Ep #582 – How to Manage Your Multifamily Asset in 2021
Kyle Mitchell is co-author of the book Best In Class: How to Manage Your Multifamily Asset, Avoid Mistakes, and Build Wealth through Real Estate. He is also a managing partner of APT Capital Group, offering busy people the chance to invest in real estate with experts who are aligned with their goals.
Here’s some of the topics we covered:
- Difference between Asset and Property management
- 3rd party property management
- Frequency of communication
- What details to focus on
- Adding value to potential residents
- Importance of training and what to train on
- Renewal letters
- Developing culture
To find out more about our guests:
Full Transcript Below:
Rod: Welcome to another edition of How to Build a Lifetime Cash Flow through real estate investing. I’m Rod Khleif and I’m thrilled you’re here. And I know you’re going to enjoy my friend who I’m interviewing today. He’s been on the show before. His name’s Kyle Mitchell and Kyle runs APT Capital Group. And he’s also got a couple of podcasts. One of them is passive income through multifamily real estate and the other one’s asset management mastery which is more recent. And we’re going to a lot of fun today because he just wrote a book as well called “Best in Class”. So, Kyle, welcome back brother.
Kyle: Rod, thanks for having me on. I’m excited to be here and to chat with you today.
Rod: Yeah, absolutely. So well, I guess let’s you know, there’s no reason for having you tell your background again. I mean, I know your– you’ve got 41,000,000 in assets under management right now and you’ve, you know, got a lot going on. I remember speaking at your meetup seems like a lifetime ago with the last L.A. boot camp I had or this one before the last anyway. But, you know, I know you’ve just written this book, so let’s just go there. Let’s talk about asset management a bit. So, you know, why is the asset let’s start there. Why is asset management important?
Kyle: Yeah, I think over the last 10, 12 years, you know, you could have gotten in this business. And let the market do its work and really just had the keys over the property management company. And done everything wrong and still made money. But it’s a different time right now. And really people don’t understand it when you’re buying apartments. You’re buying multimillion dollar businesses. Tens of millions of dollars of a business. Right? And you need to understand how to run that business. So, I don’t think it’s a time anymore where you can just hand the keys over to the property management company and say “hey, execute my business plan, raise the rents”, and that’s it. You need someone that’s really managing the asset, managing your business plan, putting systems in place to hold the property management company accountable, and also to work side by side to get the best results from your business.
Rod: Yeah. And really, I believe you treat your property manager as a partner. And but, you know, in any partnership, you’ve got to have a firm understanding of accountability and so on and so forth. Well, let’s drill down on this some more. And then I want to circle around to your book, you know, so. When you were communicating with a property management company, third party property management company. You know. Talk about what that communication looks like. Just for people that have no clue. You know, how often is it what’s discussed? Maybe you just talk about. I know we do weekly calls. I assume you probably do as well. But if you could just drill down on that, because I don’t think that’s ever been discussed on the show. So, it will be really interesting.
Kyle: Yeah. We do our weekly calls and for us, we really started with interview. An interview process to pick the right property management company. Right? We only focus in the Arizona market. So, we’re not with several different groups. We have one property management company and we spend four or five, six months choosing that property. Selecting them based on, you know, who their regional managers were? What is their infrastructure? What is their buying power in the market? What are their systems in place? Are they open to technology? But once you have that in place, you know, we do have our weekly calls with our property management company. And then there’s probably a couple of emails or phone calls in between depending on where in the business plan we are. The property stabilized. It’s probably once a week or maybe even every other week. But if we’re in a value-add phase, it’s definitely a couple of times a week and we have other tools that we utilize that’s more for the team to share. Like a tool like Trello, for example, is a tool we use for renovations. Which everyone is on and in–
Rod: What’s the tool? I’m sorry, I was distracted for a second.
Kyle: Yeah, it’s called Trello TRELLO.
Rod: Trello. Gotcha.
Kyle: And so, all of our renovations are tracked on that tool. And everyone is involved into it from our onsite manager, rehab team, regional manager, and then obviously our whole team. So that we can kind of communicate through that and see where the renovations are tracking to hold them accountable. But you know, the communication with the team is extremely important. We have our own customized reports that we’ve built that we want every week in order to ask the right questions. That’s what asset management is really about. It’s not asking “hey, what’s our occupancy? How many leases did you get last week?” You should already know that stuff from the information you’re getting from your property management company. And then it’s about taking that information and asking the right questions.
