners, you work for the tenants, and I love it when you say you're in the shelter business, because that is inclusive of all of that. I guess my next question would be when we're talking about repairs, I think so you've talked about all this front stage, backstages, stuff in the office. What about out there? You know kind of boots on the ground. What's your advice for landlords who are working with tenants to make sure that repairs are addressed and how to like? This seems like the biggest sticking point, right, something's broken. You know you can't come fix it soon enough, or it's not fixed properly or it's an inconvenience to the tenant to fix it, or, even worse, when the owner feels like it's an inconvenience to them to fix it. \n\nSo how? What's your advice on that kind of part of the relationship? \n\nChris: Well, there's really three backstage departments, right. There's the accounting department, which is backstage. There's the leasing and renewal department, which is mostly done backstage, but it does interact today. And there's rehab and maintenance, right, which is really owner-centric because the owners are paying for it, but it's also tenant-centric because we have to maintain a service standard and we have to make sure, as best as we possibly can, that those tenants are taking care of the properties. \n\nSo, you know, when it comes to getting things, if you're out there running a property one or more on your own, you know one of the things that you've got to ask yourself how are you going to proceed with repairs? Are you going to do the repairs yourself, right? If a tenant calls you, you know, and the toilet's blacked up, are you going to be the person that's going to get in the car and go, or are you contracting it out? Or are you big enough to have an employee? Whatever it is, you know, you've got to be prepared to be able to spot at a moment's notice and drop anything else that you're doing in life, right? So what we do at Roost is rehab, and maintenance is huge. So we split the rehab and maintenance up between doing turns, which is rehab and doing day-to-day maintenance. On turns, heather and her team will walk a property, take pictures, do a proposal, go over it with the owner, either price it or go out and get an additional bid or something with our team and get the owner approval. On day-to-day maintenance, we have one person her name is Jade and we use a software product called Property Mail that keeps track of all the tenant requests for repairs and Jade uses Property Mail to assign those to our W2 employees. So we have, I think, seven or eight W2 maintenance employees right now that work for us. So our goal is an emergency to get dealt with within 24 hours. Anything else is dealt with within 72 hours. \n\nRight, if, for whatever reason, the tenant is uncooperative. If they ask for something to be repaired and then you know they either don't meet us there or don't let us in or whatever, then we close that out, because if the tenant doesn't cooperate, there's nothing we can do. If it's something that is potentially a big deal, then we will post a 24-hour notice and we will go in on ourselves to take a look, because we're not going to leave the owner hanging with a potential problem, even if the tenant, for whatever reason, is uncooperative. So you know, maintenance itself is a function that it's a hard thing for individuals to do, unless you know. Being a landlord is your entire job and I guess, in a roundabout way, what we're coming back to is that day-to-day maintenance interaction between you, the owner, and those tenants. That's also key to holding on to tenants for the long term. If you don't respond to the tenant requests, they're less likely to take care of the property. If you do, they're more likely to take care of the property. \n\nLaci: Yeah, I mean, that's one of the. It's really unless being a landlord is your whole life, not even just your whole job right, Because we have back up at all hours of the day and night. \n\nChris: We have owners that do all of those. \n\nLaci: And when you're on, vacation and when you're, you know, with your grandchildren or whatever the case may be, you know. That doesn't preclude these. \n\nChris: But we do have owners that do their own maintenance and they say they're going to do their own maintenance, but it's not too long before they say well, can you do that? \n\nLaci: Right. Well, on top of just the, you know the scheduling, the logistics of it, it's that relationship management part. And I think that's one of the things I love most about Roost is how you so gracefully walk that line between you know you're working for the owners, but you're also, you know, the shelter business, but you're also working with the tenants to give everybody a really positive experience. So talk to me a little bit about, because you don't see that everywhere. So why does Roost, why is that such a big deal to you guys? \n\nChris: Well, I think the first of all we have to be clear, and when you're going, you want to make sure you're clear on this in your own mind, and we do, about talking for a property manager someday. You want to be clear. So the question is, who do we work for? Well, at the end of the day, our contract, our property management agreement, is with the owners, legally, as licensed real estate professionals and the states. We do business. We have an agency relationship with the owner. Our, our owners are our clients. \n\nOkay, first, last end of the story. Our tenants are not our clients, but our tenants are our customers. Now our tenants have a contract with the owners that Roost works with and the lease that that contract is with Roost on behalf of our owners. So any lease that we sign on behalf of our owners, because we're the owner's representative, right, we're still working for the owner, it's the owner that pays us, but the tenant is our customer and there's nothing more important than customer service and there's nothing more important or critical to landlord profitability than maintaining positive, productive and respectful tenant relations. And you know that's not an easy thing these days. And you know Marcy, dana, tina Basil, you know all these folks, walter, out there in the field every single day working with tenants. I mean, they're the reason that we are able to keep good tenants and, of course, you know, keep good owners. But our loyalty, our fiduciary responsibility, our obligation, our contract is with the owners first and foremost. \n\nLaci: Right, yeah, Well, I love how you brought it back around to profitability, because that is what this is all about and it's important. The reason that you guys embrace this kind of commitment to owners and tenants on varying levels is for that profitability. So you know, how do you choose you said, good owners how do you choose which owners to work for? Because your profitability is important here too. Right, as a property management company, everybody has to win, right? We? Want everybody it's not just the owner and the tenant. \n\nChris: that's right, you guys too. \n\nLaci: So how do you pick these good owners, what makes a good owner, and where do you find those? \n\nChris: You know, and it's funny I just had a conversation with one of our largest owners and it's just fantastic to work with and I said you know, we haven't raised our fees in over five years and things have changed and we need to talk about this. So we opened a dialogue and decided on what's appropriate and when we're going to lay a timeline out for it. But what you said is correct If we are not profitable, we can't help anybody. So it has to be when for the owners, when for the tenants and, yes, it has to be a win for us. And I'll be honest with you, we are much more selective about the owners we work with right now than we used to be. You know, our mission, like you said, is to maximize profitability for our owner clients. That's a partnership, that's a collaboration, and that means that we have to set and maintain clear expectations, you know, for what we expect from our owners and, of course, they have to know exactly what they can expect from us, and that, to a huge degree, is spelled out in the property management agreements that we have each owner signed in each market. \n\nBut another key pillar of this strategy is and we just actually created this new document. You and I talked about getting it out on a blog post yesterday, but we are setting and maintaining minimum property standards. So, again, this isn't about where a property is or who the tenant is or how much the rent is. It's about a minimum basic standard that if we're going to market a property as a roost property, then this is how that property is going to be maintained. So we created this brochure that'll be out on a website I think it would be on the website, if I'm not mistaken, definitely in a blog post this week. That's called minimum property standards for owners and managers and what that is. It lays out a standard that our owners can reference, new owners in particular, but it also lays out a standard that we as property managers go back and reference so that we hold ourselves accountable to set a standard and not cut corners. \n\nAnd yes, we have had to part ways with owners that couldn't or wouldn't maintain their properties to basic standards. And these standards they're not anything onerous, it's honestly. We took them directly from what Housing and Urban Development said is what's acceptable for them. So safe electricity, right, the roof can't leak, there can't be holes in the floors or holes in the walls and the plumbing has to work. These aren't things that are luxury amenities. These are minimum standards for health, safety and security, and to expect us to put our name on a property that doesn't meet those minimum standards again is bad for us and it's bad for the rest of our owners. \n\nSo, again, maintaining the quality and safety of the rental units we manage on behalf of our owners impacts their business and ours. If our repusation is enhanced by the properties we manage, and so are the owner's reputations right, I mean, it is a collaboration. If our name is associated with subpar or unmarketable rental units, then that's just. It's not good for us, it's not good for the owners, it's certainly not good for the tenants, and we just can't let that happen. So I don't want to set ourselves out there, that you know we are holier than now, but the only way that we can be successful is if we're working with owners that you see this as a win-win collaboration. \n\nLaci: So that's your minimum property standards. Is your application fee? That's your call. The office Don't reply to this Facebook message. That's your hurdle that owners have to overcome, right? So I? Think that's you know that's not setting the bar too high. I think that, again, minimum standards is not setting the bar too high. In a perfect world Every landlord would follow that, of course, but certainly there are some that we choose not to work with them. Yeah, yeah. Well, we've covered a lot today. \n\nI'm pretty sure my brother did not say, any sort of agreement with my Nana. What did you like? There's no property management agreement there, so I'm gonna have to bring that up at the next family meeting. \n\nChris: Well, you only have a property management meeting, if well, you need a property management agreement with. Nana says you're the functional property manager, right. \n\nLaci: Not me, just my brother and my dad. \n\nChris: All right. Well, you and your brother need a PMA. \n\nLaci: They're actually the maintenance team and the property manager. They really they wear a lot of hats, but but you know, one thing that my family has always done is maintain the neighborhood standard and price reasonably for the neighborhood, and I think that's why they've seen, even without fancy technology or, you know, keeping up with the times, in a lot of cases they've always treated tenants well, They've always maintained those minimum standards, they always price their properties right and I think that's why they've seen so much success and I think that's a testament to why people do this right, why people become landlords and what's possible, even with just kind of the few basic ideas that can keep coming up over and over as we talk. \n\nChris: Those are permanent core values, right? What you described, those are permanent core values. Those never, ever change, right? I don't care what the market does, I don't care what technology does, I don't care what the law says, those things you described, you know, barely priced, well maintained, good tenant relations, that's going to be the same. That's what it's been for the past 50 years. That's what's going to be for the next 50 years. You can count on it. \n\nLaci: It's good to have something to count on At times they are a change in always. \n\nIt's good to have those things to count on and I'm it makes me proud as a you know again, just a the marketer of the group, the family group. It makes me proud to know that you know that I'm doing this for people who, who care and care enough to maintain these values. So I'm sure you guys feel the same way. But let's wrap it up, let's kind of bring it all full circle. What final advice or tips do you have when it comes to choosing the right tenant for your rental property and making that kind of a part of your success as an investor? \n\nChris: Well, we know it's 99% of the battle when it comes to both immediate and long-term profitability. Right, the right tenant's going to keep your rehab and maintenance costs to a minimum. The wrong tenant's going to raise your rehab and maintenance costs. It just happens, right. Choosing somebody who's going to take care of your property saves you money on the back end because you're going to properties care for. They're likely to be fewer things to maintain, repair or replace entirely when your tenants move out. So it saves you money on the back end, saves you money on the front end, and that's what long-term profitability and financial security for our owners is all about. I would also add when it does come time for you to interview property management companies, keep these points in mind. Find out. Do they have standards? \n\nLaci: right. \n\nChris: Or are they just signing everybody up? What is their attitude toward tenants? Are they in the shelter business or are they in the? I got to get a check this month's business? There is a difference. Are they collaborators or are they order takers? Are they going to prescribe solutions or are they just going to report problems? And I think those are key questions. And just like there are successful investors out there and not so successful investors out there, there are successful property managers out there and not so successful property managers out there. So do your due diligence, know who you're partnering with and if you decide to get help, I hope this helps you. If you decide to continue on your own, I hope these tips help you do a better job or focus on better things to ensure your long-term profitability when it comes time to screening a tenant. \n\nLaci: Well, as always. I think this has been just super helpful. I can't see how this would not help the target audience here, these landlords, to be more profitable. The fact that you're sharing all of this, because that's a mindset of abundance. Not every property management company is going to say, well, we use this to screen tenants and this is how we do it. But truly, there's enough success out there for everybody in this podcast as a testament to that. So thanks for letting me be a part of it. \n\nChris: No, it's been great, and if anybody wants to check us out, you can go to wwwmanagedwithroostcom. Thank you, lacey. \n\nLaci: See you next time. \n\nChris:Bye. ","content_html":"In today’s episode Laci LeBlanc and I talk about How To Choose The Right Tenant For Your Rental Property and the strategic, and tactical, steps you can take to ensure that your tenants not only pay the rent on time, but leave the property in as good or better condition than when they moved in.
\n\nWhether you are an accidental landlord or a seasoned investor, I think you will find this episode thought-provoking and enlightening.
\n\n(AI transcript provided as supporting material and may contain errors)
\n\nChris: Chris McAllister, here with the Landlord Profitability Playbook, where it's my job to create and coach business opportunities and strategies that support and add value to the lives of residential real estate investors and their tenants. And I'm here today with my good friend, digital marketing expert and podcast partner, lacey LeBlanc. And today we're going to talk about how to choose the right tenant for your rental property and the strategic and tactical steps that you can take to ensure that your tenants not only pay the rent on time, but leave the property in as good or better condition than it was when they moved in. When it's time for them to move on.
\n\nLaci: This is a big one, chris, the Lord's work that you're doing, the Holy Grail that you're chasing as we speak. In my Facebook inbox right now, there are 228 messages about one of my family's properties that's up for rent. I can't imagine how many phone calls Nana has gotten about it. On top of that, plus, it's the third time this year that this particular property has been vacated and needs to be re-rented. So if you can help landlords choose the right tenant, then you deserve a cape and a spandex suit and the whole nine, and I will buy it for you if you'll promise to wear it. But let's get right into it. So, in your experience, what is rule number one? What do landlords need to understand first and foremost when setting out to find a tenant?
\n\nChris: I think the first thing that people have to keep top of mind, that landlords have to keep top of mind, is that there is a tenant for every property, and that tenant may not be you, and sometimes it's a certain mindset that we investors have to sort of get into to understand that it's okay that a property that you're renting out wouldn't necessarily be someplace that you would want to live.
\n\nOkay. So just because some neighborhoods may not be ideal places where I want to live or you'd want to live, I can tell you that there are tenants out there who will be thrilled to rent your place, especially if it's priced right, it's clean and it's functional. So those things take a paramount to everybody. But those of us who are, I guess, more fortunate than others don't really have to be conscious of that. But if we can provide anytime, we can provide a property that is functional, you know works, etc. If the house is clean, you know, maintained to the neighborhood standard and so forth, then that is a great opportunity that you as a landlord are providing. And just because you wouldn't necessarily live there doesn't mean that somebody else wouldn't be thrilled to have it.
\n\nLaci: And that's a really great point. Somebody else is going to be really proud of that property, proud of that space and finding that person that I think that goes back to them leaving it in better shape than they found it and paying their rent on time because they appreciate it, they're proud of it, they that's their spot right that there's a tenant for every property. I think that's a really great way to think about it. Can you provide us any examples maybe, of some neighborhoods where you have properties and and talk about maybe how you chose that neighborhood, because I feel like it's not where you would prefer to live? Obviously, if you're choosing your own home, you've got this set of criteria, but as an investor, if you're choosing a property, maybe in a neighborhood where you wouldn't live, what is, what's that criteria? How do you choose that?
\n\nChris: You know, as investors we may have a personal lifestyle that we're accustomed to, right, maybe we wouldn't want to quote go down market and price or where we want to live, but by the same token, you could argue that we may not be able or maybe not want to afford to go upmarket right price either, and at the end of the day, I'm not sure it really matters. Right, you know, a good investment is a good investment regardless of the size of the investment or the target tenant. What counts is the return that you receive on that investment right. We have owners and I have properties you know that are, quote lower end properties that you know rent for you know, as little as five, six, $700 a month. And I have other properties that rent for 2000 plus a month.
\n\nYou know, I feel like they're all good investments based on the rate of return I get. But obviously the dollar cost to get in to that investment, you know, was lower on some, higher on others. The return as a percentage tends to stay constant, you know, regardless of whether it's a higher end or a lower end property, and there's also times when you know a lower end property may not have a greater return but it's still appreciating right. Just like a higher end property may not have the same return versus another, as long but as long as it's still appreciating, you know, at the end of the life of that property it's all good.
\n\nSo again, does it really matter where we choose to make an investment? I say it doesn't. The trick is that we bought it right, that we manage it right, we maintain it right and so forth, and the key is that when you do make a purchase, or when it's time to reevaluate a purchase, that you get really clear on who is going to rent that property, what's that avatar look like and what does that tenant for that property? What did they expect? So you know, despite any mental blocks or reservations we might have personally about living in one of our properties, tenants are going to be willing to rent that property as long as it's, again, reasonably priced, good condition, working utilities, amenities and so forth.
\n\nLaci: Yeah, where I am, the housing market is just, it's a bear. It's hard for folks, especially folks on a budget, people who are kind of in this lower income. We just don't have a lot of housing available. So we've got tenants out there who are willing to forego good condition and has working utilities and amenities, as long as they got the reasonably priced part. But how does the condition of a property, how it's priced, how it kind of meets the needs, how does that influence the willingness of tenants to rent in a specific area?
\n\nChris: Well, everything comes back. Like we talked about the last couple of episodes. Everything comes back to that concept of the neighborhood standard. Right, if your property meets the neighborhood standard, right, if it's as good, marginally better, but at least as good as every other property you know in the neighborhood, that's going to be more than acceptable. So if it meets that standard it's fairly priced, meets the tenants, basic needs, functional, etc. You know you're going to find somebody and not just someone. If you've hit the neighborhood standard, if it's fairly priced, you're not just going to have one qualified applicant, you're probably going to have more than one qualified applicant to choose from. You know the neighborhood standard.
\n\nI just want to make this clear though right, we're talking about something priced right, and you know my philosophy is if the right price, say the average price or even the medium price of a given neighborhood is, you know, $1,000, you know a month for rent, if you can afford to comfortably rent that house for, say, 900 or 950 and it's the same house and you can afford to just be a little bit under what the average market value is, that is a great tactic to be able to attract more qualified applicants. So we're going to talk more about that in a few minutes. But the other thing I want to make clear about the neighborhood standard is not something that we get to command more rent for. The neighborhood standard is the basis for market rate rent as well as the value of that property in that neighborhood. We've talked about this before, but a common investor mistake when they purchase a property is not to account for the cost of initial repairs or the big ticket items that come up every 5, 10, 15, or 20 years.
\n\nAnd, as successful investor has to have their numbers clear enough that they're able to accumulate reserves out of whatever rent they're collecting After they pay the mortgage, after they pay the taxes, insurance, etc. They have to be able to accumulate reserves over time. So when it comes time to replace the roof since it's a non-event, because just because you replace the roof doesn't mean that $1,000 rental property is suddenly worth $1,100, $1,200 a month. It doesn't matter. The market doesn't care, your tenant doesn't care, the tenant, you can't expect the tenant to overpay for a property just because you didn't set enough money aside to get a roof put on there.
\n\nLaci: So your poor planning is not my emergency situation.
\n\nChris: And that's why we love to help people manage their properties profitably. But we also are pretty darn good at helping and try to help to figure out exactly what the financials are going to look like, going forward and making sure that there's enough room in there to accumulate reserves over time. So when the big ticket items come up whether it's a sewer line, roof, whatever it is, new air conditioner, new heating system that it's a non-event Because, remember, a problem is never a problem if you've got the cash to fix it.
