Ep# 481 Building and Growing Your Multifamily Real Estate Team
Multifamily real estate is a team sport and Randy has built an amazing team. Listen as Randy shares with Rod the keys to building an effective Multifamily Team.
- Identifying your needs
- How to select your team
- The importance of coaching and equipping your team
- Evaluating deals at scale
- The importance of communicating your underwriting parameters
- Lease renewal lengths to manage property turnarounds
- KPIs to follow
- Due Diligence process
To find out more about our guest:
Full Transcript Below
Ep #481 – Randy Lawrence – Building and Growing your Multifamily Real Estate Team
Hi my name is Rod Khleif and I’m the host of the “Lifetime Cashflow through Real Estate Investing Podcast” and every week I interview Multifamily Rockstars. We talk about how they built incredible wealth for themselves and their families through multifamily properties. So hit the like and subscribe button and get notified every Monday when a new episode comes out. Let’s get to it.
Rod: Welcome to another edition of How to Build Lifetime Cashflow through Real Estate Investing. I’m Rod Khleif and I am thrilled you’re here. and I’m super excited to interview my friend today. His name is Randy Lawrence and Randy and I met through a mastermind that I used to belong to you know how much I believe in masterminds and you know host my own as well. But Randy’s been in this business for a long long time. He’s got 1,100 doors. He’s going to close down another 350 here in short order. He’s been in this business in the single family in the multi-family space for decades. But he’s also just an amazing guy. He’s a community leader. He’s founded a church, started out as a wealth manager. I’ll let him get into his history but, welcome to the show brother!
Randy: Awesome man! Praise the Lord brother. Good to see you and glad to be on the show
Rod: Oh I’m glad you’re here buddy. So, why don’t we start with you know just giving us a little bit of background of you know who you are, where you’re from, and how you got to you know this you know this incredible, I guess in excess of a hundred and million dollar portfolio. So, yes, take us back
Randy: For sure. So, I started off, I was a stock broker, registered investment advisor had you know my degrees in finance, economics, that was the thing that was back in the 80s with the Wall Street movie and Gordon Gekko. And so I did that but then in the course of doing that over that 15-year span, I really recognized that it wasn’t all that it was cracked up to be. I bought my first duplex property in ‘99. And I’d begin to see like the power of what real estate could do and so that was you know really where the transition came where we started our company in 2003, private equity in real estate. And later sold my money management company in 2006 to focus exclusively on real estate because it’s just you know a better mousetrap in my opinion and so that began the journey and you know over that course of time for the last 17 years, we’ve you know had bought dozens of smaller apartment complexes, probably a thousand plus houses, and then in the last you know five years really focused on the larger multi-family properties. And really that’s our genuine core focus now. My original mentors back in ’99, they owned probably about 2,500 doors it was a family from church. They you know built up from smaller multi-family to large scale and you know they just owned it outright. And so that was kind of the model of you know learning from them and kind of running that path
Rod: Yeah owning it out right now. That’s real money right there. That’s a real money
Randy: Yeah so and I mean that’s not where we are. Of course we at this time we have investors that invest with us but right it really set the groundwork for the focus of what the bigger apartment complexes can do
Rod: Right. No, I love it. So, where did you start where was that duplex in ’99?
Randy: So, the duplex in ’99, I live here in Florida, Indian Rocks Beach just you know of course right up the road from you and probably just a couple of miles away in Seminole where’s where I grew up and literally probably a mile from where I grew up bought the first duplex
Rod: Okay. I was just curious if you were a transplant
Randy: I pretty much. I’ve been here since I was like four years old so
Rod: Okay yeah okay, by the way guys, if you’ve been in Florida you know your whole life you’re called a cracker, a Florida cracker. I don’t know if it’s derogatory or not but
Randy: No, you know it’s just like the old school thing man you know yeah
Rod: So, you know you’ve been in the business a long time. You’ve, I think a topic that I know that you’re great at that I’d like to start with is you know you guys know this business as a team sport. And Randy is a master at building and growing a team. So can you speak to that a little bit you know because you know in the single family world, you don’t really need a team. But in this multi-family world you do. Can you elaborate?