Rod: Nice by the way, I want to circle back to something you just said. And that was and we glossed over it, we’re moving kind of fast here. And that is interviewing property management companies. I can tell you, you know, you’ve been blessed because you’ve stayed in the same market. We’re in five, six markets right now. And I can tell you, we learned more about a market interviewing our third-party property management companies and probably anything else that we do. And guys, I’ve got a free resource. I want to throw it out there right now. I’m thinking about called “How to Hire a Third-Party Property Management Company”. It’s free just and it’s got every possible question you can think of in it that I can think of anyway. And to get it, you just text “MANAGEMENT” to “72345”. That’s “MANAGEMENT” to “72345”. It’s an incredible resource. Got a bunch of links and stuff in it as well. So that’ll help you. So that’s the first piece is making sure you get the right company. And again, you’re going to learn so much. I would even if you even if the first one you talked to sounds fantastic. I would encourage you to interview a bunch more because there’s so many nuances. You’ll get interview because you know, they know what the rents are. They know what expense rate, you know, a certain line-item expenses should run. You know, they know what their best to market in that MSA or submarket that you’re in. And so, you know, just incredible resource. Okay, so and you mentioned Trello. Yeah. We use Asana. Pretty much the same thing, project management. And it’s where everyone can communicate and track a deal. I love it. Great. Great tip there. And that’s what guys you want that when you’re, you know, when you’re, you know, a lot of moving parts when especially when you’re doing a repositioning of value add on a deal and everybody needs to be on the same page. And I’m dealing with a problem one right now that’s unorganized. Kyle and I meant– I mentioned it to Kyle before we got started here. But, you know, that’s how you pull it all together with some project management software like that. And so, talk about drill down a little bit more. You said you should already know what the occupancy is. You should already know, you know, what the collections look like and you know, what the defaults look like and what the age payables look like and so on and so forth. So, what sorts of questions you might you be asking after you get that information? Just drill down a little deeper Kyle.
Kyle: Yeah, absolutely. It is all about peeling the layer back a little bit further. Right. And so, let’s just take leads for example. You don’t want to ask how many leads you’re getting in or how many conversions. The next question is you know, why are we not converting there? What are the challenges there on conversions? Is it bad leads or is it the fact that we’re just not getting we don’t have enough staff to get back to the leads on time? Or do we not have the right leasing person in there because they’re not selling the property or our rent’s too high. Those types of things. So, you really want to get into the details of things so you can fix things and then come up with solutions to those problems. Right? Things like high level what occupancy is that? Those are a waste of time. And you want to get into the details. Are you going to drive anyway?
Rod: Yep. You know, and let me embellish what you just said as well, you know, especially as it relates to that particular topic, which is conversions on, you know, leads to to sign leases. You should look at that process every step of the way. First of all, are there enough leads coming in? Number one, what’s the response time from your team when a lead comes in? Because if it’s not immediate, they’re going to keep looking. Then, do they come in for an appointment so the conversion at that point. Do are they able to successfully get them to come in? Then when they get them to come in, how many actually do an application? Then when they get applications, how many turns into at least. Do you get the idea? You’re basically looking at every stage and evaluating every stage. Okay, just how about another example of something you might drill down on because I’d like to go a little more micro with this, Kyle.
Kyle: Yeah. So, one thing that we do, I took this from the golf industry. They used to do what was called a “Secret Shopper Report”. They hire a company, come in, they’d sit down, they’d have an experience there, and then they would rate that experience. Whether or not they were served. Whether or not they were up sold. Whether they got a receipt, or got the correct change. So, we do the same thing for all of our properties. So, we do an online inquiry and a phone call. And we have an 80-point system and we want them to get a 90 percent or better on the scorecard. And it talks about all types of things, whether it’s professional. A professional response was a response done in less than an hour or was it done in a day or two days or three days? Was there a follow up? Did it look like they just copy and paste in an email? And did they answer the questions directly? Things like that. And then we use that as a training tool to improve our process of how we communicate to our residents. We also want to add value to our residents or potential residents even before they live on our property. Right? So, in our emails and communication, we’re sending them things like local jobs, local restaurants, shopping schools, things like that so they can get to learn the area a little bit more. A lot of people are coming from out of state, right? This is their first time in this area. So, you want to help add value to those potential residents even before they step foot on the property.
Rod: That’s good. That’s good stuff. Okay. So, talk about other components of asset management. You go ahead and just elaborate on some other things that you’re going to describe in your book.
Kyle: Yeah, absolutely. I mean we have everything from– the great part about the book is you can flip to due diligence if you’re in due diligence. You can flip to leasing and marketing if you’re that. You can flip to disposition if you’re in that phase. But it’s really about being proactive. It’s about identifying bottlenecks before they happen. And really looking at things 30, 60, 90 days in advance so that you can solve those problems before they even happen. But it’s a lot about working hand in hand with the property manager. I like what you said earlier Rod. It’s not about micromanaging your property management company. It really is about partnering with them. And in our process, we actually make the property management company better as well. They learned a lot of different new systems that they’re implementing throughout their whole portfolio and they’re better because of it. But a lot of it has to do with like the training of the leasing or renovation management. I think those are the two key topics what we talk about asset management that we really want to focus on. Training the leasing agent on things like looking at least straight out. If you have a large portfolio, you have things like LRO which are lease rent optimization tools. But when you’re just first starting out one to three properties, you don’t have all those expensive tools to help you. And so, you need to learn how to manage your business and train your leasing staff on how to look at the rent roll and where the market rents are and what you’re charging for the next what for that next unit that just got leased up. And so, lease trade out is one that we really pay attention to. Lease trade out means what was it previously leased for and what is the new lease for? So, if you’re leasing it for a 1,000$ now and the previous lease was 900$, the lease trade out is 100$ dollars. You want to see a positive gain there, obviously. And then resident retention is a huge one that we work with our property management company with as well. If you can retain your residence, I mean less turnover. Turnover is one of the biggest costs to any business, no matter what business you’re in.