\n\nLaci: And that prevents so many future problems. And I've seen it again my real estate experience is adjacent, right, my family's experience. But if you have to increase the rent to cover the cost of a repair you just made, then how is that going to impact repairs you have to make in the future? That's the start of the snowball, of kind of falling below the neighborhood standard. Not only that is your tenant going to call you when something's wrong, if they think that you're going to raise their rent if you come and fix it right, and so then you get stuck with a tenant who is scared to call and something could be minimally wrong on the outside, but it's really wrong on the inside.
\n\nSo they see a little spot on their ceiling. But what does that really mean? It could really cost you a lot more in the long run. I guess is what I'm trying to say.
\n\nChris: It's an interesting point because I hadn't really thought of that, but I ventured to say that your tenants especially tenants that tend to rent for their lifetimes versus owning I bet you they have a pretty good sense of whether or not their current landlord is financially fit, and what you said is a great example of what financial fitness looks like, right? I mean, if every time you have a legitimate issue, the rent goes up, that's a problem with your owner and that's not a problem with you as a tenant.
\n\nLaci: But yeah, I mean as a recent renter, more recent in my history than other folks. I think that you're right. I think we do know about the financial fitness of our landlords based on the response to when we call. So it's nice to have. I think I've always thought my Nana would benefit from a property manager. Of course it was me calling my brother or my father who was busy with other things and that you know, if it wasn't the house falling apart, then I would be fine. So maybe I don't have the exact same experience, but I do think that it really impacts the overall relationship to which, when you think about things like are they going to refer to you if you have another house? Are they going to say, oh yeah, you know, definitely rent from them, it's a great experience, or, you know, it really can weigh long term, I think, on your reputation as an owner or manager.
\n\nChris: Absolutely, and we've got you know we do. We manage for other people. We don't own the properties that we rent, but many times if it's time for somebody to move to a bigger place or maybe move to a different neighborhood, school district or whatever, they will ask us can I stay with John, for instance, can I stay with so and so you know, because they've enjoyed living there. So there is that referty and sometimes a long term tenant means a long term tenant amongst multiple properties, not just you know one of your properties.
\n\nLaci: Yeah, that's a great point. That's a great point. So what other factors should landlords consider when they're screening tenants? So this is a big part of it, right. Like I said, we've got 228 tenants who are chomping at the bit to get to this one one apartment. So what other factors are there when you're screening tenants to ensure that they will take care of the property? Are there any from your experience? Is there anything specific expectation wise or their criteria that landlords should communicate during that process to kind of let people self select? I guess.
\n\nChris: Yeah, I think you have to have some basic expectations for your tenants as much as you have basic expectations for yourself as a landlord.
\n\nBut you know, once you've got a property that's move in ready, it's clean, it's secure, it's price straight, you're going to have more applications that you can handle maybe 200, right, and you're going to need to screen those tenants to make sure that you're choosing someone who isn't just going to pay the rent, but they're also let me rephrase that you want to rent to somebody that doesn't just have enough cash for the first month's rent security deposit.
\n\nYou want somebody who will have the first month's rent security deposit and be able to pay the rent on time every month and take care of the property. Right, and sometimes I think we get so caught up in the moment, under so much pressure, that it's easy to forget excuse me, what we really what good tenant performance looks like. Now, I absolutely believe and you know I don't think it's magical thinking, but I do believe that if you take care of your tenants and you choose your tenant wisely, that you're more likely to end up in a situation where you're going to save a ton of money down the road because that tenant is going to care for and they're going to respect your property. So you can call it magical thinking if you will, but you know we've got years and years of success of us taking care of tenants and the tenants taking care of us by way of taking care of the property. So those basic expectations, they really do matter.
\n\nLaci: Yeah, I think that's just the general psychology of reciprocity If someone is good to you, you want to be good back to them, and there's no, there's not necessarily a balance sheet for that, but I think you know we can all agree that if somebody's good to you, then you want to be good to them, barring extenuating circumstances. So the other issue that we have is you know when and this doesn't happen with a lot of our properties, so this is new to us and this is coming at a really great time but between tenants, right? So this property I'm talking about has been vacated now twice and will need to be rented for a third time this year. So what are the? What do you do between these tenants? What are the repairs that you need to make? What can you expect? I guess, are there unexpected repairs that could be avoided if you choose the right tenant next time?
\n\nChris: Well, we've always we've all had horror stories, and sometimes horror stories happen when you've done everything right, you know. But you know we've always. We've all heard stories and landlords who you know a tenant moves out and they just discover a massive catastrophe. Right, I will tell you, though, that most of the time, you know, you can see a catastrophe coming just based on whether the rents paid on time and even quick drive buys, you know, by the property right, either by you or your property manager. But let me tell you what won't happen when it comes time to turn a property, you know, if you have a good tenant. So, first of all, a successful tenant is not going to let the lawn be overgrown right, you know we've had turns where the lawn is so overgrown that you know it takes a bush hog and a crew, you know, to get the backyard cleaned up and stuff. So a great tenant isn't going to let the lawn get overgrown. A great tenant isn't going to require insect or rodent treatment, right, you know, provided they moved in and the place was perfectly clean, great tenants aren't going to destroy the carpet, they're not going to put holes in the wall. They're not going to let garbage build up. You know they're not, they're going to pay the water bill, right? You know, water bill goes with the property. You can put it in the tenant's name, but if they don't pay it, it still stays with property and comes back to the landlord.
\n\nYou could argue that successful tenants don't let their kids flush toys down the toilet. Right, there's certain things that a good tenant, a respectful tenant, a tenant who's respectable of the property is not going to do. That or going to directly translate the money that you're not going to have to spend when it is time for them to move out. You know, there's always something that has to be done between tenants. There's always basic wear and tear. You know, good, solid cleaning and nothing else but a tenant who simply lives up to the basic expectations. That alone is going to cut your maintenance and turn costs down the road dramatically, exponentially I would even say.
\n\nLaci: Right. Yeah, it's like a chicken and an egg scenario. If you provide a crappy property, then the folks who are going to be willing to live there, you know, are probably not going to clean it up and make it better. Most times, if you provide a good, clean property that works, then the motivation to keep it that way is high, I imagine. So what I'm hearing, though, is that, you know, in order really for any of these things to happen to let the lawn get overgrown, to have insects or rodents everywhere, carpet destroyed, holes in walls, garbage buildup there's a kind of a lack of oversight, right, the lack of participation on behalf of the owner, of the property manager, because some of those things you can see literally from the road right. Other things you know. If you're in there doing basic maintenance, then you know on a regular basis. Then chances are you're going to notice some of that stuff before it becomes a really big problem.
\n\nSo it sounds like kind of just being involved in a basic level of participation is necessary.
\n\nChris: Yeah, and throughout the life of a tenant you know the life of police there are various red blacks that come up, whether it's the maintenance guy seeing something when they're in there, whether not to rinse late, whether or not the grass is being mowed, you know, and a good property manager is going to be, I guess, aware, conscious of those, receptive to those red flags, and be willing to practically do something about it before things get out of hand. So that's an excellent point.
\n\nLaci: Yeah, just a basic level of involvement and not cutting corners, I think. I mean we're talking about landlord profitability here, right, so we're talking about the we want to be profitable above all, right, it's all. It's nice to talk about these touchy feeling like we want to provide a safe space and we want to, but really the bottom line is, how does it impact, you know, a property's condition, not only their condition, but the landlord's financial stability? How does it impact? How does choosing the wrong tenant kind of negatively impact your bottom line as a landlord?
\n\nChris: You're right. We've talked about a lot of upstream things, we've talked a lot about strategic things, but now let's get down to the challenge of those 228 messages in Facebook about the vacant property that Nana's got right. I mean screening, attracting the right tenant to a property and properly screening them. That that is the challenge. You know, as you know almost every market right now, especially if it's an affordable property. You're going to get unundated with applications and the thing that is really tough and where it takes time but it's hard to sort through, is that many of those applications are going to be from people who are in the process of being evicted and have nowhere to go. Some are unemployed, some are just desperate, and there's probably a few of them that are, you know, basically criminals that have never, you know, finished out a lease in their life. That's a little harsh, I guess, but you've got a lot of people in that 228 that aren't acceptable applicants or qualified applicants, and it's your job to cast a wide enough net to capture not only the unqualified but that the qualified are in there as well. And again, if that's not enough, the unqualified are really good at getting your attention, because they're the ones that will tempt you with cash, and it's always cash right. I've got the cash right here, you know, for the first month's rent and security or whatever you're asking for. The problem is, you know that's the only cash you're likely to receive. So thinking about how to pick a good tenant or the right tenant for your property isn't about whether they can pay the rent and for or not. Of course that goes without saying. So there's screening that has to be done, you know, and we'll talk about what our process is. But you know you've got to make sure they're employed, we've got to see pay stubs, et cetera, et cetera. So the goal is, when we get through that process, that you feel confident that the person, or the handful of people that you narrow down to choose from that, every one of those folks, hopefully, will give you the confidence that they're not just going to pay the rent but they're going to again, at the end of that lease, leave it in better condition than when they found it.
\n\nAnd let's talk about affordability one more time. You know it is important to choose a tenant that can not only pay the rent but, I daresay, can do so comfortably right. So again it goes back to the neighborhood standard and what market rate rent is. But you know, if you've got a property that everybody else is a thousand bucks and you can afford to rent that for 950, and that tenant is comfortable based on what you know their income and expenses are and so forth, you know that's that's going to help you in the long run.
\n\nIt's not a good sign if your tenant is stretched too thin when trying to pay the rent. You know, mathematically, based on our standards, you know which are generally. You know tenants have to show that they make three times the rent amount minimum after taxes. But of course that can be variable based on what other obligations they have. But mathematically, based on our standards, tenants who are comfortable paying the rent are more likely to leave their properties in better shape than when they found it Because, quite frankly, tenants, tenants, know if they're overpaying. They usually know when they sign the lease and they sign the lease because they don't have any choice. But I guarantee you, you know anybody who feels like they're being taken advantage of they're going to resent it. And I can tell you, more often than not the people who resent overpaying for a property take it out on the property.
\n\nLaci: Yeah, I think that's another really great point, and I think you know nobody's making a list of all their tenants and saying, and has a checkbox next to them did they leave it in better shape than they found it? Yes, yes, yes, no, yes, yes, yes, no. You know, chances are people aren't running pivot tables on all the different factors that come into play when you're screening a tenant or when they're leaving, or but. So the best way to figure this out, especially for folks who only own one or two properties, maybe, or a handful of properties, is to take it from experts who manage a bunch of properties like you guys. Right, you guys can see the patterns. You can look at a wide variety of properties in a wide variety of areas you know, owned by a wide variety of people and rented by a wide variety of people, and see the patterns about. You know what a good tenant looks like before they sign the lease, while they're in the property and, honestly, you know when they leave.
\n\nSo I think it's really, it's really exciting to have this resource in a property management organization like yours, who is sharing this information. So I just think I think that's great, because people just don't have access to it and it's not like you can just Google it.
\n\nChris: So what we should probably do. Well, we don't use paper applications anymore, but we can certainly share the paper applications that we've used in the past and get them out on the blog so people could take a look. But all of our applicants at this point apply, you know, via the web or the app on their phone, but you know when we're talking about. So let's assume for the moment that you have a comprehensive application that people can fill out, right? So what is it? What is it that we look for? What is it Do I suggest that you look for? So you know, you've got 228 people that you need to get through in Facebook. So the first thing that you need is to verify that these people make and this is just a basic standard. It could be different for you, sometimes it's different for us, depending on the owner but that they make. The tenant makes at least three times the rent amount, including any pet fees. I would even add in if you're having a pay for water or any additional utilities, it's three times the total rent amount after taxes. And the only way you can verify that is, if you have them, bring you at least 60 days worth of pay stubs. So, first thing, out of the box. We need to see pay stubs and then you can go back and do the math. You know, do they make? If it's $1,000 a month after taxes, are they making $3,000 a month based on the pay stubs? Second thing you need to look at is job history, and you know if you're not using a credit bureau to run credit reports on your applicants. One, I urge you to do so. But two, what is their job history? Right, you know. And if they build out their job history in the application and the numbers look like they pan out, you owe it to yourself to verify employment. You know that they show, because if they're jumping around from job to job every three months, I guarantee you there's a gap between jobs, which means a gap in rent. So what is their job history? Is it stable, you know, or are they unable to hold down the job? What's their eviction history? You know, if there's some, you will find people.
\n\nI'm sorry to say this, but it's getting worse and worse. Now the COVID-19 has started to end, you know, people are being evicted for not paying the rent now, more so than they were in the last three years. What is their recent eviction history? You know we're not talking about somebody that was evicted five, six, seven years ago and has had, you know, great land word references ever since. We're talking about people that are either currently in eviction or have been evicted at any time in the last, say, one, two, three years. You know what's their stable, what's their address, history. Just because evictions don't show up on county records, are they showing that they're moving from place to place? That usually indicates that they were able to pay the rent. They had a three-day notice and fortunately for the landlord they left. Unfortunately for the landlord they didn't pay. So ask for landlord references, get phone numbers. Also, I urge you to verify the phone numbers on the internet, because we have situations where people have tried to scam us and the number that they gave us for a past landlord was a family member and then it was all a ruse, right. So that stuff does happen and it happens a lot when people are, you know, under the gun, feeling desperate or whatever.
\n\nThe other thing I absolutely suggest everybody do is charge an application fee. You know, an application fee is that first hurdle. That implies I wouldn't even say it implies it makes it explicit that you're serious about the application program If it's free to apply, anybody's going to waste your time. But if there's a charge, then charge it, and our application fee at this point is $65 in all markets, so it should be enough that it covers whatever costs you have, but it also should be enough that it shows you're serious, but not so much that it's going to drive potential great applicants away. And I can tell you, at least in the markets we serve $65 as average, or a little bit less. The other thing that you've got to keep in mind, especially if you're doing this yourself, is you have to be consistent. Whatever your process is, you have to run it for every single person you consider. Otherwise you run the risk of running a foul of fair housing laws and so forth.
\n\nLaci: Yeah, do you have to document it? Do you have to document it that it's the same for everybody, or is that?
\n\nChris: Well, I would say that if you've got, if you're an accidental landlord with one property or a couple of properties, it's not likely that a HUD enforcement specialist is going to be knocking on your door. But first, if you're going to do something stupid, they will knock on your door. Especially everybody's going to know, especially at the age of Facebook. Many times people do end up being investigated owners with multiple properties because somebody was turned down. And you are absolutely allowed to turn somebody down who isn't qualified to take the property, pay the rent based on financials, but if it turns out that person didn't get the same, you didn't run everybody through the same process. You have to make a determination, right. So you have to have criteria. This is what screens people in, this is what screens people out.
\n\nIf you didn't run somebody through the process and you deny them or you short-cut the process, you could run into trouble whether you did anything that was in fact, discriminatory or not. So you know it's a situation where perception equals reality. So, whatever your process is, be consistent with every single applicant, right. If everybody gets a credit report, run. Everybody gets credit report, run. Everybody gets eviction checks Everybody gets eviction checks. And I got to tell you friends and family sign twice. So if you're going to take a chance on running to somebody, you know, some family member, somebody that refers you know, referred to you, you know, hey, this person needs a break. You know, I got to tell you you've got to run them through the process and if you don't think that this is going to be a good fit for you and your property, it's a hard thing but you got to say no. So friends and family sign twice. And I would say friends and family go through the application process twice. How's that?
\n\nLaci: Yeah, that's. I mean, it makes sense and just some of the. So our screening process is I run the ads for Nana because Nana doesn't run Facebook ads. The first I don't know. You can rest easy, because I don't have to reply to any of these. In the ad it says call this number. Messages will not be replied to, which is maybe not, you know, great for those people, but so but they have to make the call and if they're serious.
\n\nChris: they have to make the call, they have to show that they there's a commitment to this on your terms.
\n\nLaci: So I don't think that's the number of sob stories that I get on the Facebook messages is a whole. Nother you know the number of. I just need a break the number and I'm a bleeding heart. So it's good that I'm not the one who's making these decisions.
\n\nBut you know, if you don't have some sort of solid criteria, then how do you choose between the single mom who you know needs a place for her and her six kids, or the person who has, you know, a terminal illness in the family and really needs a place because they can no longer afford this place, or so? I think that's a really especially if you're a small, small business with just a couple of properties, but it doesn't mean that you have an obligation to.
\n\nChris: You know, destroy yourself financially trying to be nice to somebody who may or may not appreciate it. Right, I know it sounds coarse but this is. It is a business and you know there's many times, you know, people come through the office, you know, and we'll, you know especially, you know we're really fortunate to have some great tenant relations folks and if they don't qualify, we do try to point them in the direction where they can seek some, you know, help or assistance and you know we help existing tenants who hit a tough patch get over the hump with different forms of assistance and obviously, somebody who gets into trouble it's been a great tenant. You know our landlords aren't going to just boot them the first time that they're, you know, a couple of days late on rent. But it is hard and that's why not everybody should be a landlord or not everybody should manage their own properties. There's a couple of next level things that you know. I think what we just ran through checking evictions, stable address, history, landlord references and so forth you know if you're going to use a service and our credit service is built in with our application app that we use with a company we just called FindDigs that runs credit checks and so forth for us. But if you're really going to get to the next level, run a credit check Right, and we don't necessarily use a credit check as the final decision.
\n\nIf anything, it's just another data point. You know, a lot of times people may have a bad credit score but everything else plays out just fine and that's the reason why they rent and they don't own Right. But you may find other people when you run a credit report that you know have a ton of collections. You know, maybe there's the bankruptcies we don't worry too much about because most of the people who file bankruptcy I mean there are some serial people who file every seven years, but usually somebody who runs into a bad batch and files bankruptcy are some of the best tenants that you can put into a property, provided everything else is in place there. So run a credit report. We don't. You know we don't set. You know you have to have a 600 or this or that. We don't play it that way. We look at it as another data point and see what else we can learn.
\n\nThe other thing you can do is run a criminal background and you can pay for it, or you can go on your local county court site and you could find out if somebody has been evicted or what other criminal backgrounds they have. Right, obviously, it's going to show up if you're paying for a service which you know is paid for by the application fee that the tenant pays you for your costs and your time. But what is their criminal background? You know, if it's, you know something that happened when they were kids, 10, 15 years ago. You know, maybe it doesn't matter, right, if it's something more recent or if it's drug dealing and you know that corresponds with, you know, terrible landlord references or rent history and so forth.