Randy: For sure. Absolutely. I think you know first and foremost it starts with what you just said, you’ve got to acknowledge that you need to have other people with you you know there’s a lot of lone rangers and/or you know kind of solo practitioner and it starts with one recognizing you’ve got to have the other people with you because it’s just going to be critical. And then once you’ve identified, you know who those team members are that’s you know paramount as well. You’ve got to have the right people that are a part of your team. And so identifying what does that look like you know. So for us, it’s like okay you’ve got to have the right management partnership whether that’s your own management company or a third party manager that you’re working with. You’ve got to have the right kind of boots on the ground if you will in terms of you know people are that are going to be doing the due diligence on the projects. You’ve got to have the right on-site managers, that’s huge, if you don’t have the right people in the seat there at the complex, man, you’re in trouble. And even down to the maintenance staff you know so all these different team members I think you have to clearly identify and I think sometimes it is people don’t know what they don’t know because they don’t know it right. So, they just blindly accept okay this person’s here but you’ve got to really drill into understanding who is this person, what are their qualifications to be a part of your team you know and not making an assumption, oh they’re okay because there’s plenty of complexes we’ve taken over. The manager’s been there for five years and done a good job. But really has been underperforming the market for the entirety of the five years. And then they don’t have the ability through coaching, training, and equipping to kind of rise up to the next level. And then, so we’ve had to make a change you know and so I think that at first you got to recognize you need a team. And then really with succinct measure identify who those participants are.
Rod: So you know one thing I want to flag that you said is did you hear how he described you know the management team, he called it a management partnership because even if you’ve hired a third-party property manager, they are your partners. There’s no question and you need to take on that mindset because you can live or die by the quality of that partnership
Randy: For sure, make it or break it. I think one of the things, I’ve got several friends that own management companies and that’s one of the kind of things that they don’t like is they got the one-off Johnny that comes in as the rogue guy trying to you know tell them what to do and it’s like, it’s disfavorable. And so, then it’s not really a partnership relationship it’s you know I don’t want to say adversarial but it’s just not quality and you want to have a quality relationship. And I think especially as you enter into that if you know you’re going to be in this particular market or sub market, that’s where you’re saying, hey, we’re going to develop and grow here and we’d like to grow together. And so that’s part of the thing where you’re setting the tone out of the gate to have a profitable partnership or relationship with them
Rod: Right. So, we went right to management you know property management, what about, let me, actually, let’s finish up on that topic but I actually want to back up and talk about maybe your core team
Rod: If you have one as well
Randy: A hundred percent yeah
Rod: Okay, so you said you said coaching, training, make sure that they have the right coaching, training, and equipment and I really like that. Can you elaborate on that?
Randy: Sure. One of the things I think and again kind of a three core to your team is you know is one, is having the clarity of knowing what the mission is, two having the equipping to accomplish that mission and then three, the accountability to ensure that it’s happening. And so, in that equipping part a lot of times people just do abdication instead of delegation. And where you’re delegating them but now you’re also coming in and making sure that they’ve got the training, the equipping or the coaching, and then the equipping and or equipment tools and resources that they need because what happens like let’s say for that management that the girl that was the underperforming five-year manager right at that property we took over. So, we come in we assess okay here’s what the goal is with this complex, the renovation plans all that the you know the rents are whatever 800 they’re going to 950 because it’s all new and renovated. And so we lay out the plan and then now we begin to coach her on what is the you know demographics of the area, the possibility, and then give her the tools and resources she needs for the marketing of it and then the equipping or the coaching to say like you know role playing. And then if you’ve done that along the way over a week or two week period of time and then they’re unable to perform to the level necessary to accomplish the task, then you’ve got a person that’s really a six that can’t rise to an eight and maybe they’re only able to rise to a six and a half and again a 60-65 out of 100, that’s failing. And so that’s where I think sometimes what I see people do in their teams is they just say go do. And then they don’t really give them the coaching, the equipping, where they’re coming alongside of them to help them and then also saying you know what tools or resources do you need to be successful with this? And it’s frustrating because on one level it’s more work right. That’s just it’s more work but it also is the proper way to do it because then you can now have a successful team member that’s going to be able to run on their own or you at least identify, hey, I’ve done everything as a leader I can do and they’re not going to cut it and I’ve got to replace this person