\n\nYou know you have to use it. You can't especially if you're well for all of us you can't just say, even from a fair housing standpoint, that somebody did something at X amount of time and that's the sole reason for not selecting them as a tenant. You know it's another data point, but you want to look at it. The other thing that you got to do and this has happened to us recently you've got to make sure that the person you're talking to is the person that they say they are yeah, I'm going to stand on that, yeah, yeah, so we this sounds terrible and thank God it was one of my properties, but we had just started.
\n\nyou know we use tenant Turner and it's pretty cool because it asks a lot of qualified questions. You have to jump through who she has to pay an application fee and so forth, and you know we had an application come in for a property that I have in Columbus. Everything looked just absolutely great, hey Stubbs, everything. You know it was too good to be true. It wasn't. It was just super solid, right, and we moved them in to the apartment. We also allowed them to pay their first month's rent and security online through the app. It was a couple thousand dollars. Everything looked great, it was fine. They paid the money.
\n\nLike six, seven, eight days later, after they had moved in, the bank reversed the payment to us. So you know we go knocking on the door to see what's going on and the people who were in there clearly weren't the people that we approved. So we got 100%, totally and completely scammed. You know trying to make the application process as friction-free as possible, as good for everybody as possible and again, thank God this was my property and I didn't have to explain that to an owner or pay that out of my pocket.
\n\nBut anyway, what it did was, you know, all the technology in the world is great, but we went back to the old school way that, yes, you could apply online, yes, we're going to do all of our due diligence and so forth online, we communicate online, but at the end of the day, they have to come to the office, they have to have a driver's license, they have to have a certified check or a money order for first month and security and that person has to be has to match the name of the driver's license, has to match the face and match the people that we've been working with. So, anyway, that shouldn't air a dirty laundry, but that's one of the things.
\n\nLaci: No, that's crazy. I think it proves a good point, though, where, even if it hadn't been your property, then it's you, the property management company, who has taken the responsibility for that, because that can happen to anybody.
\n\nYou know, like, especially if you guys have all the checks and balances in place. And it happened, then right, and it's rare, but it could happen to Nana, and if Nana is doing it on her own, then she's the one that yeah and there's nothing you can do about it, right, we have to post a three-day notice and then we have to wait until we can file the eviction.
\n\nChris: So they sat in that property 45 days and the sheriff ultimately had to come and set them out. So it was just a catastrophe all around. So do as I say, not as I do, right?
\n\nLaci: Well, what you've done. Is there anything else that I'm skipping ahead on anything, Because I do have another question.
\n\nChris: Oh no, you go ahead.
\n\nLaci: I think that covers the whole criteria for what you need to be looking at Well because what I'm sitting over here thinking is like how complicated this sounds and how terrifying it must be to be an individual and have to do this yourself. So this is like a I think it's I absolutely think it's terrifying.
\n\nChris: I mean, when I first bought rental properties, it was back when we had newspapers, right. I put it in the newspaper with my cell phone like an idiot and that phone ring off the hook for weeks. It was a nightmare. And then, you know, we move into Craigslist and that's a whole other set of scams. But I can't imagine what you and Nana are going through right now.
\n\nSo here's what we do, right? First of all, we have some standards as to who we work with and so forth. So once we decide to work with an owner, we walk the property, make sure it's ready to rent to our standards, make sure that there's no surprises for us or the owner, because oftentimes the owner might have been told that somebody cleaned up the property and maybe they didn't do a great job. So you know, first of all we make sure that we've got a good property. We also divide everything up that happens in property management. We basically, you know, we divide it up between what are sort of front stage activities and what are backstage activities and, coincidentally, the backstage activities tend to be more involved with working directly with the owners and the front stage activities tend to be involved in working directly with the tenants, right? So quote backstage you know we have tenant who, heather, who runs our Roost Rehab and Maintenance Department. You know she has an office with a maintenance coordinator and we've got somebody that goes out and inspects properties, does estimates for repairs and so forth. Those are backstage. Gretchen essentially works backstage. She's a property management director and she's responsible for everything that happens in all of the offices and everybody in property management reports to you, to her. So that whole backstage thing, the other backstage things are accounting, right. You know, these people are someplace else, they're not disturbed, they take care of the money, they get the owners paid the bills and so forth. Running applications is backstage, right. You need to be focused on running those applications, doing the underwriting, making sure that we follow all the rules consistently every single time. So anything that requires somebody to sit, be still undisturbed and do quality work on behalf of the owners tends to be backstage.
\n\nSo what's front stage? Well, front stage is almost all tenant interactions, right? So our property managers, tina and Faisal in Columbus and Springfield, for instance, or Susan and Rena in Florida, they have sort of a bivocative responsibility. They do talk directly to owners and they are the owner's property managers, but they are also out there on stage meeting tenants and supporting the tenant relations staff.
\n\nSo we have Marcy, for instance, who's our tenant relations specialist, columbus, and Marcy is just amazing person because she just has a way of talking to tenants and setting them straight and saying things that I don't know how I would ever say them, but she does it appropriately and she gets away with it.
\n\nShe just is so good working one-on-one with tenants, helping tenants who have a problem, helping new applicants, and saying, well, this is how it is, this is how it is, and you know she's been a godsend and you know we finally got a place where our front stage activities are what I like to call five-star review worthy.
\n\nSo it's critical that you know that we have this front stage interaction with people that take anything that they're able to do online, whether it's an application or renewal or whatever but we bring it into the real world. So, yeah, we use Tenet Turner for marketing properties and getting people into properties and we use Findix for underwriting applicants and so forth, but at the end of the day, it's Brenda who does the actual leasing and it's Marcy and Dana and Springfield that really make the experience real for the tenants, and you know, I know it sounds like that we're going on and on about tenants, but I can tell you there is nothing more important to long-term owner profitability than superior tenant relations and you know, thank God, right now we've got a fantastic team of place that understands that as well.
\n\nLaci: Yeah, another important point, you know this is, as property managers, you are the middleman, right, so you know there's. You work for the owners, you work for the tenants, and I love it when you say you're in the shelter business, because that is inclusive of all of that. I guess my next question would be when we're talking about repairs, I think so you've talked about all this front stage, backstages, stuff in the office. What about out there? You know kind of boots on the ground. What's your advice for landlords who are working with tenants to make sure that repairs are addressed and how to like? This seems like the biggest sticking point, right, something's broken. You know you can't come fix it soon enough, or it's not fixed properly or it's an inconvenience to the tenant to fix it, or, even worse, when the owner feels like it's an inconvenience to them to fix it.
\n\nSo how? What's your advice on that kind of part of the relationship?
\n\nChris: Well, there's really three backstage departments, right. There's the accounting department, which is backstage. There's the leasing and renewal department, which is mostly done backstage, but it does interact today. And there's rehab and maintenance, right, which is really owner-centric because the owners are paying for it, but it's also tenant-centric because we have to maintain a service standard and we have to make sure, as best as we possibly can, that those tenants are taking care of the properties.
\n\nSo, you know, when it comes to getting things, if you're out there running a property one or more on your own, you know one of the things that you've got to ask yourself how are you going to proceed with repairs? Are you going to do the repairs yourself, right? If a tenant calls you, you know, and the toilet's blacked up, are you going to be the person that's going to get in the car and go, or are you contracting it out? Or are you big enough to have an employee? Whatever it is, you know, you've got to be prepared to be able to spot at a moment's notice and drop anything else that you're doing in life, right? So what we do at Roost is rehab, and maintenance is huge. So we split the rehab and maintenance up between doing turns, which is rehab and doing day-to-day maintenance. On turns, heather and her team will walk a property, take pictures, do a proposal, go over it with the owner, either price it or go out and get an additional bid or something with our team and get the owner approval. On day-to-day maintenance, we have one person her name is Jade and we use a software product called Property Mail that keeps track of all the tenant requests for repairs and Jade uses Property Mail to assign those to our W2 employees. So we have, I think, seven or eight W2 maintenance employees right now that work for us. So our goal is an emergency to get dealt with within 24 hours. Anything else is dealt with within 72 hours.
\n\nRight, if, for whatever reason, the tenant is uncooperative. If they ask for something to be repaired and then you know they either don't meet us there or don't let us in or whatever, then we close that out, because if the tenant doesn't cooperate, there's nothing we can do. If it's something that is potentially a big deal, then we will post a 24-hour notice and we will go in on ourselves to take a look, because we're not going to leave the owner hanging with a potential problem, even if the tenant, for whatever reason, is uncooperative. So you know, maintenance itself is a function that it's a hard thing for individuals to do, unless you know. Being a landlord is your entire job and I guess, in a roundabout way, what we're coming back to is that day-to-day maintenance interaction between you, the owner, and those tenants. That's also key to holding on to tenants for the long term. If you don't respond to the tenant requests, they're less likely to take care of the property. If you do, they're more likely to take care of the property.
\n\nLaci: Yeah, I mean, that's one of the. It's really unless being a landlord is your whole life, not even just your whole job right, Because we have back up at all hours of the day and night.
\n\nChris: We have owners that do all of those.
\n\nLaci: And when you're on, vacation and when you're, you know, with your grandchildren or whatever the case may be, you know. That doesn't preclude these.
\n\nChris: But we do have owners that do their own maintenance and they say they're going to do their own maintenance, but it's not too long before they say well, can you do that?
\n\nLaci: Right. Well, on top of just the, you know the scheduling, the logistics of it, it's that relationship management part. And I think that's one of the things I love most about Roost is how you so gracefully walk that line between you know you're working for the owners, but you're also, you know, the shelter business, but you're also working with the tenants to give everybody a really positive experience. So talk to me a little bit about, because you don't see that everywhere. So why does Roost, why is that such a big deal to you guys?
\n\nChris: Well, I think the first of all we have to be clear, and when you're going, you want to make sure you're clear on this in your own mind, and we do, about talking for a property manager someday. You want to be clear. So the question is, who do we work for? Well, at the end of the day, our contract, our property management agreement, is with the owners, legally, as licensed real estate professionals and the states. We do business. We have an agency relationship with the owner. Our, our owners are our clients.
\n\nOkay, first, last end of the story. Our tenants are not our clients, but our tenants are our customers. Now our tenants have a contract with the owners that Roost works with and the lease that that contract is with Roost on behalf of our owners. So any lease that we sign on behalf of our owners, because we're the owner's representative, right, we're still working for the owner, it's the owner that pays us, but the tenant is our customer and there's nothing more important than customer service and there's nothing more important or critical to landlord profitability than maintaining positive, productive and respectful tenant relations. And you know that's not an easy thing these days. And you know Marcy, dana, tina Basil, you know all these folks, walter, out there in the field every single day working with tenants. I mean, they're the reason that we are able to keep good tenants and, of course, you know, keep good owners. But our loyalty, our fiduciary responsibility, our obligation, our contract is with the owners first and foremost.
\n\nLaci: Right, yeah, Well, I love how you brought it back around to profitability, because that is what this is all about and it's important. The reason that you guys embrace this kind of commitment to owners and tenants on varying levels is for that profitability. So you know, how do you choose you said, good owners how do you choose which owners to work for? Because your profitability is important here too. Right, as a property management company, everybody has to win, right? We? Want everybody it's not just the owner and the tenant.
\n\nChris: that's right, you guys too.
\n\nLaci: So how do you pick these good owners, what makes a good owner, and where do you find those?
\n\nChris: You know, and it's funny I just had a conversation with one of our largest owners and it's just fantastic to work with and I said you know, we haven't raised our fees in over five years and things have changed and we need to talk about this. So we opened a dialogue and decided on what's appropriate and when we're going to lay a timeline out for it. But what you said is correct If we are not profitable, we can't help anybody. So it has to be when for the owners, when for the tenants and, yes, it has to be a win for us. And I'll be honest with you, we are much more selective about the owners we work with right now than we used to be. You know, our mission, like you said, is to maximize profitability for our owner clients. That's a partnership, that's a collaboration, and that means that we have to set and maintain clear expectations, you know, for what we expect from our owners and, of course, they have to know exactly what they can expect from us, and that, to a huge degree, is spelled out in the property management agreements that we have each owner signed in each market.
\n\nBut another key pillar of this strategy is and we just actually created this new document. You and I talked about getting it out on a blog post yesterday, but we are setting and maintaining minimum property standards. So, again, this isn't about where a property is or who the tenant is or how much the rent is. It's about a minimum basic standard that if we're going to market a property as a roost property, then this is how that property is going to be maintained. So we created this brochure that'll be out on a website I think it would be on the website, if I'm not mistaken, definitely in a blog post this week. That's called minimum property standards for owners and managers and what that is. It lays out a standard that our owners can reference, new owners in particular, but it also lays out a standard that we as property managers go back and reference so that we hold ourselves accountable to set a standard and not cut corners.
\n\nAnd yes, we have had to part ways with owners that couldn't or wouldn't maintain their properties to basic standards. And these standards they're not anything onerous, it's honestly. We took them directly from what Housing and Urban Development said is what's acceptable for them. So safe electricity, right, the roof can't leak, there can't be holes in the floors or holes in the walls and the plumbing has to work. These aren't things that are luxury amenities. These are minimum standards for health, safety and security, and to expect us to put our name on a property that doesn't meet those minimum standards again is bad for us and it's bad for the rest of our owners.
\n\nSo, again, maintaining the quality and safety of the rental units we manage on behalf of our owners impacts their business and ours. If our repusation is enhanced by the properties we manage, and so are the owner's reputations right, I mean, it is a collaboration. If our name is associated with subpar or unmarketable rental units, then that's just. It's not good for us, it's not good for the owners, it's certainly not good for the tenants, and we just can't let that happen. So I don't want to set ourselves out there, that you know we are holier than now, but the only way that we can be successful is if we're working with owners that you see this as a win-win collaboration.
\n\nLaci: So that's your minimum property standards. Is your application fee? That's your call. The office Don't reply to this Facebook message. That's your hurdle that owners have to overcome, right? So I? Think that's you know that's not setting the bar too high. I think that, again, minimum standards is not setting the bar too high. In a perfect world Every landlord would follow that, of course, but certainly there are some that we choose not to work with them. Yeah, yeah. Well, we've covered a lot today.
\n\nI'm pretty sure my brother did not say, any sort of agreement with my Nana. What did you like? There's no property management agreement there, so I'm gonna have to bring that up at the next family meeting.
\n\nChris: Well, you only have a property management meeting, if well, you need a property management agreement with. Nana says you're the functional property manager, right.
\n\nLaci: Not me, just my brother and my dad.
\n\nChris: All right. Well, you and your brother need a PMA.
\n\nLaci: They're actually the maintenance team and the property manager. They really they wear a lot of hats, but but you know, one thing that my family has always done is maintain the neighborhood standard and price reasonably for the neighborhood, and I think that's why they've seen, even without fancy technology or, you know, keeping up with the times, in a lot of cases they've always treated tenants well, They've always maintained those minimum standards, they always price their properties right and I think that's why they've seen so much success and I think that's a testament to why people do this right, why people become landlords and what's possible, even with just kind of the few basic ideas that can keep coming up over and over as we talk.
\n\nChris: Those are permanent core values, right? What you described, those are permanent core values. Those never, ever change, right? I don't care what the market does, I don't care what technology does, I don't care what the law says, those things you described, you know, barely priced, well maintained, good tenant relations, that's going to be the same. That's what it's been for the past 50 years. That's what's going to be for the next 50 years. You can count on it.
\n\nLaci: It's good to have something to count on At times they are a change in always.
\n\nIt's good to have those things to count on and I'm it makes me proud as a you know again, just a the marketer of the group, the family group. It makes me proud to know that you know that I'm doing this for people who, who care and care enough to maintain these values. So I'm sure you guys feel the same way. But let's wrap it up, let's kind of bring it all full circle. What final advice or tips do you have when it comes to choosing the right tenant for your rental property and making that kind of a part of your success as an investor?
\n\nChris: Well, we know it's 99% of the battle when it comes to both immediate and long-term profitability. Right, the right tenant's going to keep your rehab and maintenance costs to a minimum. The wrong tenant's going to raise your rehab and maintenance costs. It just happens, right. Choosing somebody who's going to take care of your property saves you money on the back end because you're going to properties care for. They're likely to be fewer things to maintain, repair or replace entirely when your tenants move out. So it saves you money on the back end, saves you money on the front end, and that's what long-term profitability and financial security for our owners is all about. I would also add when it does come time for you to interview property management companies, keep these points in mind. Find out. Do they have standards?
\n\nLaci: right.
\n\nChris: Or are they just signing everybody up? What is their attitude toward tenants? Are they in the shelter business or are they in the? I got to get a check this month's business? There is a difference. Are they collaborators or are they order takers? Are they going to prescribe solutions or are they just going to report problems? And I think those are key questions. And just like there are successful investors out there and not so successful investors out there, there are successful property managers out there and not so successful property managers out there. So do your due diligence, know who you're partnering with and if you decide to get help, I hope this helps you. If you decide to continue on your own, I hope these tips help you do a better job or focus on better things to ensure your long-term profitability when it comes time to screening a tenant.
\n\nLaci: Well, as always. I think this has been just super helpful. I can't see how this would not help the target audience here, these landlords, to be more profitable. The fact that you're sharing all of this, because that's a mindset of abundance. Not every property management company is going to say, well, we use this to screen tenants and this is how we do it. But truly, there's enough success out there for everybody in this podcast as a testament to that. So thanks for letting me be a part of it.
\n\nChris: No, it's been great, and if anybody wants to check us out, you can go to wwwmanagedwithroostcom. Thank you, lacey.
\n\nLaci: See you next time.
\n\nChris:Bye.