Rod: Yeah and that’s you know, it’s interesting that’s pretty much applies to any business yeah and that’s really what this business is. It is a business and for sure you know it reminds me you’re talking about the equipping and you know we took over the management of one of our assets that have been you know not managed well by a partner and you know we get there and it’s the properties almost a mile long and they had one golf cart. And I’ve now bought six okay and they didn’t you know they didn’t have a snack a big snake and you know to snake out the main lines and you know and just, they didn’t have any equipment and there certainly wasn’t any training going on. So, I really liked you know and I’ve spent literally six weeks there over the last few months
Randy: You see, I love to, like what you just said right now, people will have missed this right. That’s taking hands-on responsibility for the outcome when necessary right. And people would go, oh well Randy you’re here, or Rod you’re up here talking on these podcasts, and but no. It’s like look you know what’s going on in an asset if a team member’s faltering, hey, there’s an ability to jump in and correct the ship, put the right people in place and make sure she’s sailing on track and that’s ultimately what it takes
Rod: Yeah no, there’s no question. So let’s step back a minute and talk about your you know you talked about it in you know you having you know of course the management partnership. But let’s talk about you know the due diligence, the you know your financial analysis. Now you probably do that piece because you’ve got a finance background but you know there are several pieces in a multi-family team that have to be allocated. And very often you know I’ll see a partnership between someone that’s super analytical, like my partner Robert. And I, who’s really more the mouthpiece you know and but he’s becoming more of a mouthpiece too. We’ll say that he’s been doing a lot of speaking, but I see that a lot. But talk about your situation is it just you? Do you have other people?
Randy: No, we have seven people on our internal team. And so we developed that focus just like we had scaled out the single family business to scale and you know doing 75 plus of those a year. And so, just that business scale systems mindset is how I’ve always approached things. And so even on when we originally doing the original underwriting, yes that was me. But then establishing the parameters the criterion and then bringing on you know an acquisition person so that then their role is to you know undertake all the underwriting. We developed actually kind of a spreadsheet concept. It’s two you know legal size 10 by 14 kind of the crappy deals are on the back and then they migrate their way to the front. And so we have a weekly report that we can go through you know 20-30 whatever many number of properties and then I can see, okay here’s the top five let’s drill into this, drill into this, drill into this, to really identify you know what appears to be the best transactions. And so again, even when looking at that and for people who are listening maybe and they’re starting their journey or on their journey, when you’re looking at it maybe you’re doing that role but you’re looking at it from that perspective of developing a system with the mindset of having somebody to come in and take over that responsibility.
Rod: So, this person, this acquisitions person, are they the ones that are calling the brokers weekly to say hey what have you got and they’re getting the deals in the door? Are they the front line on the broker relationships and hunting for deals?
Randy: Yeah exactly. Yeah, so, and again in the beginning stage, probably for a 12 to 18 month period, I did the kind of the ground and pound, going through the mud, talking to people, and you know some of the efforts that would appear fruitless that a lot of people listening maybe don’t want to do right. And that’s part of the hard work necessary to develop the relationships with people where now in any of the marketplaces we’re in. We’re a go-to person. We’re you know one two or three on the call and you know and that gives us advantage because then there’s better quality assets coming to us because they know one, we’re not going to screw around with it. We’re going to be fast on it. And then two, if we shake on it for whatever 10 million, we’re going to get it done and there’s not going to be hiccups you know
Randy: Right right you close. You don’t you know a lot you know these brokers don’t get paid unless a deal closes and if they know you know, and that’s kind of the way the business works guys you know it’s brutal until you take down your first deal but then the clouds part and they see that you can do it but then it’s very very important to manage those relationships, let them see what you’re up to, and then you know they recognize that you actually will close because you know so often a deal will go under contract and the people can’t deliver. And that’s why it’s so important guys that you know we talk about this in my training programs is that you know if you lose out on a deal or you’re number two or three, always stay in touch with that broker on a weekly basis because so often those deals will come back around. I can tell you how often you know that happens that you’ll be back in the saddle on a deal that you didn’t think you got right
Randy: Yeah and the other thing I would say with even the underwriting piece is like sometimes a crappy deal will come to the person than like a newer guy and they look at and they, God, it’s crap. And that’s the end of it right it’s like no no. Look, you need to take the time to properly evaluate it and then connect together with the guy that sent it to you and communicate with them why it doesn’t fit for your parameters so that the guy at least sees that you’re serious right. And that begins the maybe you do that three four times and then the fifth one is decent or good, and but if you don’t do it those three or four times you’re not going to get the decent or good you know
Rod: Oh yeah that’s so cute. I’m so glad you said that because I actually train that specifically don’t be a black hole. Don’t just let a deal come to you and then not respond. You need to give them a credible reason why it didn’t work you know we need a return of x and at this price it’ll be y and so this is why you know we can’t close you know we can’t do this deal because I’m you know I’m sure we can’t get it for that price but I want to let you know you know let them see that you did your homework, you took the time to evaluate it. No, I’m glad you said that
Rod: So, that’s your guy that finds
Randy: And then we have a construction manager where he had been involved in overseeing residential construction. And so probably about you know 24 months ago, we began the process with him to begin to you know oversee construction at assets. So again, with some of the ones that we’ve bought had a little bit more on the construction side. A lot of times we’re purchasing where it’s you know light exterior cosmetic stuff here, roofs, and then you know and then doing the renovations on the turn. But so we purchased a property that needed a bit more heavier construction. So we developed the process inside of our CRM system with Podio to manage that with Gantt charts and you know kind of really be able to invite other team members so the on-site manager, regional manager, can see construction progress and communicate in there. And then really with that he’s now progressed into a manner which he’ll oversee all exterior construction. And so again, like in the first 90 to 120 days when we take over an asset, bam, he’s on it with roofs and AC and paint and landscaping and you know interfacing with the other team members so that they can focus exclusively on operational improvements while he’s executing the exterior strategy because on that asset like that maybe it’s 90-95 occupied we’re going to renovate interiors on the turn, and so that’s more of a done in conjunction with our asset manager and the on-site manager just you know managing that process because maybe it’s three or four at a time something like that
Rod: I see. So, that’s how you do it. You do it on turns rather than you know pulling 10 people out at a time and ramping that a little faster okay
Randy: Yeah and so, because then with that for us it keeps cash flow stronger you know in that near term purpose at least in the projects that we’re looking at. And then you know with those, we’re also mitigating the lease renewal by you know okay hey if our rent targets $950 and let’s say they’re averaging $800 maybe we’re offering them a renewal at you know $895 on a seven month lease and so we get you know 30 non-takers on that and that’s the three to four that we’re going to renovate to market. The other ones we really haven’t had to do much out of the gate and they’ve moved from $800 to $895. And then if they you know non-renew after the seven-eight month lease then then we take them to market on the renovation at that time. So it’s just a kind of a diligence process that we do to manage how many are being turned every month plus what’s the you know the bump that we’re getting on the renewals as well
Rod: And so you’d you do the shorter term lease so that you can manage how many how many people you might have moving at a given time
Randy: Yeah correct. So, even in our lease management, we try to mitigate like December and November as a non-robust month. And then also try to layer where we only have let’s say on a 100-unit project you know we don’t want more than 10% in any one month coming up available for renewal and then we can kind of spread that out
Rod: Yeah. So guys, when you take over an asset, it’s very very important when you’re doing your lease review that you look at the expiration dates because if you’ve got a big chunk of your portfolio or a big chunk of your units coming due at the same time, that’s a problem. And so what you do is what Randy’s talking about here. Now, he’s in the middle of a renovation so he’ll go shorter term but if you’re not renovating, you’re going to want to go longer term. You might go 13, 14, 15, 16 months you know whatever and spread out those renewals and of course you don’t want people, you don’t want them expiring in the dead of winter if you’re up north. And I’m assuming when you said just December, January, you’re talking about assets that aren’t in Florida. You’re talking about
Randy: Not in Florida yeah so, and even too like some of the stuff we’ve got in Georgia or South Carolina, there is a slowdown in you know Christmas time you know not as many people looking to move in December that kind of thing. Now that being said we still rent units but right maybe not as robustly. So that’s where if we had three renewals versus 10 we’re in a much better position because then you’re you know just able to still drive the renewal a little bit better whereas if we’ve got, and we’ve taken over assets like that where the previous owner had no thought process in it. And it’s like, dear Jesus, you got 15 renewals in December, what are you thinking you know because now you can’t really go to those people and say hey we want to move from $850 to $950 or $900, you can’t do that in December because you don’t have a lot of traffic coming in behind that you know so, but, and that goes into I think you know and you’re so spot on with what you teach and how you operate but it’s like you’ve got to be thinking that through and then instilling that in the team and then it goes back to the team members to make sure they want or clear about it so that the on-site manager knows that that’s part of it, your asset manager or if you’re doing the asset management you’re ensuring that that’s happening. And then if your regional’s overseeing it that they’re on spot with it too so that it’s, and for us we’ve kind of documented that out like here’s a process or a protocol for our leasing team it’s like you know we don’t want heavy renewals in this month and this month because I found that if it’s in writing it’s more like hey it was in writing you know what I mean like you’ve seen it you’ve been shown it it’s like, oh I forgot about that. Well, it’s like good God, it’s right there in Dropbox under the leasing protocol