","summary":"In today’s episode Laci LeBlanc and I talk about How To Choose The Right Tenant For Your Rental Property and the strategic, and tactical, steps you can take to ensure that your tenants not only pay the rent on time, but leave the property in as good or better condition than when they moved in.\r\n\r\nWhether you are an accidental landlord or a seasoned investor, I think you will find this episode thought-provoking and enlightening.","date_published":"2023-10-18T09:00:00.000-04:00","attachments":[{"url":"https://aphid.fireside.fm/d/1437767933/e6ae97de-6d4b-4344-8b9f-b62c4c887188/693c3ca9-23e2-4cd7-ae8d-5bcf67130ed5.mp3","mime_type":"audio/mpeg","size_in_bytes":41284622,"duration_in_seconds":3337}]},{"id":"72f358c4-aa42-4f59-9912-895c1d86130c","title":"Ep003: Which Amenities To Add (& Avoid) in Your Rental Property","url":"https://www.landlordprofitabilityplaybookpodcast.com/003","content_text":"In today’s episode Laci LeBlanc and I continue our conversation around the neighborhood standard and how this core landlord profitability concept relates to decisions around what amenities to add – or avoid adding – to your properties.\n\nWhether you are considering buying a new rental property or making some capital improvements to an existing property, I think you will find this episode thought provoking and enlightening.\n\n\nSHOW HIGHLIGHTS\n\n\nThe concept of the neighborhood standard is essential in real estate investment. It helps determine which amenities to consider adding to your residential rental properties. It is advised to only add amenities common in the neighborhood you're investing in to ensure a return on investment.\nThe BRRR method (Buy, Rehab, Rent, Refinance, Repeat) is a viable investment approach that involves rehabbing a distressed property, renting it out, and then refinancing it. This allows the investor to recover their initial investment and potentially make a profit.\nWhen considering amenities to add to rental properties, it's important to consider operating costs and how to provide tenants with value for their money. Over-improving beyond the neighborhood standard could lead to higher maintenance costs and may not necessarily yield a higher return.\nTenants in high-income neighborhoods or short-term rentals might have specific expectations from a property, including upscale kitchen appliances, premium flooring, high-end light fixtures, and luxury outdoor living spaces. Investors should consider these when making upgrades.\nPlanning for capital improvements and guarding against overspending is crucial in real estate investment. It's important to balance between providing high-end amenities and managing operating costs.\nTo maintain neighborhood standard, rental properties should offer functional and affordable appliances, flooring, storage solutions, exterior lighting, and more. These elements should be cost-effective and durable.\nInvesting in energy-efficient light fixtures and luxury vinyl flooring can be a wise long-term investment. These upgrades can increase the appeal of the property while reducing maintenance costs in the long run.\nWhen updating properties, investors should prioritize longevity and quality over extravagance. Choosing the right updates and amenities can ensure the property meets the neighborhood standard.\nPartnering with a local property manager who has in-depth knowledge of the local market can be beneficial for investors. They can provide insights into neighborhood trends, tenant preferences, and advise on cost-effective updates and amenities.\nLastly, maintaining a property to the neighborhood standard doesn't have to cost a fortune. With careful planning and strategic investment, landlords can create desirable rental properties that yield profitable returns.\n\n\n\n\nLINKS\n\n Show Notes\n\n Be a guest on the Landlord Profitability Playbook Podcast \n\n Download your FREE copy of The Landlord Profitability Playbook and learn how to automate your property management. \n\n Visit ROOST Property Management and find out more about the ways we can help you create a more profitable portfolio. \n\n\n\n\nTRANSCRIPT\n(AI transcript provided as supporting material and may contain errors)\n\n\nChris McAllister\nChris McAllister, here with the Landlord Profitability Playbook, where it's my job to create and coach business opportunities and strategies that support and end value to the lives of real estate investors. I'm here today with my good friend and podcast partner, Laci LeBlanc. Today we're going to continue our discussion about the concept of the neighborhood standard and how it relates to deciding what amenities you could consider or not consider to add to your residential rental properties. \n\nLaci Leblanc\nYes, this is a good one. This is like every episode of Flip this House, chris, but like with a twist. So you have to come up with your budget and your plan for the house. You have to do all the work, you have to navigate the inevitable problems you find behind the walls. \n\nChris McAllister\nRight. \n\nLaciLeblanc\nAlways my favorite part, but in this case it's a home that you have to market and sell over and over again to renters for years to come. So there's this big consideration that most of these you know really cool Flip this House shows on online or on TV don't consider. So it's, these decisions have a lot more weight in some cases. So very exciting. \n\nChris McAllister\nYeah, you know, if you're crunching the numbers and you're trying to figure out how much to pay for an investment property, if you're considering a new purchase, you have to consider how much money you're going to need to put in on top of the purchase price for any necessary upgrades or amenities, and that's a different calculation than just budgeting. \n\nYou know a certain amount of reserves for ongoing repairs. You know, like we discussed in our last episode and the key here is the trick on this to maintain profitability is only add the amenities that are common to the neighborhood that you're going to buy in, and only are. Those are the only amenities that you can expect to get a return on your investment. Right, I mean, if you're talking about putting a jacuzzi tub into a neighborhood where you know everything's a stand up shower, you know that neighborhood is never going to command a premium because you put a jacuzzi tub in. You know, I mean it's a real simplistic example, but it's something you have to keep mindful of that you only want to be adding amenities to properties that are going to get you a return on your investment and you have to let the neighborhood dictate your amenity budget. \n\nLaci Leblanc\nYeah, that makes total sense. And this is a tough one, right, because for a lot of folks who are in the financial position to own investment properties, right, we don't necessarily live in the neighborhood that we own those properties in, and so it can be kind of battle of the wills you want to put stuff in that you think would be great, that you know you would like to have, but the neighborhood standard just doesn't always command it or allow for it. \n\nChris McAllister\nExactly If you have a property in a neighborhood that rents, you know, for 2000 a month or 3000 a month. That's a whole different environment, A whole different set of considerations than if you have a property in a neighborhood where the rents are close for two, you know, seven, eight, $900 a month. \n\nLaci Leblanc\nYeah, I mean assuming you want to make money and that's why you're doing it. \n\nChris McAllister\nYeah, if you want to make money, that's true. \n\nLaci Leblanc\nIf you don't want to make any money, there's a whole different conversation. That's another podcast. \n\nChris McAllister\nSo one of the things that you know, one of the strategies for you know what your personal investment strategy might be. There's this concept out there in the world called BRRR, and it's BRRR I think it's for Rs and what it stands for is buy for the B, rehab, rent, refinance and repeat. And the BRRR method it's an investment approach that involves rehabbing a distress property. Obviously, the trick is finding a distress property at the right price. But you rehab it, you rent it out and then you go to the bank and you get a cash out refinance on it and that money allows you to go buy your next property. \n\nSo the trick on any BRRR is that first of all, you've got to buy it at such a price. So say, you find this house for you know a hundred grand or whatever, and you've got to put 50 in it to bring it up to the neighborhood standard. And the trick on this is that it would be I would appraise, let's say, for 200, right. So you buy it for 100, you fix it up for 50, and it appraises for 200. And let's say that you get a 75% loan to value and you get to borrow 75% of 200,000 from your bank. That would give you $150,000 back from the bank using the BRRR method to get your money back for the purchase and the rehab and you could take that money and go on to the next property. But, of course, if you're not making good decisions as far as how far you're going to take that rehab, if you're not making the right financial decisions as to how much you're going to put into the rehab, of course, then that could jeopardize that BRRR opportunity. \n\nLaci Leblanc\nYeah, that reminds me of the video we just recorded, which was about your investment strategy, your real estate investment strategy, and how important it is to have one. But this is a great example, I think, of a strategy to make money doing this and be very intentional about it. Do you have an example of this kind of like a real life story for us to kind of illustrate these points? \n\nChris McAllister\nYeah, I've been working with one of our owners in Columbus the past few days and he has a five unit. It's five connected townhouses close to the inner city in Columbus and I think four of them are two bedrooms and one is a three bedrooms and it's a C or D neighborhood. I guess people would refer to it as I mean, it's got some opportunities in the neighborhood. Let's just say that. So he bought the house Let me get sure I get my numbers straight but I think he bought the house for $180,000 or the property Five units for $180,000. And he put a little over $100,000. In the house. So he had to reduce some kitchens and appliances and bathrooms and electric. I mean he did a lot of work, you know, fix up the parking area, things like that. \n\nWe've been working with him on managing that property since he bought it and I guess it was 2020. And we finally got it to the point where you know it's stable, fully rented, everything's fixed and so on. So what he's thinking of doing is cashing out that property. So let me back up. So he's got 180, he bought it for right, he put $100,000 in it and if we were to put it on the market today. \n\nI'm pretty confident, based on the comparables and on the financials, that property will command roughly $450,000, right, it'll sell for that, but it would also appraise for that. So the cool thing is, and from a Burr perspective is if you take that $450,000, let me just check by math one more time but if you have $450,000, and let's say your bank is willing to give you 75% of that as a cash out refinance, he's going to get $337,500 in his pocket. I mean there's closing costs and things like that. But if you take that $337,500 and you subtract out the $280 he put in it, you know he's not only going to get his money back, he's going to walk away with over $50,000 that he can put towards his next property. So that has a beautiful you know Burr example. So what does that make sense? Does that really? \n\nLaci Leblanc\nillustrate the point perfectly and I love the thinking, which is you could cash out that property. Right, you could sell it for $450,000. But you know, depending on your investment strategy, you could also take that cash out, refinance and, like you said, you've got your money back and then you've got extra to put towards that next property. \n\nChris McAllister\nAbsolutely. And the cool thing was in this case, you know, again, it's a lower in property. So you know, these units don't have air conditioning, there's no dishwashers or anything like that. I mean they are basic, functional, safe, livable units. So when he redid the kitchens he did them to the neighborhood standard. He didn't install new appliances but obviously they were, you know, super builder basic appliances. \n\nAnd the other cool thing about this property is, you know, when you don't have air conditioning and things like dishwashers or garbage disposals, the ongoing maintenance costs every month tend to be less too. So again, that's the critical point of not adding amenities above them, beyond the neighborhood standard, because it's going to cost you money down the line as well to maintain those right. But he is giving these tenants in this price range exactly what they're paying for. He's offering fantastic value in the neighborhood and he's being compensated adequately. Right, he's making his numbers, and perfectly appropriately. You know he's not gouging any, he's not overcharging anybody, he doesn't have excessive tenant turn because he's asking too much rent. You know it's pretty much textbook. And he didn't try to, you know, over improve, did what he had to do with plumbing, he changed out fixtures, he had to do fixed water heaters and so forth, and he did a great job and he is really he's sitting pretty. I'm so happy for him that this worked out for him. Just a textbook. \n\nLaci Leblanc\nYeah, I think this is something that my family, who's been in real estate for you know, since before I was born, has always done really well and I've lived in some of their properties as before I bought my own home and they've always been safe and secure and clean and maintained, but they've never been too nice for the neighborhood. \n\nI might would don't like hopefully Nana's not listening, but I might even call some of them a little outdated but they rent fast, people stay for a long time for the most part, and they get the same rent as other properties in the area and I think that was just part of their strategy. So the neighborhood standard to me is this it's like a if you're listening to this right as an investor, this is the golden rule. \n\nIt comes into play when you're buying, when you're selling, when you're rehabbing, when you're maintenance, like all of it. So what it talks to me about, like the neighborhood standard and amenities and where how you can kind of frame your, your upgrades or your renovations or just your maintenance in general by the name neighborhood standard and what that means. \n\nChris McAllister\nYeah, well, you know, like we said, you know, many times, down there with standard comes into play almost every element of rehabbing and maintaining and especially amenities. You know, when I first started, I think I bought my first rental property. I guess it's 22 years ago now. You know, I tried to do that I wanted to do and I tried to make decisions based on what I thought other people would appreciate, based on what I would appreciate as a tenant. And you know that's just the wrong way to think about it, right? I'm not building this rental property for me, I'm building it for, you know, my perspective tenant and I was I didn't even think about, you know, tried to, I didn't even try to put myself in the shoes of a prospective tenant and what's important to them and what they expect. I completely disregarded that and it was sadly all about me. And you know I fell into the trap of wanting to buy, you know, appealing amenities and you know some were just stupid, right, you know please give me an example. \n\nLaci Leblanc\nI can't hear that. \n\nChris McAllister\nMany blinds, many blinds in a low end property. We're talking to an owner we have in Springfield, dennis, yesterday, and he says you know, many blinds have gone from $10 to $36. Do I have to put it in many blinds? No, you don't. And the thing is, if you've got 10 windows, it's $360 every time you lose a tenant. Maybe you don't add many blinds right Now. There was another argument at one point where we said okay, let's maybe put many blinds in the first floor so that, if you know, people who maybe want to steal something from the house or damage the house are less likely to do so if they can't see what's in there. So you put many blinds. But you know, but even many blinds, it sounds like a small number, but then you get the habit of every time there's a turn, you know you're replacing these cheap many blinds and that adds up over time. \n\nLaci Leblanc\nYeah, you've got a five unit property and they each have, you know, fiber, fiber, 10 windows and you're replacing it every time. I've never thought about that, but I will say what I have seen on many occasions is you drive by a home and the many blinds are, you know, crumpled by the door where they, like, have been thin to look out or like a child or a pet has gotten the hold of them or yeah. \n\nChris McAllister\nSo there's many times you know maybe it's better off not to even have them, right? So but that, especially depending on the rent you're commanding in your neighborhood, you know maybe it doesn't even make sense to have many blinds in there, but I ended up spending. You know whether it was paint, the type of paint I bought. You know it's cheaper to put two coats of. You know Lowe's basic, you know than it is Benjamin Moore, of course you know and nobody cares. You know. \n\nYou know the types of cabinet. I chose it just. There's just no payoff right and the you know. So we finally learned our lesson that you know if you go to the back wall of Lowe's, they have cabinets. You know basic cabinets that you can buy off the shelf and you make the kitchen fit the size of the cabinets that are available and on the rack and cheap, right, there's no reason to try to build the kitchen and, you know, make it 2% more functional, but you have to end up doing a special order on a cabinet. There's a zillion examples of stupid things that I did and I just hate for people to make those. \n\nLaci Leblanc\nThat's a whole other podcast. \n\nChris McAllister\nYeah, that's the stupid mistakes podcast. But you know, there's just things. I never recouped that investment. You know I lost it and it took me a long time, but I finally learned the lesson. \n\nLaci Leblanc\nWell, I'm glad that you've learned the lesson and that you're willing to share that with all of these wonderful people who are listening, because that's really this is kind of Chris's mess up podcast notes in a way. \n\nYou do include a lot of the things that you've done wrong, so that other people don't have to make those same mistakes, which you know. I think last time we talked about this being a very noble profession and that's a very noble activity to share all this stuff. But let's talk about some specifics. Let's talk about you know when you're trying to decide, you know you got it again. \n\nChris McAllister\nLike I said, you got to think about what a prospective tenant wants, needs, expects. You know, and also to a huge degree again, this goes back to the neighborhood what are competing properties offered? And you don't want to go above that. You don't want to go below that and the true message on this is you got to rely on facts and you can't rely on your personal emotions or magical thinking. You know it's like you said, you're not going to, you know, be living in that rental property that you own, right? You're not the person that's going to move into that property. \n\nSo it's critical to think about, you know, and get yourself okay with the fact that what might not be acceptable for you and your family is perfectly acceptable and, in some degrees, aspirational for you know, your target tenant or your target applicant. \n\nYou know, if you have a property in the higher end though think about this for a minute, because I always tend to adhere to the lower end, because that's where, you know, people tend to gravitate, because the purchase prices are lower or investors tend to gravitate but you know, if you go to a higher end neighborhood, you know that two, three, four thousand dollar rate, you have to be competitive, right, you have to not just meet, but it may make more sense to go above and beyond, you know, to command rent, especially if you're in a place where rents are going up. \n\nSo that's the one place where I think it's critical that you do keep up with the Joneses, right, you know it's a different, it's a different investment. The other place where you know some fancy wow factor amenities can really pay off is if you're investing in short-term rental properties, like in vacation destinations. Or, you know, here in Columbus there's a lot of short-term rentals around the Ohio State University that get booked up years in advance, you know, during Ohio State football season. And any wow items that you can add and feature in your Airbnb page there, those will pay for themselves. So you know there are investment strategies that do require you to think about well, this is what I want in a property, and in that case, you know, you probably should go with your gut. But when you're going the other direction and you're providing, say, basic, adequate housing at a fair price, you just want to guard against that sort of inclination. \n\nLaci Leblanc\nRight, yeah, I think that's a good point, because I too, because again, that's where my family's investments are I think about I mean, you know, lower end. I think you called them C and D neighborhoods earlier, you know, and I've lived in some of those neighborhoods because I lived in some of these properties, so there's no judgment there, but there are folks who really gravitate towards the kind of this style of rehabbing or and I think it's important to think about that when you're building that overall investment strategy. But yeah, so what are some examples of the amenities that tenants in high income neighborhoods or some of these Airbnbs might expect out of a property? \n\nChris McAllister\nI think you want to go with upscale kitchen appliances. You know this is where you need your fancy designer collars or your stainless steel. You want to upgrade the cabinets. You want to have them have that luxury feel. You know that they close themselves you know, everybody loves the soft clothes. \n\nLaci Leblanc\nYou're looking at granite countertops. \n\nChris McAllister\nYou're looking at premium flooring. You know big spa like bathrooms, high end light fixtures, and these are furnished. So you know, obviously you want to have quality furniture but by the same token, you also want furniture that is going to hold up and it's going to be easy to clean, especially in a short term round where you've got, you know, people passing through there. Everything is a single week and it could be very hard on the furniture. But the other place where people really are really looking for these days is I've even used a term luxury outdoor living, right decks and entertainment spaces and, you know, down in Florida, pools and hot tubs and so forth. I mean, those are the things that people are looking for when they go on vacation. So you know, I have investments on the lower end and you know we have a couple of houses in Florida that we ran out and in Airbnb and, yeah, you got to put a different hat on when you're thinking about improving different properties. \n\nLaci Leblanc\nYeah, I mean, I know that's what my family always looks for. Is that spaces? You know, we even scrunch in on the inside, honestly, if it's got a really dreamy which. We live near the mountains in North Carolina, so we spend a lot of time up there and we can squeeze everybody into maybe not quite enough bedrooms, as long as there is a place outside to the weather and the views, and so, yeah, I think that's definitely real life there. \n\nAnother area, though, where I think it might be smart to really consider your investment level is the capital improvements, right? So I don't think you want to. I mean, definitely there's a neighbor. What is the? How does the neighborhood standard apply to capital improvements, to your space like your? You know, your big major renault? \n\nChris McAllister\nImprovement is a significant improvement to your property that you end up taking a tax deduction for depreciation over time. It's these are big things. They're not routine things. These are your. You know your initial major rehabs, like on the five unit I was just talking about these are when these are the things that you're setting aside 20% of your rent every the cover eventually, right Like these are those expenses. \n\nYeah, you've got to have reserves, not just for maintenance, but you have to have reserves for future capital improvements. You know, every 20 years, or even shorter in Florida, you've got to replace a roof. You know windows have to be replaced. You know, from time to time, I mean, windows last quite a while, but when you're fortunate enough to buy a lower priced property, the windows tend not to have been replaced. So to replace windows is a capital improvement. \n\nLaci Leblanc\nYeah, we just had a guy come by and quote us for windows and siding and doors and I bought my house for my family and I got a great buy on it. I was just bought at a time when, you know, the market wasn't super inflated and I got a great rate on my mortgage. So, all in all, this guy came out and quoted us. This is a perfect example of a neighborhood standard not being addressed. And his quote for siding, windows and doors on my like 1200 square foot home was about $5,000 less than I paid for the home itself. So he clearly did not have a neighborhood standard in mind. \n\nChris McAllister\nWell, you know it's like you can pay for Pella windows. But you know, unless you're in a house where people are looking for Pella windows, there's really no point. You know you can get great windows in a lot of different places for, you know, a super fair price. But again, capital expense, it's something that and again you have to talk to your tax accountant about this but that you really shouldn't be in. You aren't really allowed to expense immediately against the property and take it off your taxes. You know, basically it's over 27 years or whatever the number is, that you get to divide that capital expense by and take a portion of it every year and through the life of the property. But at some point I'll take another thing and you know, honestly, I don't know if we were, if we were able to expense this or not. \n\nBut you know, I have a lot of older properties in Springfield, ohio, and we had a rash a couple of years ago. I had three, at least three houses where the sewer lines or the water lines went bad and went bad, went bad, bad. You know we had to dig up the yard and everything. It was five, six thousand a pop. And you know, sadly, those things you don't get to expense out immediately or at least I wasn't advised to do that and they have to be, you know, depreciated out over time. But at some point making capital improvements it's going to be unavoidable, whether you make it at the time that you buy the property or some point during the life cycle of the investment. So you've got to get, you've got to get comfortable and build your budget conservatively so that you know when that rainy day comes and they always do come eventually that you're ready for it and you know thinking about improvements. And I guess I'm just going to rant for a second and feel that I'm listening. \n\nYou know I am all about landlord profitability. There's just no point in messing around with this if you're not going to be profitable. But so many landlords put off capital investments or just refuse to do them. And again, this is my personal rant. But there is no room in this business, you know, for cutting quarters, hiding defects, trying to rent properties in poor condition and get neighborhood standard price or in some cases, you know these people are trying to get even more than that for a property that they haven't done a thing to. \n\nAnd you know that is the definition of a slum board, that you know that term gets thrown around and I hate the term, but I have to say I know where it comes from. \n\nYou know, if you haven't set yourself up or you just flat out refuse, you know that you're going to make any improvements to a property to make it safe and so forth or the neighborhood standard, then you are a slum board and we don't manage for slum boards. \n\nYou know all of our properties are maintained and managed to the neighborhood standard and if we have an owner who's not willing to do that or not able to do that, you know we have to part ways and our property management agreements. They all say that either one of us whether it's us, we, the property managers, or they, the owners can terminate the relationship by giving one another a 30-day notice. And there have been many times where, whether we took on an owner that we shouldn't have which you know, another one of Chris's mistakes or we had an owner that we thought was, you know, going to do the right thing and it turned out they didn't and we've had to, you know, let them go. But our company values, you know, dictate that our properties and the properties we manage more, that they're clean, they're moving ready, they're functional, the lights work, the furnaces, the electric safe, and you know, at the end of the day, that's what tenants deserve. And sometimes there are capital expenses involved in getting to that. \n\nLaci Leblanc\nYeah, I think that you've always said you're in the shelter business, right. So that's part of it is, you're in business not just with the owners but with the tenants. So I think that's really that's a standard that I'm proud of for Roost and I know you're really proud of it too. But you know there are some advantages to this kind of neighborhood standard and set, and that's one of those, I think, is that it gives you kind of a checklist right. You don't have to think so much about what you're doing to these properties because you're doing the same thing to each one. \n\nI know in a past conversation, which I'm sure you'll talk about, this is you now have a paint and a carpet and a type of cabinet that you go to readily when it's time to rehab a property you know within a certain neighborhood standard. So if you're in, you know B neighborhoods, then these. If you're in a C neighborhood or an A neighborhood, it's these, and so you know I love that. It's like a checklist. What's the checklist for these kind of amenities for rental properties in kind of low to mid income areas? \n\nChris McAllister\nWell, here's some things to consider, and not all of these are going to be appropriate, but I think almost all of them are. But you know, if you're going to offer appliances, they have to be functional and affordable. We have owners that are continuously looking for deals at used appliance stores, for instance. I have never, ever, and I used to try to do that too, and every time I would buy a used appliance. You know it was cheaper than going to Lowe's, but you know, it only lasted six months. Right, you know, I found that if I do have a property where I'm going to offer appliances, then I put new ones right, yeah, like a new white appliance better than a used stainless steel appliance. \n\nLaci Leblanc\nThat's a general rule, right it's? \n\nChris McAllister\nnot going to have ice makers and you know it's just going to be a basic. You know refrigerator box, but you know functional and affordable appliances. Laminate or vinyl flooring. You know some storage solutions. You know closets with shelves in them. Exterior lighting too, from a safety standpoint, is critical. And if there's common areas, if we're talking about an apartment building or a multi unit, you know maintaining the common areas and the parking areas. You know some of the basic stuff. You know many houses. You know old toilets. Replace the toilets. You know at a minimum. You know replace the seat. You know it's funny, a lot of these old houses they have tiny toilets relative to what you pick up those today for a new toilet. So you know you want to rent the property. Spring for a new toilet. \n\nLaci Leblanc\nThe other thing, that's the Easter egg of the whole podcast. Yeah, spring for a new one In this bar and heard that seed one thing yeah. \n\nChris McAllister\nAnd then you know handicapped accessible. You know bathtub grab bars, for instance. You know that's something that everybody's going to appreciate. You know a mom with small kids. You know an older person, whatever. That's something that is never going to, you know, be destroyed and it's something that is going to enhance the property for a little bit of money. \n\nMany people these days have pets. You know dogs, and if you restrict, you know, all of your properties to people with no pets, you know more power to you. I respect that. But you know, on the other hand, there's an argument for you know making your properties pet friendly. So if there's a partial fence, you know maybe both neighbors, you know, on either side have a fence up and maybe it's in your interest to fence off the backside at your expense and get the whole yard secure. You know installing gates that can be secured if gates are missing. I can't tell you how many houses I see where there's fences but the gates have been torn off years ago. Storm doors, you know, yes, I know storm doors get torn off, but you can also get a quality storm door at any type of storm door and if it's installed correctly it's less likely to be torn off. But you know there's something to be said for being able to open the front door and let some light into a property. \n\nI don't ever expect anybody to put a washer and dryer you know in a property and offer those you know. But at a minimum, if there's any way at all that you can get washer and dryer hookups in your property, in the basement or in someplace else in the house, that's going to help you rent your property for top dollar for years to come. I don't care what neighborhood you're in. Nobody likes to have to pack up and go to the laundry path and that's why apartment complexes that you know tend to have, you know, washer and dryer common areas in them. But washer and dryer hookups, I think that's a great investment. You know a new mailbox and house numbers. You know it's. I won't say it's exactly like a new toilet, but you know if there's something fresh when you walk in. You know I think that goes a long way. \n\nLaci Leblanc\nNow we've moved from flip this house to curb appeal. Yeah, and you know like we talked about windows. \n\nChris McAllister\nYou know, in Ohio vinyl replacement windows are a huge selling point and there's so many people who skip that. But again, Home Depot, lowe's, local sources, you know there's still some places to get affordable windows. Here's another thing, and I think this is something that really helps you rent properties anywhere, but clean the basement. Get the cobwebs out of the rafters in the basement, paint the walls, paint the floor, paint the stairs. Make sure the stairs are set up with railings and you can actually get down to the basement so somebody could use it for storage or whatever. It just goes a long way to show that you know, you care and you took the time to do the entire house. \n\nWhen you do a rehab, this is something that is just one of those little things, but I absolutely believe it matters. You know, when you're doing the basement, clean off and the furnace and the water heater right, make them look like they're, you know, if not brand new, make them look like that they've been maintained and obviously you want to maintain them as the owner. But you know, maybe touch up paints a little bit too far, but you know, I've seen some grungy, corroded, just flat out filthy, dirty water heaters and furnaces that look like they're on their last legs. So if that's what you've got in the basement and the tenant sees that's not going to help you, it's going to hurt you. \n\nLaci Leblanc\nYeah, and scare good folks, I think, away from what otherwise is a good property, because those are the types of you know, accidents. If you think that the water heater is going to go bad just because it looks bad, then that's a huge pain for a renter, even though they don't own the property and they're not going to be responsible necessarily for fixing it or cleaning it up, but it's going to be a real pain in their life for sure. So those things can scare people away, I think. But like this checklist kind of thing, it saves time more than anything, I feel like right. \n\nChris McAllister\nSo, like time, is money your time is worth money, right. \n\nSo, whether you're managing for yourself or you know what we do for others, you basically only have to make those decisions once, so you don't have time to make a decision for every unit. We just want to do what works. So and you know sort of the wrapped up section you know you're going to save a lot of money in the long run by ensuring that whatever updates you make are going to last. So we're focused on longevity and quality, and that's where I learned my lesson in cheap final mini blinds. Right, we're looking to do things that are you know are going to last from tenant to tenant. Sometimes it's tempting to buy more expensive materials and make you know changes that you could bring in money, but they likely won't. But just be cost effective. Go for value, prioritize longevity and quality over extravagance. You know, in a nutshell, don't spring for grant and countertops when basic permicates are going to work. \n\nLaci Leblanc\nYeah, so that's what we have had talked about in a past conversation in one of our sessions was, you know, the saving money when choosing updates and amenities? You just pick what works and then you follow through with that, and that's where we were talking about paint and hard floors versus carpet, right? \n\nChris McAllister\nYeah, so you know, paint every room the same color you know. Just because you have an extra can of paint laying around that's a different color, it's not going to be worth it. Paint every room the same color. It's going to save you time and money down the road on touch ups and maybe you don't have to repaint the whole unit when somebody moves out. Maybe you just have to do a room or, if you're lucky, maybe you don't even have to do the entire room, as long as you're always using the same color paint in the unit over the years and in every unit that you have. Think about affordability, think about durability. Whether you're talking about fixtures, countertops or flooring, you know you want to look for the sharpest look that you can get without overspending. I think they call it LBT luxury vinyl. It's like it looks like hardwood floors, like a plank. \n\nLaci Leblanc\nIt's a man made material. \n\nChris McAllister\nYeah, that is a great long term investment. Yeah, you know it's very durable. You can get it easily in basic colors and I always urge our owners, you know we're trying our best to get away from carpet altogether. And that can be expensive, though, and you know, sometimes you can't do it all at once. But especially if you have a property where you have pets, you know going to the expense and time to refinish hardwood floors that are going to last for years. You know maybe an extra coat of poly from time to time we're putting LBT into, you know, floors, so that you don't have to keep spending money over and over on carpet or shampoo, and carpet is going to save you a ton of money down the road and it's like you know. \n\nJust to reiterate, you know those cabinets on the back wall of Lowe's and Home Depot. Those are the key. You know, buy mass manufactured cabinets and hardware. You know don't buy unique sizes or whatever. You know don't try to buy used cabinets and make them fit. You know, just get the package that works in that kitchen. You know the first time you get the same ones every time, good quality. They're going to last. And the other cool thing is, you know a lot of those back walls, cabinets. You know. If a door breaks off, you can buy a door. If the drawer goes bad, you can buy a drawer. Right, you don't have to replace the entire cabinet. Sometimes you can actually buy parts. And one of the other things too that you know. Other kind of cost effective upgrades you know. Install energy efficient lighting fixtures. You know and here's another trick, and again I don't care which you know what your price range is. You know for the property, but you know how now, lacey, you can go out and buy like bulbs and the colors don't match anymore. \n\nLaci Leblanc\nOh, I do. I so do. It's one of my pet peeves as a human being. I was going to say as a whole owner, but really just as a human. \n\nChris McAllister\nYeah. So you know you want to make sure you buy the same light bulb and the same color you know and put them in every room and get enough wattage that it lights up the room. I was talking to our team at Columbus the other day and we were going over the the rental report that shows how many days a rental property has been up for rent and it hasn't rented yet. And you know we had one that was well over 30 days and I said what is going on with this? Who's seen it? And they said oh, it's just dark, it's just so dark. \n\nLet there be light, and it's just what it is, and literally they get the creeps, you know, and they turn around and leave. So what do you got to do there? So well, maybe that's where you don't want any wall cover or window coverings, right, you want to get light in there. But you know, let's say somebody looks at the property and it's dusk or after dark. You know you go ahead and spring for the light bulbs and make sure they all match, make sure they're bright, you know, maybe put something on a timer. So you know, things come on whatever, but energy efficient lighting fixtures and just from a renting perspective, just make sure that they all match and that they all work. Landscaping right, durable, low maintenance, you're not really looking to. I don't want to say you want to enhance the curb appeal. But you know what? If the neighborhood standard is overgrown and grungy, then don't be that standard, right, you can keep the grass. \n\nThis is the time when it's okay to over achieve a little, you know just doing the right thing and be above the neighborhood standard, and you know this isn't the place to go out and buy bushes or to do this, and that the tenants just are not going to take care of them as you might and it's just going to aggravate you. So durable, low maintenance, but keep the grass cut, keep the foundation you know, weed-wacked and clean. Another thing to think about are programmable thermostats. You know some tenants are going to appreciate that, maybe some of them won't, but you know, at a minimum you can set it up the way you know you want them set up, you know, before you rent the property. But again, try to choose affordable materials that look good but will hold up over the long term. \n\nLaci Leblanc\nYeah, so that's an interesting point about the programmable thermostats and the energy efficient lighting, because people are, things are constantly changing, right, and so there's this neighborhood standard. And then there's where everybody wants to live, like one day or in a it has stainless steel appliances and granite countertops, like I don't think there are many folks out there looking to rent who wouldn't like to have that stuff if it were available. They just maybe don't have the budget for it, so, but things are constantly changing. Like all of our light bulbs are the same because we have Alexa light bulbs, so we can say, alexa, turn on the bedroom lights, which will probably happen now. But how do you know? You know, like, how do you know what, like the neighborhood standard is maybe not quickly changing, but it is constantly changing, I feel like. So how do you know and keep your finger kind of on the pulse of that neighborhood standard? \n\nChris McAllister\nThat's interesting that you say that, because we are seeing, especially in Columbus and Florida, where we are, where the markets are vibrant and the economy is incredible right now, that there's a lot of neighborhoods that are improving right before our eyes. And you're right, you know, as the values of the neighborhood goes up, as the rent rates go up, you know you do have to kind of reassess. You know what is it appropriate to add on to these properties right now. But you know, I think the key is that you need to partner with a local property manager that is involved in sales also. You know, but knows their rental rates, knows what things are selling for, can help you, you know, do your return on investment calculations, figure out your cap rate, things like that. \n\nBut a property manager with local market knowledge can give you insights to. You know neighborhoods, tenant preferences, the whole thing. They can help, advise you and help you. You know, collaborate with you to make decisions on. You know cost-effective updates and you know the amenities that align with your target tenant demographic, whether it's, you know, long term or you know if you're doing a short term furnished Airbnb rentals. But you know a good property manager can help you optimize your budget you know, set your expectations for what's going to happen financially with that properly, appropriately, over time, and also help you recommend where to buy in the first place. So again, like everything else in this business, having somebody who's in entire life's work Israel estate and knowing you know how much things are and what things sell for and what things rent for that's the key. If you can find that person or that property management team, you're going to do much, much better over time, no question. \n\nLaci Leblanc\nAnd yes, I am partial. This is where the Christmas mistakes podcast comes in to play. \n\nChris McAllister\nYeah, I am partial, because that's what we do for a living, but I can't tell you how many. You know people who have bought properties on their own manage them on their own to the point where they can anymore, and then they come to us and we're happy to do it, but they hire us to, you know, put things back together for them. So you know we do that as well. \n\nLaci Leblanc\nYeah, it'd be great if you just didn't have to put anything back together and you just went that way, right? \n\nChris McAllister\non the gate. \n\nLaci Leblanc\nI guess right, Not a sales pitch, just me making an observation. \n\nChris McAllister\nAll right. So I think we hit the high points today, but I guess maybe it's time to sum up a little bit. \n\nLaci Leblanc\nYeah, I think this has been, again, always insightful, but I think this time in particular, we've gone over a lot of really specific information that goes almost like a checklist, like if you took this with you and we'll transcribe it and put it up and then people can use it to literally go down the list and check off and make sure they have a large toilet with a new seat and exterior lighting and all the things. \n\nChris McAllister\nBut you know, I guess in closing, you know, choosing amenities for rental properties, it doesn't have to cost a fortune and it really shouldn't. \n\nYou know, and it's true that some investment properties that you know you'll purchase or maybe you want to purchase, they're going to need maybe some more work than others, you know, for needed upgrades, upgrade dates, maintenance, amenities, repairs. \n\nBut again and I know I sound like a broken record but it's critical you've got to focus on the neighborhood standards. That's going to dictate the level to which you want to improve your property and maintain it to for the rest of the life cycle of that property. You know, even if you think you'd want a nicer dishwasher or a bigger outdoor space, you got to keep in mind that there's a tenant for every rental property and the people who end up renting your property will be thrilled to live there as long as it's clean, everything's in good working order and you're willing to make repairs as needed to ensure as it stays up to the neighborhood standards, which now includes your tenant standards. And then you know a selfish plug you know you've got to have the right team by your side. You know managing your investment property is going to be a lot easier if you're working with a professional on the ground there, your eyes and ears. That's just going to help you sleep better at night and, you know, make more money. That's the trick. So this one was fun. \n\nLaci Leblanc\nYeah, that's how you do it in the shelter business. \n\nChris McAllister\nThat's how you do it in the shelter business. That's right. So all right. Well, thank you very much. We will talk to you next time. Thank you all for listening to the landlord profitability playbook podcast. ","content_html":"In today’s episode Laci LeBlanc and I continue our conversation around the neighborhood standard and how this core landlord profitability concept relates to decisions around what amenities to add – or avoid adding – to your properties.
\n\nWhether you are considering buying a new rental property or making some capital improvements to an existing property, I think you will find this episode thought provoking and enlightening.
\n\n(AI transcript provided as supporting material and may contain errors)
\n\nLaci Leblanc
\nYes, this is a good one. This is like every episode of Flip this House, chris, but like with a twist. So you have to come up with your budget and your plan for the house. You have to do all the work, you have to navigate the inevitable problems you find behind the walls.
Chris McAllister
\nRight.
LaciLeblanc
\nAlways my favorite part, but in this case it's a home that you have to market and sell over and over again to renters for years to come. So there's this big consideration that most of these you know really cool Flip this House shows on online or on TV don't consider. So it's, these decisions have a lot more weight in some cases. So very exciting.
Chris McAllister
\nYeah, you know, if you're crunching the numbers and you're trying to figure out how much to pay for an investment property, if you're considering a new purchase, you have to consider how much money you're going to need to put in on top of the purchase price for any necessary upgrades or amenities, and that's a different calculation than just budgeting.
You know a certain amount of reserves for ongoing repairs. You know, like we discussed in our last episode and the key here is the trick on this to maintain profitability is only add the amenities that are common to the neighborhood that you're going to buy in, and only are. Those are the only amenities that you can expect to get a return on your investment. Right, I mean, if you're talking about putting a jacuzzi tub into a neighborhood where you know everything's a stand up shower, you know that neighborhood is never going to command a premium because you put a jacuzzi tub in. You know, I mean it's a real simplistic example, but it's something you have to keep mindful of that you only want to be adding amenities to properties that are going to get you a return on your investment and you have to let the neighborhood dictate your amenity budget.