Rod: Good. I bet yeah you brought up Dropbox you know I know you used Podio that’s you know that that came from your single family days because I know all the big hitters and the flippers wholesalers you know they use Podio and that’s how you’re managing construction which is awesome because I know you can do overlays and do all sorts of things in there. We use Asana as our project management which works really well with the slack and but you know guys you you’ve got to have some sort of project management solution, Basecamp you know whatever, even if it’s just Dropbox where you’ve got all your stuff in one place but you know there’s some great solutions out there for that. And you’ve got to track it. Back to tracking for a second, what KPIs do you measure on your assets on an ongoing basis? You want to speak to that for a second?
Randy: Yeah for sure. So, we’re looking at our projected performance you know overall and then we’re looking at our you know budget that’s in agreement with our management company and then actual. And so we’re looking at that on gross revenue, net revenue, expenses, those are kind of the big ticket
Rod: You’re comparing projections to actual and seeing if you’re off
Randy: For sure yeah and we do it both on you know our projection that we underwrote for over the five-year time period and then also tracking against the annual budget that our property management’s putting together and to see if there’s a discrepancy between the two and then also the actual performance. And so those are kind of the big three that we look at and then from there on a weekly basis you know we’re looking at the vacancy, we’re looking at the marketing track of you know how many leads do we have coming in, what sources they’re coming in from, what’s the conversion ratio of those leads. We’re tracking on a weekly basis
Rod: Let me stop you one sec. Let me stop you just because I want to hammer something. Guys, when you’re looking at the marketing and you’re you know basically your ability to lease units what he just said is really important because what you look at so how many leads are coming in the door, and then you’ll know if you’ve got an issue there where you need to do more marketing or different marketing. Then, how many of those people are actually showing up at the property that would be a metric and then you’ll know whether or not your team is is good at bringing them in. And then how many are actually doing applications and you can see, so you can look at every step of this process to a lease signing to see if there’s any places that need to be worked on that where there’s a breakdown if that makes any sense. I’m sorry to interrupt
Randy: No, that’s, I mean that’s gold what you just shared right there. That is the truth of what it is and so we have a weekly excel sheet that’s coming in from the management team that breaks that down and shows all of that information so that you can identify quickly you know that you’ve got a conversion problem and that means your person on the phone at the office is not doing the job to bring them in like you said or then if you’ve got a lack of approval problem. We’ve got you know four apps and one gets approved it’s like okay so we’re bringing in unqualified traffic that’s not good let’s look at the traffic sources. So you know what you said in the very beginning, this is a business. And so you have to approach it like a business if you’re just kind of winging it or running and gunning it’s not good you know
Rod: And every business is nothing but people and systems. And so it’s critical that you like you said you got to get the right seats on the bus, you talked about that earlier. But you’ve also got to make sure those systems are in place and you know like you talked about documenting these different procedures and you know they were in Dropbox or whatever that’s critical, checklisting everything you know and
Randy: Checklists are great because checklists are simple. You don’t have to reinvent the world and it’s like that’s at least an easy starting point. So you don’t have to take down this massive technical component system. You can start if you don’t have good systems just with a simple checklist and that’s at least a starting point you can grow from there. I mean ultimately that’s how we did it back in the single family days probably you know 12 years ago is beginning with checklist and building the systems. And then you know becoming systems oriented and there’s great books on systems mindset that you could read as a practitioner to help you think that way
Rod: Sure. E-myth, Michael Gerber, franchising you know treating it like a McDonald’s. It’s a great one
Randy: A great, I read that book, I’m like, holy crap, I’m the baker right, back in the day like in 2006. I was like, oh my God you know so yeah but you know the other one of the key metrics that we look at in those elements is you know the vacant units and then days in turn or days in renovation. That’s super critical to see you know how long is that unit vacant? Why is it not turned? What’s the default? And so that’s a key thing that then really gets
Rod: Tell my listeners why that’s such a key thing..