\n\nLaci Leblanc
\nYeah, that makes total sense. And this is a tough one, right, because for a lot of folks who are in the financial position to own investment properties, right, we don't necessarily live in the neighborhood that we own those properties in, and so it can be kind of battle of the wills you want to put stuff in that you think would be great, that you know you would like to have, but the neighborhood standard just doesn't always command it or allow for it.
Chris McAllister
\nExactly If you have a property in a neighborhood that rents, you know, for 2000 a month or 3000 a month. That's a whole different environment, A whole different set of considerations than if you have a property in a neighborhood where the rents are close for two, you know, seven, eight, $900 a month.
Laci Leblanc
\nYeah, I mean assuming you want to make money and that's why you're doing it.
Chris McAllister
\nYeah, if you want to make money, that's true.
Laci Leblanc
\nIf you don't want to make any money, there's a whole different conversation. That's another podcast.
Chris McAllister
\nSo one of the things that you know, one of the strategies for you know what your personal investment strategy might be. There's this concept out there in the world called BRRR, and it's BRRR I think it's for Rs and what it stands for is buy for the B, rehab, rent, refinance and repeat. And the BRRR method it's an investment approach that involves rehabbing a distress property. Obviously, the trick is finding a distress property at the right price. But you rehab it, you rent it out and then you go to the bank and you get a cash out refinance on it and that money allows you to go buy your next property.
So the trick on any BRRR is that first of all, you've got to buy it at such a price. So say, you find this house for you know a hundred grand or whatever, and you've got to put 50 in it to bring it up to the neighborhood standard. And the trick on this is that it would be I would appraise, let's say, for 200, right. So you buy it for 100, you fix it up for 50, and it appraises for 200. And let's say that you get a 75% loan to value and you get to borrow 75% of 200,000 from your bank. That would give you $150,000 back from the bank using the BRRR method to get your money back for the purchase and the rehab and you could take that money and go on to the next property. But, of course, if you're not making good decisions as far as how far you're going to take that rehab, if you're not making the right financial decisions as to how much you're going to put into the rehab, of course, then that could jeopardize that BRRR opportunity.
\n\nLaci Leblanc
\nYeah, that reminds me of the video we just recorded, which was about your investment strategy, your real estate investment strategy, and how important it is to have one. But this is a great example, I think, of a strategy to make money doing this and be very intentional about it. Do you have an example of this kind of like a real life story for us to kind of illustrate these points?
Chris McAllister
\nYeah, I've been working with one of our owners in Columbus the past few days and he has a five unit. It's five connected townhouses close to the inner city in Columbus and I think four of them are two bedrooms and one is a three bedrooms and it's a C or D neighborhood. I guess people would refer to it as I mean, it's got some opportunities in the neighborhood. Let's just say that. So he bought the house Let me get sure I get my numbers straight but I think he bought the house for $180,000 or the property Five units for $180,000. And he put a little over $100,000. In the house. So he had to reduce some kitchens and appliances and bathrooms and electric. I mean he did a lot of work, you know, fix up the parking area, things like that.
We've been working with him on managing that property since he bought it and I guess it was 2020. And we finally got it to the point where you know it's stable, fully rented, everything's fixed and so on. So what he's thinking of doing is cashing out that property. So let me back up. So he's got 180, he bought it for right, he put $100,000 in it and if we were to put it on the market today.
\n\nI'm pretty confident, based on the comparables and on the financials, that property will command roughly $450,000, right, it'll sell for that, but it would also appraise for that. So the cool thing is, and from a Burr perspective is if you take that $450,000, let me just check by math one more time but if you have $450,000, and let's say your bank is willing to give you 75% of that as a cash out refinance, he's going to get $337,500 in his pocket. I mean there's closing costs and things like that. But if you take that $337,500 and you subtract out the $280 he put in it, you know he's not only going to get his money back, he's going to walk away with over $50,000 that he can put towards his next property. So that has a beautiful you know Burr example. So what does that make sense? Does that really?
\n\nLaci Leblanc
\nillustrate the point perfectly and I love the thinking, which is you could cash out that property. Right, you could sell it for $450,000. But you know, depending on your investment strategy, you could also take that cash out, refinance and, like you said, you've got your money back and then you've got extra to put towards that next property.
Chris McAllister
\nAbsolutely. And the cool thing was in this case, you know, again, it's a lower in property. So you know, these units don't have air conditioning, there's no dishwashers or anything like that. I mean they are basic, functional, safe, livable units. So when he redid the kitchens he did them to the neighborhood standard. He didn't install new appliances but obviously they were, you know, super builder basic appliances.
And the other cool thing about this property is, you know, when you don't have air conditioning and things like dishwashers or garbage disposals, the ongoing maintenance costs every month tend to be less too. So again, that's the critical point of not adding amenities above them, beyond the neighborhood standard, because it's going to cost you money down the line as well to maintain those right. But he is giving these tenants in this price range exactly what they're paying for. He's offering fantastic value in the neighborhood and he's being compensated adequately. Right, he's making his numbers, and perfectly appropriately. You know he's not gouging any, he's not overcharging anybody, he doesn't have excessive tenant turn because he's asking too much rent. You know it's pretty much textbook. And he didn't try to, you know, over improve, did what he had to do with plumbing, he changed out fixtures, he had to do fixed water heaters and so forth, and he did a great job and he is really he's sitting pretty. I'm so happy for him that this worked out for him. Just a textbook.
\n\nLaci Leblanc
\nYeah, I think this is something that my family, who's been in real estate for you know, since before I was born, has always done really well and I've lived in some of their properties as before I bought my own home and they've always been safe and secure and clean and maintained, but they've never been too nice for the neighborhood.
I might would don't like hopefully Nana's not listening, but I might even call some of them a little outdated but they rent fast, people stay for a long time for the most part, and they get the same rent as other properties in the area and I think that was just part of their strategy. So the neighborhood standard to me is this it's like a if you're listening to this right as an investor, this is the golden rule.
\n\nIt comes into play when you're buying, when you're selling, when you're rehabbing, when you're maintenance, like all of it. So what it talks to me about, like the neighborhood standard and amenities and where how you can kind of frame your, your upgrades or your renovations or just your maintenance in general by the name neighborhood standard and what that means.
\n\nChris McAllister
\nYeah, well, you know, like we said, you know, many times, down there with standard comes into play almost every element of rehabbing and maintaining and especially amenities. You know, when I first started, I think I bought my first rental property. I guess it's 22 years ago now. You know, I tried to do that I wanted to do and I tried to make decisions based on what I thought other people would appreciate, based on what I would appreciate as a tenant. And you know that's just the wrong way to think about it, right? I'm not building this rental property for me, I'm building it for, you know, my perspective tenant and I was I didn't even think about, you know, tried to, I didn't even try to put myself in the shoes of a prospective tenant and what's important to them and what they expect. I completely disregarded that and it was sadly all about me. And you know I fell into the trap of wanting to buy, you know, appealing amenities and you know some were just stupid, right, you know please give me an example.
Laci Leblanc
\nI can't hear that.
Chris McAllister
\nMany blinds, many blinds in a low end property. We're talking to an owner we have in Springfield, dennis, yesterday, and he says you know, many blinds have gone from $10 to $36. Do I have to put it in many blinds? No, you don't. And the thing is, if you've got 10 windows, it's $360 every time you lose a tenant. Maybe you don't add many blinds right Now. There was another argument at one point where we said okay, let's maybe put many blinds in the first floor so that, if you know, people who maybe want to steal something from the house or damage the house are less likely to do so if they can't see what's in there. So you put many blinds. But you know, but even many blinds, it sounds like a small number, but then you get the habit of every time there's a turn, you know you're replacing these cheap many blinds and that adds up over time.
Laci Leblanc
\nYeah, you've got a five unit property and they each have, you know, fiber, fiber, 10 windows and you're replacing it every time. I've never thought about that, but I will say what I have seen on many occasions is you drive by a home and the many blinds are, you know, crumpled by the door where they, like, have been thin to look out or like a child or a pet has gotten the hold of them or yeah.
Chris McAllister
\nSo there's many times you know maybe it's better off not to even have them, right? So but that, especially depending on the rent you're commanding in your neighborhood, you know maybe it doesn't even make sense to have many blinds in there, but I ended up spending. You know whether it was paint, the type of paint I bought. You know it's cheaper to put two coats of. You know Lowe's basic, you know than it is Benjamin Moore, of course you know and nobody cares. You know.
You know the types of cabinet. I chose it just. There's just no payoff right and the you know. So we finally learned our lesson that you know if you go to the back wall of Lowe's, they have cabinets. You know basic cabinets that you can buy off the shelf and you make the kitchen fit the size of the cabinets that are available and on the rack and cheap, right, there's no reason to try to build the kitchen and, you know, make it 2% more functional, but you have to end up doing a special order on a cabinet. There's a zillion examples of stupid things that I did and I just hate for people to make those.
\n\nLaci Leblanc
\nThat's a whole other podcast.
Chris McAllister
\nYeah, that's the stupid mistakes podcast. But you know, there's just things. I never recouped that investment. You know I lost it and it took me a long time, but I finally learned the lesson.
Laci Leblanc
\nWell, I'm glad that you've learned the lesson and that you're willing to share that with all of these wonderful people who are listening, because that's really this is kind of Chris's mess up podcast notes in a way.
You do include a lot of the things that you've done wrong, so that other people don't have to make those same mistakes, which you know. I think last time we talked about this being a very noble profession and that's a very noble activity to share all this stuff. But let's talk about some specifics. Let's talk about you know when you're trying to decide, you know you got it again.
\n\nChris McAllister
\nLike I said, you got to think about what a prospective tenant wants, needs, expects. You know, and also to a huge degree again, this goes back to the neighborhood what are competing properties offered? And you don't want to go above that. You don't want to go below that and the true message on this is you got to rely on facts and you can't rely on your personal emotions or magical thinking. You know it's like you said, you're not going to, you know, be living in that rental property that you own, right? You're not the person that's going to move into that property.
So it's critical to think about, you know, and get yourself okay with the fact that what might not be acceptable for you and your family is perfectly acceptable and, in some degrees, aspirational for you know, your target tenant or your target applicant.
\n\nYou know, if you have a property in the higher end though think about this for a minute, because I always tend to adhere to the lower end, because that's where, you know, people tend to gravitate, because the purchase prices are lower or investors tend to gravitate but you know, if you go to a higher end neighborhood, you know that two, three, four thousand dollar rate, you have to be competitive, right, you have to not just meet, but it may make more sense to go above and beyond, you know, to command rent, especially if you're in a place where rents are going up.
\n\nSo that's the one place where I think it's critical that you do keep up with the Joneses, right, you know it's a different, it's a different investment. The other place where you know some fancy wow factor amenities can really pay off is if you're investing in short-term rental properties, like in vacation destinations. Or, you know, here in Columbus there's a lot of short-term rentals around the Ohio State University that get booked up years in advance, you know, during Ohio State football season. And any wow items that you can add and feature in your Airbnb page there, those will pay for themselves. So you know there are investment strategies that do require you to think about well, this is what I want in a property, and in that case, you know, you probably should go with your gut. But when you're going the other direction and you're providing, say, basic, adequate housing at a fair price, you just want to guard against that sort of inclination.
\n\nLaci Leblanc
\nRight, yeah, I think that's a good point, because I too, because again, that's where my family's investments are I think about I mean, you know, lower end. I think you called them C and D neighborhoods earlier, you know, and I've lived in some of those neighborhoods because I lived in some of these properties, so there's no judgment there, but there are folks who really gravitate towards the kind of this style of rehabbing or and I think it's important to think about that when you're building that overall investment strategy. But yeah, so what are some examples of the amenities that tenants in high income neighborhoods or some of these Airbnbs might expect out of a property?
Chris McAllister
\nI think you want to go with upscale kitchen appliances. You know this is where you need your fancy designer collars or your stainless steel. You want to upgrade the cabinets. You want to have them have that luxury feel. You know that they close themselves you know, everybody loves the soft clothes.
Laci Leblanc
\nYou're looking at granite countertops.
Chris McAllister
\nYou're looking at premium flooring. You know big spa like bathrooms, high end light fixtures, and these are furnished. So you know, obviously you want to have quality furniture but by the same token, you also want furniture that is going to hold up and it's going to be easy to clean, especially in a short term round where you've got, you know, people passing through there. Everything is a single week and it could be very hard on the furniture. But the other place where people really are really looking for these days is I've even used a term luxury outdoor living, right decks and entertainment spaces and, you know, down in Florida, pools and hot tubs and so forth. I mean, those are the things that people are looking for when they go on vacation. So you know, I have investments on the lower end and you know we have a couple of houses in Florida that we ran out and in Airbnb and, yeah, you got to put a different hat on when you're thinking about improving different properties.
Laci Leblanc
\nYeah, I mean, I know that's what my family always looks for. Is that spaces? You know, we even scrunch in on the inside, honestly, if it's got a really dreamy which. We live near the mountains in North Carolina, so we spend a lot of time up there and we can squeeze everybody into maybe not quite enough bedrooms, as long as there is a place outside to the weather and the views, and so, yeah, I think that's definitely real life there.
Another area, though, where I think it might be smart to really consider your investment level is the capital improvements, right? So I don't think you want to. I mean, definitely there's a neighbor. What is the? How does the neighborhood standard apply to capital improvements, to your space like your? You know, your big major renault?
\n\nChris McAllister
\nImprovement is a significant improvement to your property that you end up taking a tax deduction for depreciation over time. It's these are big things. They're not routine things. These are your. You know your initial major rehabs, like on the five unit I was just talking about these are when these are the things that you're setting aside 20% of your rent every the cover eventually, right Like these are those expenses.
Yeah, you've got to have reserves, not just for maintenance, but you have to have reserves for future capital improvements. You know, every 20 years, or even shorter in Florida, you've got to replace a roof. You know windows have to be replaced. You know, from time to time, I mean, windows last quite a while, but when you're fortunate enough to buy a lower priced property, the windows tend not to have been replaced. So to replace windows is a capital improvement.
\n\nLaci Leblanc
\nYeah, we just had a guy come by and quote us for windows and siding and doors and I bought my house for my family and I got a great buy on it. I was just bought at a time when, you know, the market wasn't super inflated and I got a great rate on my mortgage. So, all in all, this guy came out and quoted us. This is a perfect example of a neighborhood standard not being addressed. And his quote for siding, windows and doors on my like 1200 square foot home was about $5,000 less than I paid for the home itself. So he clearly did not have a neighborhood standard in mind.
Chris McAllister
\nWell, you know it's like you can pay for Pella windows. But you know, unless you're in a house where people are looking for Pella windows, there's really no point. You know you can get great windows in a lot of different places for, you know, a super fair price. But again, capital expense, it's something that and again you have to talk to your tax accountant about this but that you really shouldn't be in. You aren't really allowed to expense immediately against the property and take it off your taxes. You know, basically it's over 27 years or whatever the number is, that you get to divide that capital expense by and take a portion of it every year and through the life of the property. But at some point I'll take another thing and you know, honestly, I don't know if we were, if we were able to expense this or not.
But you know, I have a lot of older properties in Springfield, ohio, and we had a rash a couple of years ago. I had three, at least three houses where the sewer lines or the water lines went bad and went bad, went bad, bad. You know we had to dig up the yard and everything. It was five, six thousand a pop. And you know, sadly, those things you don't get to expense out immediately or at least I wasn't advised to do that and they have to be, you know, depreciated out over time. But at some point making capital improvements it's going to be unavoidable, whether you make it at the time that you buy the property or some point during the life cycle of the investment. So you've got to get, you've got to get comfortable and build your budget conservatively so that you know when that rainy day comes and they always do come eventually that you're ready for it and you know thinking about improvements. And I guess I'm just going to rant for a second and feel that I'm listening.
\n\nYou know I am all about landlord profitability. There's just no point in messing around with this if you're not going to be profitable. But so many landlords put off capital investments or just refuse to do them. And again, this is my personal rant. But there is no room in this business, you know, for cutting quarters, hiding defects, trying to rent properties in poor condition and get neighborhood standard price or in some cases, you know these people are trying to get even more than that for a property that they haven't done a thing to.
\n\nAnd you know that is the definition of a slum board, that you know that term gets thrown around and I hate the term, but I have to say I know where it comes from.
\n\nYou know, if you haven't set yourself up or you just flat out refuse, you know that you're going to make any improvements to a property to make it safe and so forth or the neighborhood standard, then you are a slum board and we don't manage for slum boards.
\n\nYou know all of our properties are maintained and managed to the neighborhood standard and if we have an owner who's not willing to do that or not able to do that, you know we have to part ways and our property management agreements. They all say that either one of us whether it's us, we, the property managers, or they, the owners can terminate the relationship by giving one another a 30-day notice. And there have been many times where, whether we took on an owner that we shouldn't have which you know, another one of Chris's mistakes or we had an owner that we thought was, you know, going to do the right thing and it turned out they didn't and we've had to, you know, let them go. But our company values, you know, dictate that our properties and the properties we manage more, that they're clean, they're moving ready, they're functional, the lights work, the furnaces, the electric safe, and you know, at the end of the day, that's what tenants deserve. And sometimes there are capital expenses involved in getting to that.
\n\nLaci Leblanc
\nYeah, I think that you've always said you're in the shelter business, right. So that's part of it is, you're in business not just with the owners but with the tenants. So I think that's really that's a standard that I'm proud of for Roost and I know you're really proud of it too. But you know there are some advantages to this kind of neighborhood standard and set, and that's one of those, I think, is that it gives you kind of a checklist right. You don't have to think so much about what you're doing to these properties because you're doing the same thing to each one.
I know in a past conversation, which I'm sure you'll talk about, this is you now have a paint and a carpet and a type of cabinet that you go to readily when it's time to rehab a property you know within a certain neighborhood standard. So if you're in, you know B neighborhoods, then these. If you're in a C neighborhood or an A neighborhood, it's these, and so you know I love that. It's like a checklist. What's the checklist for these kind of amenities for rental properties in kind of low to mid income areas?
\n\nChris McAllister
\nWell, here's some things to consider, and not all of these are going to be appropriate, but I think almost all of them are. But you know, if you're going to offer appliances, they have to be functional and affordable. We have owners that are continuously looking for deals at used appliance stores, for instance. I have never, ever, and I used to try to do that too, and every time I would buy a used appliance. You know it was cheaper than going to Lowe's, but you know, it only lasted six months. Right, you know, I found that if I do have a property where I'm going to offer appliances, then I put new ones right, yeah, like a new white appliance better than a used stainless steel appliance.