Randy: Yeah I mean it’s one we’re losing revenue but it also reports to us on the activity of the on-site manager and our asset manager in terms of bringing the contractors in, getting the unit turned, renovated and completed, we’ve got like a five-day turnaround time frame if they’re not hitting that there’s a problem
Rod: That’s right and the reason is, is because if you’ve got, if you’re averaging say a week to turn a property versus two weeks, do the math on that loss of revenue and the math on the value component, it’ll blow your mind how big a deal it is okay. And I have slides in my presentation in my boot camp because turnover obviously is your biggest expense and your ability to maximize you know and systemize your ability to turn over a unit fast, it can it can be huge to your bottom line
Randy: Huge on the NOI for sure because I mean you multiply that across the 150 units times 12 months and then one-week good lord that is a lot of money. And you can’t rent the unit that’s not rent-ready I mean that’s you know they can’t move in you know and oh yeah pre-lease it, hey look, don’t make excuses, get the systems working right so that you can get it done. And again it’s sometimes challenging right and especially now with Covid, there’s some supply issues and this that and the other where yeah you know I had that just the discussion the other day with our construction manager, I said look, I get it that there’s challenges. In life, there are always challenges. You and my job is to figure out the solutions to overcome the challenge. So if it’s a shortage on this material and we know we’ve got as a percentage x coming due in two months order that crap now because it’s on a six week delivery time and we’ll have it for when those prospective units are coming available
Rod: Yeah I know we’re having some real issues with appliances right now and you know we’re actually going to have to go to cream or bisque appliances for a short while. I hate doing it because I don’t like them but you don’t have a choice you know we got to get these units rented. So, okay, so talk about your due diligence process a little bit in a little more detail if you don’t mind because that’s such a critical component in this business
Randy: For sure, huge. So, we’re actually doing due diligence on one of the projects tomorrow. And so we have our on-site team that’s coming which is comprised of our management team. So we’ll have probably two to three people you know two that are in the office that do a complete lease audit so that we’re going through just like you mentioned earlier, understanding are these people qualified, did they go through a qualification process, is there maturity problems coming on the leases as well and then put together a robust report that’s in excel analysis of you know the lease file audit. And so that’s critical there. So we usually have two people doing that and then
Rod: Let me, let me, if you, I’m sorry I just want to add something before you move on. The other thing like we just bought a 282-unit asset in Cincinnati and I had a real concern with this Covid business. I literally looked at the employment of every single resident and did a little analysis as to the impact that I thought Covid would have on that particular employer yeah just to get a comfort level you know and you know it was yeah it was my numbing yes it was but it was important. So, okay, so you do your lease audit and please continue I’m sorry
Randy: Yeah I just I love that though too because again you know people, they take for granted that these things don’t happen right, that’s like oh well you said I’m the mouthpiece yeah but you’re like oh yeah Rod’s mouthpiece. No, it’s like, I’m the guy, you’re the guy that’s making sure that no stone is left unturned so that it’s a successful endeavor. It’s like that’s the truth of what it takes to be successful at the level that’s being achieved. I mean that’s just the truth. So, lease file audit depending on your size you know two maybe three people again anything 150 below, two people can knock that out no problem. And then on the walk, we walk every unit we’ve got at least probably two to four people that are walking the units. We do a full analysis of the interior that we’re looking at you know floor condition, wall condition, paint color, is it a change out you know the cabinet conditions, we’re inspecting the AC, the water heaters, all of it. And then producing an excel file spreadsheet that really lists every unit, it lists every component on it, it assigns a dollar value to it so that at the end of that, let’s just use a hundred unit walk, that we know the condition whether they’re you know classic premium or elite. We also know every deferred maintenance item that’s insufficient and then we also know a attributable dollar value to every item that’s deficient to bring it to the level we need it to be based on what our game plan and renovation plan is for the property