Laci Leblanc
\nThat's a general rule, right it's?
Chris McAllister
\nnot going to have ice makers and you know it's just going to be a basic. You know refrigerator box, but you know functional and affordable appliances. Laminate or vinyl flooring. You know some storage solutions. You know closets with shelves in them. Exterior lighting too, from a safety standpoint, is critical. And if there's common areas, if we're talking about an apartment building or a multi unit, you know maintaining the common areas and the parking areas. You know some of the basic stuff. You know many houses. You know old toilets. Replace the toilets. You know at a minimum. You know replace the seat. You know it's funny, a lot of these old houses they have tiny toilets relative to what you pick up those today for a new toilet. So you know you want to rent the property. Spring for a new toilet.
Laci Leblanc
\nThe other thing, that's the Easter egg of the whole podcast. Yeah, spring for a new one In this bar and heard that seed one thing yeah.
Chris McAllister
\nAnd then you know handicapped accessible. You know bathtub grab bars, for instance. You know that's something that everybody's going to appreciate. You know a mom with small kids. You know an older person, whatever. That's something that is never going to, you know, be destroyed and it's something that is going to enhance the property for a little bit of money.
Many people these days have pets. You know dogs, and if you restrict, you know, all of your properties to people with no pets, you know more power to you. I respect that. But you know, on the other hand, there's an argument for you know making your properties pet friendly. So if there's a partial fence, you know maybe both neighbors, you know, on either side have a fence up and maybe it's in your interest to fence off the backside at your expense and get the whole yard secure. You know installing gates that can be secured if gates are missing. I can't tell you how many houses I see where there's fences but the gates have been torn off years ago. Storm doors, you know, yes, I know storm doors get torn off, but you can also get a quality storm door at any type of storm door and if it's installed correctly it's less likely to be torn off. But you know there's something to be said for being able to open the front door and let some light into a property.
\n\nI don't ever expect anybody to put a washer and dryer you know in a property and offer those you know. But at a minimum, if there's any way at all that you can get washer and dryer hookups in your property, in the basement or in someplace else in the house, that's going to help you rent your property for top dollar for years to come. I don't care what neighborhood you're in. Nobody likes to have to pack up and go to the laundry path and that's why apartment complexes that you know tend to have, you know, washer and dryer common areas in them. But washer and dryer hookups, I think that's a great investment. You know a new mailbox and house numbers. You know it's. I won't say it's exactly like a new toilet, but you know if there's something fresh when you walk in. You know I think that goes a long way.
\n\nLaci Leblanc
\nNow we've moved from flip this house to curb appeal. Yeah, and you know like we talked about windows.
Chris McAllister
\nYou know, in Ohio vinyl replacement windows are a huge selling point and there's so many people who skip that. But again, Home Depot, lowe's, local sources, you know there's still some places to get affordable windows. Here's another thing, and I think this is something that really helps you rent properties anywhere, but clean the basement. Get the cobwebs out of the rafters in the basement, paint the walls, paint the floor, paint the stairs. Make sure the stairs are set up with railings and you can actually get down to the basement so somebody could use it for storage or whatever. It just goes a long way to show that you know, you care and you took the time to do the entire house.
When you do a rehab, this is something that is just one of those little things, but I absolutely believe it matters. You know, when you're doing the basement, clean off and the furnace and the water heater right, make them look like they're, you know, if not brand new, make them look like that they've been maintained and obviously you want to maintain them as the owner. But you know, maybe touch up paints a little bit too far, but you know, I've seen some grungy, corroded, just flat out filthy, dirty water heaters and furnaces that look like they're on their last legs. So if that's what you've got in the basement and the tenant sees that's not going to help you, it's going to hurt you.
\n\nLaci Leblanc
\nYeah, and scare good folks, I think, away from what otherwise is a good property, because those are the types of you know, accidents. If you think that the water heater is going to go bad just because it looks bad, then that's a huge pain for a renter, even though they don't own the property and they're not going to be responsible necessarily for fixing it or cleaning it up, but it's going to be a real pain in their life for sure. So those things can scare people away, I think. But like this checklist kind of thing, it saves time more than anything, I feel like right.
Chris McAllister
\nSo, like time, is money your time is worth money, right.
So, whether you're managing for yourself or you know what we do for others, you basically only have to make those decisions once, so you don't have time to make a decision for every unit. We just want to do what works. So and you know sort of the wrapped up section you know you're going to save a lot of money in the long run by ensuring that whatever updates you make are going to last. So we're focused on longevity and quality, and that's where I learned my lesson in cheap final mini blinds. Right, we're looking to do things that are you know are going to last from tenant to tenant. Sometimes it's tempting to buy more expensive materials and make you know changes that you could bring in money, but they likely won't. But just be cost effective. Go for value, prioritize longevity and quality over extravagance. You know, in a nutshell, don't spring for grant and countertops when basic permicates are going to work.
\n\nLaci Leblanc
\nYeah, so that's what we have had talked about in a past conversation in one of our sessions was, you know, the saving money when choosing updates and amenities? You just pick what works and then you follow through with that, and that's where we were talking about paint and hard floors versus carpet, right?
Chris McAllister
\nYeah, so you know, paint every room the same color you know. Just because you have an extra can of paint laying around that's a different color, it's not going to be worth it. Paint every room the same color. It's going to save you time and money down the road on touch ups and maybe you don't have to repaint the whole unit when somebody moves out. Maybe you just have to do a room or, if you're lucky, maybe you don't even have to do the entire room, as long as you're always using the same color paint in the unit over the years and in every unit that you have. Think about affordability, think about durability. Whether you're talking about fixtures, countertops or flooring, you know you want to look for the sharpest look that you can get without overspending. I think they call it LBT luxury vinyl. It's like it looks like hardwood floors, like a plank.
Laci Leblanc
\nIt's a man made material.
Chris McAllister
\nYeah, that is a great long term investment. Yeah, you know it's very durable. You can get it easily in basic colors and I always urge our owners, you know we're trying our best to get away from carpet altogether. And that can be expensive, though, and you know, sometimes you can't do it all at once. But especially if you have a property where you have pets, you know going to the expense and time to refinish hardwood floors that are going to last for years. You know maybe an extra coat of poly from time to time we're putting LBT into, you know, floors, so that you don't have to keep spending money over and over on carpet or shampoo, and carpet is going to save you a ton of money down the road and it's like you know.
Just to reiterate, you know those cabinets on the back wall of Lowe's and Home Depot. Those are the key. You know, buy mass manufactured cabinets and hardware. You know don't buy unique sizes or whatever. You know don't try to buy used cabinets and make them fit. You know, just get the package that works in that kitchen. You know the first time you get the same ones every time, good quality. They're going to last. And the other cool thing is, you know a lot of those back walls, cabinets. You know. If a door breaks off, you can buy a door. If the drawer goes bad, you can buy a drawer. Right, you don't have to replace the entire cabinet. Sometimes you can actually buy parts. And one of the other things too that you know. Other kind of cost effective upgrades you know. Install energy efficient lighting fixtures. You know and here's another trick, and again I don't care which you know what your price range is. You know for the property, but you know how now, lacey, you can go out and buy like bulbs and the colors don't match anymore.
\n\nLaci Leblanc
\nOh, I do. I so do. It's one of my pet peeves as a human being. I was going to say as a whole owner, but really just as a human.
Chris McAllister
\nYeah. So you know you want to make sure you buy the same light bulb and the same color you know and put them in every room and get enough wattage that it lights up the room. I was talking to our team at Columbus the other day and we were going over the the rental report that shows how many days a rental property has been up for rent and it hasn't rented yet. And you know we had one that was well over 30 days and I said what is going on with this? Who's seen it? And they said oh, it's just dark, it's just so dark.
Let there be light, and it's just what it is, and literally they get the creeps, you know, and they turn around and leave. So what do you got to do there? So well, maybe that's where you don't want any wall cover or window coverings, right, you want to get light in there. But you know, let's say somebody looks at the property and it's dusk or after dark. You know you go ahead and spring for the light bulbs and make sure they all match, make sure they're bright, you know, maybe put something on a timer. So you know, things come on whatever, but energy efficient lighting fixtures and just from a renting perspective, just make sure that they all match and that they all work. Landscaping right, durable, low maintenance, you're not really looking to. I don't want to say you want to enhance the curb appeal. But you know what? If the neighborhood standard is overgrown and grungy, then don't be that standard, right, you can keep the grass.
\n\nThis is the time when it's okay to over achieve a little, you know just doing the right thing and be above the neighborhood standard, and you know this isn't the place to go out and buy bushes or to do this, and that the tenants just are not going to take care of them as you might and it's just going to aggravate you. So durable, low maintenance, but keep the grass cut, keep the foundation you know, weed-wacked and clean. Another thing to think about are programmable thermostats. You know some tenants are going to appreciate that, maybe some of them won't, but you know, at a minimum you can set it up the way you know you want them set up, you know, before you rent the property. But again, try to choose affordable materials that look good but will hold up over the long term.
\n\nLaci Leblanc
\nYeah, so that's an interesting point about the programmable thermostats and the energy efficient lighting, because people are, things are constantly changing, right, and so there's this neighborhood standard. And then there's where everybody wants to live, like one day or in a it has stainless steel appliances and granite countertops, like I don't think there are many folks out there looking to rent who wouldn't like to have that stuff if it were available. They just maybe don't have the budget for it, so, but things are constantly changing. Like all of our light bulbs are the same because we have Alexa light bulbs, so we can say, alexa, turn on the bedroom lights, which will probably happen now. But how do you know? You know, like, how do you know what, like the neighborhood standard is maybe not quickly changing, but it is constantly changing, I feel like. So how do you know and keep your finger kind of on the pulse of that neighborhood standard?
Chris McAllister
\nThat's interesting that you say that, because we are seeing, especially in Columbus and Florida, where we are, where the markets are vibrant and the economy is incredible right now, that there's a lot of neighborhoods that are improving right before our eyes. And you're right, you know, as the values of the neighborhood goes up, as the rent rates go up, you know you do have to kind of reassess. You know what is it appropriate to add on to these properties right now. But you know, I think the key is that you need to partner with a local property manager that is involved in sales also. You know, but knows their rental rates, knows what things are selling for, can help you, you know, do your return on investment calculations, figure out your cap rate, things like that.
But a property manager with local market knowledge can give you insights to. You know neighborhoods, tenant preferences, the whole thing. They can help, advise you and help you. You know, collaborate with you to make decisions on. You know cost-effective updates and you know the amenities that align with your target tenant demographic, whether it's, you know, long term or you know if you're doing a short term furnished Airbnb rentals. But you know a good property manager can help you optimize your budget you know, set your expectations for what's going to happen financially with that properly, appropriately, over time, and also help you recommend where to buy in the first place. So again, like everything else in this business, having somebody who's in entire life's work Israel estate and knowing you know how much things are and what things sell for and what things rent for that's the key. If you can find that person or that property management team, you're going to do much, much better over time, no question.
\n\nLaci Leblanc
\nAnd yes, I am partial. This is where the Christmas mistakes podcast comes in to play.
Chris McAllister
\nYeah, I am partial, because that's what we do for a living, but I can't tell you how many. You know people who have bought properties on their own manage them on their own to the point where they can anymore, and then they come to us and we're happy to do it, but they hire us to, you know, put things back together for them. So you know we do that as well.
Laci Leblanc
\nYeah, it'd be great if you just didn't have to put anything back together and you just went that way, right?
Chris McAllister
\non the gate.
Laci Leblanc
\nI guess right, Not a sales pitch, just me making an observation.
Chris McAllister
\nAll right. So I think we hit the high points today, but I guess maybe it's time to sum up a little bit.
Laci Leblanc
\nYeah, I think this has been, again, always insightful, but I think this time in particular, we've gone over a lot of really specific information that goes almost like a checklist, like if you took this with you and we'll transcribe it and put it up and then people can use it to literally go down the list and check off and make sure they have a large toilet with a new seat and exterior lighting and all the things.
Chris McAllister
\nBut you know, I guess in closing, you know, choosing amenities for rental properties, it doesn't have to cost a fortune and it really shouldn't.
You know, and it's true that some investment properties that you know you'll purchase or maybe you want to purchase, they're going to need maybe some more work than others, you know, for needed upgrades, upgrade dates, maintenance, amenities, repairs.
\n\nBut again and I know I sound like a broken record but it's critical you've got to focus on the neighborhood standards. That's going to dictate the level to which you want to improve your property and maintain it to for the rest of the life cycle of that property. You know, even if you think you'd want a nicer dishwasher or a bigger outdoor space, you got to keep in mind that there's a tenant for every rental property and the people who end up renting your property will be thrilled to live there as long as it's clean, everything's in good working order and you're willing to make repairs as needed to ensure as it stays up to the neighborhood standards, which now includes your tenant standards. And then you know a selfish plug you know you've got to have the right team by your side. You know managing your investment property is going to be a lot easier if you're working with a professional on the ground there, your eyes and ears. That's just going to help you sleep better at night and, you know, make more money. That's the trick. So this one was fun.
\n\nLaci Leblanc
\nYeah, that's how you do it in the shelter business.
Chris McAllister
\nThat's how you do it in the shelter business. That's right. So all right. Well, thank you very much. We will talk to you next time. Thank you all for listening to the landlord profitability playbook podcast.
In today's episode of the Landlord Profitability Playbook podcast, Laci and I give you a step-by-step guide to ensure your property is hitting the neighborhood standard without overshooting.
\n\nWe speak about grasping the nitty-gritty of the rental market, including how to pinpoint the rental rates that are just right for your neighborhood.
\n\nTune in for insights and strategies you've never heard of before, guaranteed to maximize your returns in the property investment game.
\n\n(AI transcript provided as supporting material and may contain errors)
\n\nLaci Leblanc
\nYeah, I'm excited to be here, chris. As you know, my family has been in the real estate business, both as agents and investors, since before I was born, so it's all really fascinating to me. Just happy to hear your expert take on it. What are we talking about today?
Chris McAllister
\nWell, today we're going to talk about neighborhood standards. So we're going to be discussing ways to ensure that our listeners' properties maintain or live up to, but, more importantly, don't surpass, the standard of the neighborhood that they reside in. So that's what this one's all about today.
Laci Leblanc
\nThat's a great topic, I think, especially right now. I think about how the price of literally everything is going up so rapidly, and in real estate investing I feel like that's particularly tricky because costs are going up for investors and for the renters that they want in their properties. So finding a balance that covers your cost as an investor and makes you a little money each month but also doesn't overextend a good renter in your area has to be pretty difficult, I imagine.
Chris McAllister
\nYeah. So I always coach our property managers and clients that when they buy a property, you know you get all excited, you know you get caught up in the moment and you want to really create something that you're proud of, right. But what you want to be conscious of is, wherever you buy the property, what are the standards of the neighborhood and how can you know? I want to say, live up to them, but not go crazy either. So the term neighborhood standards and compasses, like you said, a lot of different elements of ownership.
It comes from you know, first of all, how much did you pay for the house? You know how much our house is selling for in that neighborhood. Did you get a great deal in underpay or did you not get such a great deal? You know and overpay. And then the other issue is you know how much money do you put into rehabbing the house and how much money is that house going to cost you to maintain, you know, over the next 5, 10, 15, 20 years? So you got to make sure that the property, got to make sure it keeps up.
\n\nLaci Leblanc
\nYeah, do you have some examples of you know neighborhood standards and it's kind of a I don't know, it's not a term you can find in Webster's dictionary. So just some examples of what we're looking for as investors on what commonly you need to know about neighborhood standards.
Chris McAllister
\nWell, let's start with the very beginning. So you know, I always urge all of our listeners and any client that we deal with. You know we have a lot of property management clients that work with other real estate professionals to buy properties and we have many that work with us to buy and we manage for them. But the first thing is you've got to have a partnership with your realtor, with your real estate professional, and they have to be very clear on not just your goals but what your strategy is for creating a real estate portfolio. So if you've got, if you've decided that you there's a certain type of house or a certain neighborhood that you want to focus on because it's your sweet spot that works for what you need in your portfolio, that's great. Just, make sure that your realtor understands it as well. And your realtor can always give you, you know comparable sales for the properties, right? So you know, if you've got a neighborhood that you know the houses generally cost 150,000, you know that you can rent that out for, or you hope that you can rent that out for, you know 1500 a month, that's great, right? So but obviously, if the houses sell on that street or in that neighborhood for 150,000,. The last thing that you want to do is to pay more than 150,000 for that house because you're immediately outside the standard.
But you've also got to think through. It's not just what the house retails for, it's how much you have in the property all in after getting it ready to rent again. So obviously if you find a house that's $150,000, it's move-in ready, fantastic. You've hit your numbers, no question asked. But if you happen to find a house that's I don't really care what it's listed at, but let's say it's listed for $150,000, but it's going to require $40,000 out of pocket to get it rent ready and get it to the neighborhood standard, then obviously the most that you can spend on that property to purchase it is $110,000, right, because you can't have more than $150,000 in. So the neighborhood standard just isn't about the list price or how much you can close the house for. The neighborhood standard is about your all-in investment on the street or in the neighborhood. So if you don't have access to those kind of comparables, then you want your real estate partner, your realtor, to be able to get that information for you. So that's the first step. That's critical.
\n\nLaci Leblanc
\nYeah, part one of three-ish, it sounds like, is just for investors to purchase the property and to my untrained eye, the market is crazy, seems crazy right now. Interest rates alone are a nightmare. So it sounds like research and partnering with somebody who can help you with that is key. I mean, research is I guess it's easy to do, but it's easier not to do. It somehow always falls to the bottom of the list, like leaving you scrambling at the last minute, and I feel like investors could use this is almost like a checklist of what they should be looking at prior to investing in a particular neighborhood.
Chris McAllister
\nYeah, exactly. And again, when it comes to price, you got to research, like you said, you got to understand the price range of the properties in the neighborhood before you dive in. You've got to compare the property's price with similar properties in the area so you don't overpay. And that's where you get into. If all the other houses in the neighborhood are four bedrooms and this one happens to be two bedrooms, that's an issue. You've got to know that up front.
If you find out that all the other houses had a bath and a half and yours only has a bath, you know, but it doesn't necessarily work. Conversely, the last thing you want to do is to pay 150,000 for a house when the house isn't exactly like the ones that have been selling for 150,000, because the rental math doesn't work both ways. So if the average house in the neighborhood is 150,000 and it rents for 1500 and has four bedrooms and two baths, and the house you bought, you know, only has two bedrooms and one bath, no matter how much you want it, you are not going to rent that house for anywhere near the same price that the other houses in the neighborhood has. Now, I know that sounds obvious and dumb, but here's the thing, though, that people forget. Let's say that the standard in the neighborhood is four bedroom and you've got a house with six bedrooms and two and a half baths. Don't expect that you're going to rent that house for $17, $18, $1900 just because it's got a couple of extra bedrooms, if that's not what the neighborhood standard is.
\n\nYour market for people who are going to be willing to pay more because that house has additional square footage, that's not a big group to choose from. So what you tend to find yourself is if you don't buy the standard you're going to get. You know, if the house you buy is enough to the standard, you can expect to take less rent, but if the house you buy is ahead of the standard, you cannot expect to get a commensurate extra amount of rent to justify your purchase. So you know, we really urge you to keep that in mind and, again, that's where your partnership with your realtor is going to come in very handy.
\n\nLaci Leblanc
\nYeah, I think that's, in my opinion, the kind of the most riveting part of this conversation we're going to have today. You know why is it important to avoid renting a property. You know, trying to rent a property for more than the neighborhood standard and I like this question because it deals directly with profit. You know it's numbers. You can justify just about anything when you're talking about buying a property maybe throw a little too much or and I've heard it all from Nana and my parents and you know my Nana is an agent and she owns several rental properties but what you can't argue with are the numbers. So when you talk about if I start talking about profit and numbers, it's always how I make my point when I'm discussing my family's business with them as a marketer and a business person. So I know yours will perk up here when we start to talk about avoiding renting, trying to rent a property for more than the neighborhood standard.
Chris McAllister
\nYeah, I mean I can't tell you how many investors that and I'm one of them.
I'd like to think I'm better now, but when I first got started I was guilty of just the most Rehabilitated, I mean, but I was guilty of just the most incredible magical thinking that you know I was going to buy this house and I'm a nice guy and I'm going to treat everybody well and I'm going to fix it up. You know so nicely and everybody's going to be coming out of the woodwork to pay me money and pay me extra money, and you know it's all just going to be sweetness and niceness. And you know this, great, you do, yeah, and it just doesn't happen that way. So, just as important as you know, not overpaying for a house relative to the neighborhood standards, you've got to make sure that the house you purchase or the house that you rehab, is that the numbers work in such a way that you are going to be cash flow positive and get a suitable return on your investment. But the only way that you can calculate that is to look at the numbers. So you know your realtor can help you find rental rates. You know in the area. Your property manager certainly can give you input on what rental rates are in the neighborhood. You can, of course, check the internet, apartmentscom, whatever you want to look at.
\n\nBut please don't do what I did, you know, when I first started out. Don't kid yourself. The numbers are the numbers and you know I don't care if somebody tells you that they're getting. You know way above them, beyond, what somebody else is getting If they did, if they're telling the truth. I can't guarantee anything, but I'm going to say it. I guarantee you that they did not collect rent for the whole year. It's easy to find somebody with cash burning a hole in their pocket and give a landlord you know, first month's in the security deposit, but if that rent is outside of the standard, it just simply will not last. So you know I don't want to harp on this, but it's so critical and I see it happen so many times.
\n\nSo if you're going to charge, if you're going to try to charge, excessively high rent compared to the neighborhood standard, you are not going to have the number of qualified applicants that you need to have to find a tenant that not only is going to pay the rent every month for the next 12 months but is going to leave that property in at least as good, and hopefully better condition than when they found it.
\n\nSo you've got to hit that rent sweet spot. That's at the standard you know for the neighborhood and, let's face it, you know prospective renters, especially ones that do well managing their money. You know they've got all the information that we have right. They know what the neighborhood standard is. They know how much rent is supposed to be. I mean, you know they're savvy, and probably more savvy than they used to be, and anybody that is going to be willing to pay above and beyond that you should be suspect, because there's probably a good chance that you know something in their background or history or income or employment is going to make it less likely that they're going to, you know, successfully complete the lease terms. So setting the price within the standard range increases the likelihood that you're going to attract, I guess, what I like to call perfect bit tenants that are going to live up to the terms of the lease and minimize vacancies down the road.
\n\nLaci Leblanc
\nYeah, I think when we talked about this in the past. You talk about how it's, about what the market demands, and again that goes back to just the numbers and, as a marketer, that really resonates with me, because it's the same conversation, whether we're talking about, you know, a smartphone app for $1.99 that's targeted to my kids and my bank account in the end? Or a $75,000 luxury car or a $500,000 real estate investment. So, knowing who your target market is, who's going to live in that neighborhood, what the market will bear, you know what the neighborhood standard is. And then this is going to lead me to an obvious next question. But how to get the most out of what you're offering is just a paramount conversation when it comes to marketing anything really. So talk to me about why investors should avoid falling below the neighborhood standard when rehabbing a property.
Chris McAllister
\nWell, the most critical thing is, of course, that we want to be offering properties as owners and as property managers that are I guess, for lack of a better term safe and secure right. I don't care what the property is, whether it's a $500 a month property or a $2,500 a month property. The property has to work right, the plumbing has to work, the electric has to work, the roof has to be secure. You know, it's just absolutely paramount that the property is safe and secure. So, even if safe and secure is above the neighborhood standard you're looking at, I guess that's one case that I'm going to break the rule right. But if that's something that you want to invest in, you know safety and security, it's just a basic human need. It's what you owe your tenants and, quite frankly, as a property management company, we don't work with owners who don't follow that logic. So basics come first. Now, having said that, you know if every other house in the neighborhood let's just use the bathroom as a bath and a half and yours has a single bath, you know it's not going to be a complete deal breaker, but you're not quite to the neighborhood standard. The other direction, lacey, is actually easier to talk about and make the point, and it's something that you know I did wrong at the beginning again.
So let's say that you get caught up in the moment you buy this house. You're all excited, you're going to make a beautiful. You know it's fun to decorate, pick out paint colors, whatever. And you know you say to yourself oh my gosh, I'm just going to make this the best. Everybody's going to want to rent it. And you do some silly things like you put a dishwasher in. No, dishwasher sounds like a pretty basic thing, but it's not right. There are many neighborhoods where kitchens don't have dishwashers. Or take the next extreme you know you're going to put in a jacuzzi tub, because you know jacuzzi.
\n\nLaci Leblanc
\nYou add up the day right because you want one, so you're going to put one in your rental property.
Chris McAllister
\nSo to spend that money to go above and beyond the neighborhood standard because it feels good to you is going to be, you know, money that you're fleshing down the drain. There is no tenant that is going to be excited about paying you an extra 50, $100, $200 a month because you know there's a brand new dishwasher, jacuzzi cup and a bidet and that house. If that's not what the neighborhood standard is Now, if you're in a neighborhood where that is the standard and you don't have those things, you're going to have a problem. But you know, for most, 90% of the folks that we work with, you're going to stay within the standard and any money you spend above and beyond the standard for I guess what I would call whether they're frivolous items, it's just quite simply going to be money down the drain.
Laci Leblanc
\nSo what the thing is, and this is hard for me to hear, but this is not the time to be an overachiever or an underachiever. Really, this really is the time to just kind of toe the line and maintain the status quo and, really, you know, make it timeless, make it work and let it be after that. So what are the areas, like the key areas, that investors should focus on? You know when, when we're talking about meeting neighborhood standards we talked about, you know, safe and secure. Obviously, I'm guessing there are some areas of a home that you know it's more important that it be, you know, newer or nicer, I don't know what. So what are the areas that investors should focus on and how do you meet the neighborhood standards in those areas without going too far one way or the other?
Chris McAllister
\nSo, again, I think you have to start with the basics. You got to make sure the plumbing, the electricity is working, it's all safe, that the house is structurally sound, right, that the porch isn't falling off the front of the house, you know there's no water damage, and so forth. The other thing that you that again it sounds terrible, but that I feel strongly about is the first thing is you've got to catch up on any deferred maintenance. Right, if you know some, it could be as simple as the gutters not getting cleaned out. Because, right, if the gutters are clogged over time, you're going to have to have basement problems, you're going to have foundation issues.
If you know, in Ohio we've got a lot of older houses with these great grump porches and I can't tell you how many front porches are in disrepair, you know, just because of the weather and the rain and the hot and the cold over the years and years. So any deferred maintenance has to be dealt with first, safety deferred maintenance absolutely critical. If you haven't done those things, and if not doing those things takes you below the neighborhood standard, you're not going to make money on this property. And the sad part is, if you are in a neighborhood where that's not the standard, god, you're kind of on your own because we can't work with you.
\n\nLaci Leblanc
\nI would say that's a really good point. That's a good point like lipstick on a pig, right if it, if you're it is, but you know everything.
Chris McAllister
\nEverything also comes back to what did you pay for it? Right? And if the max is 150,000 and you know you've got 50,000 or 40,000, whatever it is to put in it to make sure you buy it right so that there's enough room and to get that property back to where it needs to be, right? So I can't stress that strongly enough. It's. You know there's so little inventory on the market right now that I think people are, you know, overpaying for properties and hopes that you know it's they're going to make it up over time. But the reality is, if the property in that neighborhood is 150,000, you've got to put 50 in it just to make it standard. Then you cannot be paying.
Laci Leblanc
\nYou know more math doesn't math, the math isn't mapping the math doesn't math.
Chris McAllister
\nThat's exactly right. And the other thing you got to keep in mind is you know what kind of house are you buying, right? And what is it going to cost to be paying it? So let's, let's say it's as simple as is this house already have aluminum siding? Or is this house, you know, painted clapboard, right? You know, with aluminum siding, the house is probably going to last quote longer without major repairs, although you know there's many times that it's going to be exciting.
But if you have a house that is painted and it's already peeling or faded or chipping or on the way to, you know, disintegration, you've got to take that into account as well. So and again, I feel like I'm talking out of both sides of my mouth but so let's say that you've got enough room to get that house to the standard. You get a great tenant in there. They work out their lease for a year or two, what have you? You put some money aside. Then it becomes appropriate to do some things to that property because you're going to hold on to it. So maybe it is. You know you're going to put vinyl siding on the property, right, because if you make that investment and vinyl siding on the property. That property is going to serve you far better and more economically, you know, forever.
\n\nRight, you got to have a good roof. But you know, there's times when I've seen landlords just continue to spend hundreds of dollars fixing a roof, and maybe it's because they don't have the capital to replace the roof. But there comes a point where the repair costs are more than you know. Putting a new roof on it's almost like, you know, having a used car that's paid for it. It feels great and you keep fixing it and then finally you get to the point where you realize, my god, I just need to buy a new car. So there is some talking on both sides of your mouth.
\n\nRight, you got to stay into the neighborhood standard. But if you bought the right house, you've got income. You know you can rent it and it's time to improve it for the long term. Then it's time to do that. And maybe it is a higher efficiency furnace, maybe, depending on the neighborhood, it's air conditioning, it probably is vinyl siding I think I said aluminum earlier, but that just shows my age but vinyl siding, a roof and so forth.
\n\nAnd you know one other tip on that there are there's things that you can do to the interior of the house too, that maybe in the moment could exceed the neighborhood standard, but in the calculation of holding onto that house for the long term makes sense. So you know, I've had houses and we've had owners that just every other tenant, they're changing out cheap carpet, right, and that might be $500 to do cheap carpet and maybe it costs $1,000 to do laminated flooring. Well, you know, there does come a point where, when you're in this game for the long term, that making the investment in a flooring product that is going to, you know, hold up for the next 10, 12, 15 years is the right decision, even if in the short term, you know, suddenly you do have the nicest house in the neighborhood. But at that point you're doing it for yourself, you're doing it for your family, you're doing it for your financial future.
\n\nLaci Leblanc
\nYeah, this conversation sounds very familiar, probably because we just did a rehab and maintenance guide right, which just reiterates how important the whole cost-effective rehab and maintenance of a property is for you, the investor, for the tenant, for maintaining neighborhood standards. It also reminds me about how important it is and this is something that, like my family, struggles with being a family business. My family has always kind of relied on whoever's working my brother, my dad, my uncle, my grandfather, my grandmother to maintain the property. So they'll go in and make the fixes or they'll call the AC guy or whatever the case may be. But they don't have a great property management team that is dedicated to either, you know, in-house or outsourced that's dedicated to keeping a property up and kind of maintaining it, and that's been a real headache for them.
So I think that's another good point when you're talking about neighborhood standards is just having a system in place whether you do it in-house or you outsource it to a property management company to make sure that you're incrementally making these you know, you're maintaining it and you're rehabbing and you're adjusting and you're upgrading as you can so that you don't end up, you know, with a long-term tenant, which is everybody's goal right, a good long-term tenant that pays their rent and keeps the property up and leaves it better than they found it. But if they're there for 10 years, then if you haven't kept up with things, then you got a lot of work to do before you can rent that property out again. So that's just another fair point.
\n\nChris McAllister
\nThat's very true. You know, we've, you know, we've seen it, We've had that situation many times where I think you become complacent, right, You've got somebody who's in the property for years and years to continue to pay the rent. They don't ask for anything, and you know, out of sight, out of mind, and then suddenly you know they're gone after 10 years and you've got, you know, a giant renovation on your hands. Now, if you actually, you know, kept your reserves in place for that 10 years, you'd probably, you know, in a perfect world you'd have a nice chunk of change to do that renovation with and if you raised your rate with the market which a lot of people also don't do right a long-term tenant.
Laci Leblanc
\n10 years ago they were paying $4.75 and it's $20.23 and they're still paying $4.75 and you're just paying your property tax. That's really.
Chris McAllister
\nExactly, and you know that's why property management is so all-encompassing and most of us don't have all those skills you know ourselves. But you're right, you know a long-term tenant, the rent should go up. You know, incrementally Doesn't have to go up crazy, it just goes up incrementally. And I don't. It's easy to have a tenant become, you know, out of sight, out of mind, but you could end up with a giant bill on your hands. You know when that person leaves.
So what would you do in a perfect world? You know, having interaction with the tenant on an annual basis, doing an inspection on the property of an annual basis, negotiating the new rent with the tenant. And you know it's always a great conversation to have to check with the tenant. Hey, we're coming up in the end of the lease, we're hope you're going to stay. You know we want to. You know, hopefully, improve the property, make sure that you're happy and we're happy. Can we take a quick look?
\n\nAnd sometimes you know you can keep a tenant for years and years just by. You know, checking in with them. You know, even once a year, and maybe you know you've got to raise the rent 50 bucks because that's where the market's at. But that doesn't mean that they wouldn't be thrilled with the fact that you're going to install a new ceiling fan for them, because the old one is all wiggly and raggedy and all that stuff right. So there are things that you know you have to do to protect yourself, even with a long-term tenant. What a fabulous opportunity, what a great relationship. But that doesn't mean it's not a business. It doesn't mean that the rent doesn't go up. It doesn't mean that you don't make incremental improvements. And better you maintain the property over that 10-year period than wake up 10 years later without a tenant and a giant bill on your hands.
\n\nLaci Leblanc
\nYeah, for sure. And there's so much psychology that goes into this. And you know tenants, I know there are tenants out there who if something breaks, that's minor, they're happy to live with it, as opposed to saying, hey, you know, this broke, it needs fixing, it's a you know a light switch or a ceiling fan, or but because they don't want their rent to be raised, right, they don't want, they don't want people to come in and raise their rent because they had to do work, because sometimes they just don't want to be bothered and they deserve that too.
Chris McAllister
\nBut you still have a business to run and you've got an asset to protect. You mentioned something too that's interesting. You know we, when I talk about you know I know it sounds really arbitrary that you know it's going to cost $40,000 retail, you know, to fix a property to the neighborhood standard. That doesn't take into account that we have a lot of owners that we work with that either have construction companies or, you know, are handy or retired and they love doing that work Right. So you know, and that's everybody has give some advantages, capabilities, whatever.
And if you are somebody who is handy and can do things and if not, just manage the construction of the rehab or actually do a lot of the work, obviously you're going to save a tremendous amount of money. And if it's a house that really makes sense for your portfolio and you can pay 125 for it, that maybe I can only pay 110 for it, that's an advantage that you should exercise, as long as you're willing to go in and do that work yourself. So we do have quite a few owners like that. On the other hand, we have quite a few owners that have full-time jobs, professions, dentists, lawyers, whatever they are into real estate investing to diversify their overall financial portfolio and they want a more hands-off approach and they know that they're going to have to pay more than somebody else might, and they're okay with it. There's no right or wrong way, but you want your property manager to understand what your personal advantages are and help you leverage them, just like you want your realtor, who's helping you purchase properties, level your personal advantages and help you leverage them.
\n\nLaci Leblanc
\nYeah, that all makes sense and we've covered so much on this topic. I think the neighborhood standard is just kind of an all-encompassing. It's like a jumping off point for all things real estate investing, it seems like. But above all, what I'm hearing is there are so many variables. You have to know your market, you have to know your sweet spot and you have to be willing to make the hard decisions to make sure you're in that sweet spot. Does that pretty much sum it up?
Chris McAllister
\nIt does. You've got to know the market you're in. You've got to know the tenants who live in that market. You've got to know what your personal capabilities are. You've got to know, you've got to be informed, and you can't advocate that responsibility to anybody. But you do need partners around you that understand that knowledge is power and to not have that knowledge or to back in the face of it is going to cost you money.
What are the assets I wanted to say today? I'm going through my notes real quick as we wrap up here. But again I guess, lacey, just to sum up please, as an investor, don't sink your cash into unnecessary updates and amenities because you're not going to get paid back for it. Make sure that you're taking care of the tenants, that you're giving them a safe place to live and that it's a fair price and that it works for both of you. You can't be renting your properties out at a price that doesn't allow you a suitable return on investment or maximum investment that you can possibly get. You're a business person. You deserve that, but the only way that works and the only way you get to enjoy that is if your tenant that's renting the property gets what they need out of the property as well.
\n\nLaci Leblanc
\nYeah, I think these are words that almost everybody in this industry need to hear. I personally, when this episode comes out, I'm going to anonymously email it to my entire family, so with your contact information for any question that they may have.
Chris McAllister
\nWell, I guess. To wrap up, I would really urge everybody. If you haven't already downloaded the Landlord Profitability Playbook, I would love for you to do that and take a look, and you can do that at wwwprofitabilityplaybookcom. If you're new to the investment game or if you've been at it for a while, I think you may find some helpful tips and ideas in there to help you take your residential real estate investment business to the next level. And I'd be remiss if I didn't ask you to check us out at roosterillestatecocom. Blasey, thank you very much.
Laci Leblanc
\nMy pleasure. Thanks, Chris.
Welcome to the very first episode of the Landlord Profitability Playbook Podcast.
\n\nI couldn’t think of a better way to kick off this new series than to share a discussion I recorded with Kristi Linebaugh of 90MinuteBooks.com about my book The Landlord Profitability Playbook / The Eight Profitability Plays You Need to Automate Property Management and Get on With Your Life.
\n\nThere are a lot of great nuggets of information here and I hope you enjoy listening.
\n\n