Rod: Nice yeah you have to do it. You have to do it and you know I would encourage you when you’re doing these inspections to have somebody videoing and someone taking pictures and literally when they, before they walk in the unit they video the door number or they take a picture the door number everything behind that is that unit because that may be the only time you’re in that unit for years
Randy: A 100 percent, that’s yeah critical because then even too your on-site manager can refer back to that when lease renewals are coming up to get an idea, is this a heavy turn you know what’s the condition of the unit that’s 100% spot on and again having it as a system you know that’s just how you do it, and that information is readily available. Additionally, then, we also have our contractor that’s there as well. He’s inspecting all buildings, all foundations, all ingress, all egress, really making sure that there’s any identifiable problems or issues that are you know significant. We also have at least two roofing contractors that are part of our go-to on the team that are inspecting all roofs on the property. We use one or two of our go-to electrical contractors that inspect all electrical at the property as well both on the master meters and the individual meters in the or panels within the apartment units. And we’re also you know checking for confirm aluminum wiring or pigtail whatever just those kinds of things that may or may not exist based on the age of the complex. And then also some of the things guys miss this though is the plumbing contractor. We snake every main drain line video camera to really ensure that there’s no significant issues there
Rod: Yeah yeah you have to I mean if there’s if you’ve got a lot of trees in your complex or you’ve got maybe collapsed lines, I mean that’s a problem especially if it’s underneath your foundation then you’ve really got a problem. And so very very important that you do that. I want to circle back to a couple things you said, you have your contractor check the structure. Guys, never ever ever ever ever buy a property without having it inspected by a building inspector of some sort you use a GC contractor because guys, you can’t tell, you don’t know how well stuff can be hidden. I had someone send me a picture of a of a building that had been cited and he’s like you know I can’t see you know the foundation I said well go along the bottom let me see the bottom and sure as hell there was a crack running down behind the siding down into the ground. They had hidden structural cracks. So guys, it’s so critical and I won’t, listen, I’ve bought like you I’ve bought thousands of properties literally and I would never buy one without having it inspected by second set of eyes you know that knows what they’re doing right
Randy: And I would just echo even too you may think you know but like I’ve seen just on an asset we we’re buying now that they did foundation repairs, looked you know decent but again immediately the GC was able to pick apart wham wham this is not right this is not right, and this is not right. This whole thing’s got to be redone for these reasons where to maybe a less trained eye, they would look at it and say oh yeah, it’s already been done and it’s like no it’s not been done and that right there was a $78,000 repair
Rod: There you go
Randy: And you know so we were able to get that plus the plumbing stuff for maybe about 120 grand included to say, hey, these are legitimate structural items that need to be fixed. We’re not a retrader but it’s like, hey, these are things that were found in the due diligence period and they’re like hey, we agree, no problem, let’s get it fixed. And that saved us and our investors 120 grand
Rod: Yeah and guys, you know you don’t want to be known as somebody that re-trades a bunch of deals. These brokers won’t do business with you. But if you find a legitimate thing that wasn’t disclosed or worth something misrepresented, by God you go in there and say hey what are we going to do about this
Randy: A 100%
Rod: Now I want to circle back to one other thing you said, that you said the contractor looks at the ingress and the egress and so how does someone, how does a unit, I mean how does a you know resident get in and out of that unit and here’s why that’s so critical. You might see you know slabs of sidewalk that have you know that have curbs that need to be ground down or things because of roots and things like that you know safety issues, stairways that are tilted or you know banisters or railings that are that are damaged or loose or whatever. And it’s so critical that all that gets looked at. So, I just want to circle back on that as well. So, you’ve done your interior due diligence, you’ve done your exterior, you’ve walked the units, you retrade if you have to. So there you have it. Do you have anything to add? I think
Randy: Yeah and then we also then our team at least you know myself or one of the other team members of the management team members then go and drive and walk the immediate comps. We’ll actually go in talk to the managers inside you know sometimes people get scared about that and it’s like we just go talk to them right you know it’s like, hey, you know and you know we talked to him about the complex oh and do you mind if we take a look and see a unit? Do you have one available? And you know probably 80% of the time it’s a positive favorable thing and they’re like oh yeah and you know show you and it’s all good and what that does is it gives us a very clear picture of here’s these three other complexes in our immediate sub market. This is our competitors
Rod: Sure. I mean you need to know what their interior finishes look like you sometimes you have to mystery shop. I mean you’re a devout Christian and you’re gonna, me I have to, I’ll go in and bs and say I’m interested in the unit to get in I want to get in and see it okay. So I mean that’s, but the bottom line is you have to know your competition you have to know them. And you know the other thing is you want to see you know how enthusiastic they are about it. How good, do they jump up when they see you come in and a big smile and make you feel welcome because you know you want to see how you’re going to rate according to that very very important and you’ve got to know the market and a great question to ask them when you’re there, if you’re you know if you go in and tell them you know you’re buying that you know the whatever the asset is you’re buying then you know they may not be as loose lipped. But I always like to ask them what do you think about you know Willow Oaks, the one you’re buying and see what they say because they’re gonna give you all the dirt. They’re gonna give you all the dirt on that complex that you might not hear from anybody else you know when you’re mystery shopping. And you can really get some interesting information when you do that but yeah we get, you have to go out and see every single competitor with you know within range because that’s critical. And you have to do it consistently because especially you know with, I think we’re headed for a real contraction in this country and I think you know it’s coming. I really do/ I think it could be after the election but I think it’s coming and with that said, you know asset management and tenant retention is going to be critical. And you need to know really on a monthly basis or definitely quarterly what your competition is doing to beat you out so that you can stay occupied through you know downturn so yeah
Randy: We require our on-site managers to do a monthly market survey, keep the pulse of what’s going on at the competition. They’ve got to upload that report and it’s every month you know and then that way our asset manager can see it in their weekly calls and then each month see what the competitors are doing and just making sure we’re on track because no doubt this is going to be the time of operations you know I mean like you could have been blind deaf and dumb and made money in this market the last five years, seven years with cap rate compression, and you know all that’s taken place but just exactly what you said it’s like, you got to have your hands on the wheel at this time especially with you know the economic slowdown that we’ve facing and/or like you said even face potentially even worse
Rod: Yeah we just did a special meeting of my Multifamily Boardroom Mastermind and it was asset management in times of crisis. And it was all these things that these extra things that you need to be paying special attention, a lot of it was basics getting back to basics but being so diligent right now. I mean it hasn’t happened yet it’s been you know angel singing right now but it’s coming and so you know being ready for it being you know forewarned is forearmed, but well listen Randy, Randy’s company is Prosperity Capital Partners and that’s prosperitycapitalpartners.net, Randy, I really appreciate you being on the show brother you did
Randy: A 100%
Rod: You’ve added a ton of value today. It’s great to see you. I hope
Randy: Great to see you too. Let me add one more team member that sometimes people miss and this is super critical
Rod: Oh please
Randy: You’ve got to be a part of a group like Rod’s or around other people that you’re not just a solo practitioner. You’ve got to be around other high level operators, mentors that can challenge you, encourage you, and help lay a pathway that you see these things in a regular basis. So I just, that’s the truth and
Rod: Thank you buddy. No, I appreciate that. No, it’s critical. I mean it’s why my students have bought somewhere between 20,000 to 30,000 units and I’ve only been doing this for a little a little over two and a half years not even three years yet. So, it’s having that environment, that ecosystem you know to be able to support you and do deals with and learn from and grow with and you know rising tide lifts all ships. Well thank you for bringing that up
Randy: Hey, I appreciate you. Good to see you and when I’m down that Sarasota way, I’ll reach out to you
Rod: Sounds good
Randy: To connect brother
Rod: Sounds good. All right buddy. Take care man
Randy: Take care now. All right