Rod: The biggest–
Kyle: Yeah. We really focus on retention of our residents, making sure that they’re they feel safe. They love the place. We even do like a renewal anniversary letter instead of just a renewal letter. Right? So, let’s thank you for staying with our property for a year. We appreciate that you’re a loyal resident of ours. And it just repositions the mind set a little bit. Right? We’re still asking for a rent increase. We’re still asking for a renewal. But now their mindset is “hey, they really appreciate us and they’re welcoming us”.
Rod: Nice. Okay. Talk about any other things that you might do to create culture at an asset. To make residents feel like they’re part of a community instead of just writing checks. Is there anything that you do in that vein?
Kyle: Yeah. I mean the anniversary letter is a good one. Now with covid, it has been much more difficult to do resonant events but we’ve done an online resident event. We did one for Halloween where everyone dressed up hopped on Zoom. We had a winner and you post the winner. But it’s also just the communication and listening to your residents. Right? Listening to what’s going on. And so, if there’s a little bit of crime, don’t just say you’re going to fix it. Actually, do something to fix it, make them feel safer. And I think that’s gone a long way. There was a huge uptick in crime in the Phoenix area during covid because no one else had anything else better to do. And so, there was crime. And so, we hired security patrol. We gave them phone numbers to call in. We made sure the police were coming around. And so those types of things, it’s backing up. What you say you’re going to do goes a long way in building culture. And our resident retention has increased because of that.
Rod: Nice. Let’s talk about renovation management for a moment. You know, talk about let’s come up with some strategy and tips around, you know, managing a you know, can be it can be cumbersome actually. You know, I’m heavily involved in one right now that’s significant. And you know, I know firsthand from previous how cumbersome they can be. Why don’t you give some tips there?
Kyle: Yeah man. Renovation management is one that you’re always trying to pick away at. It’s not easy to deal with contracts and vendors. The one benefit we have is that our property management company has an in-house GC and rehab team. But still nowadays, with materials rising, with labor being tough to find, it is a challenge. And so ordering things in bulk, sitting down with the team and really talking through your process every month or even every week is important. But that Trello board has been invaluable for us. And in that Trello board is not just the unit that’s being renovated and where it is in the process. It’s also when the move out date is. When the actual move out date is. When the move in date is. What the cost of the turn or the rehab is. And what the old lease and the new leases. So, we’ve got a lot of information in there. And on our weekly calls, we have our rehab team up on the call and we talk through each of these things going on. Whether its appliances are back or what can we do which we order 2020 sets at a time if we’re doing a large renovation. So, we can stay ahead of it. Rising costs. Do we need to adjust our business plan or the types of materials that we’re using to get them in a little bit quicker and also to save on costs? And so, it’s about open communication. They understand that we’re trying to get to a common goal and we’re not just trying to drill down on them. And I think it’s just working with them as a partner but also having a tool that allows organization. If you don’t have a tool, that’s where the problem comes in. Right? No one knows anything. It’s like why are we here? What are we doing? And then you have the same conversation week after week after week and you don’t make any strides. And so, whether it’s Excel or a tool like Trello, which is free. Just have some type of project management tool where you can all work together and try to accomplish that common goal.
Rod: Nice. So, what else is in your book? It’s called “Best of Class” and it comes out when? June–
Kyle: June 29th. You can pick up the e-book a little bit couple of days before it’s 99 cents on Amazon.
Rod: Oh fantastic. Okay good. Well, you’ll hit bestseller with that for sure. That’s awesome. Good. I did the same strategy with my book and it works very well. So– awesome. And it’s called “Best in Class” just kind of give us a summation of what’s in it. I know because I read it already. I appreciate you. Let me read it in advance. But–
Kyle: Yeah, absolutely. Well, first it’s an overview of asset management. What is asset management? I think a lot of people get confused because they feel asset management is property management, which it’s completely not. But we take you through the steps of building a team. How to build out the right external team and internal team. We talk about going through due diligence. All the things you need to to know. You know, getting a peek under the hood. Making the right decision, not doing a deal, just to do a deal. And then we go into like some deep dive. Not the sexy stuff, right? That’s what asset management is. It’s not the sexy stuff, but it’s the stuff that’s really important. Budgeting and financial analysis. How to read your financials. What is a balance sheet? What is a cash flow statement? What is a general ledger? Things like that. We go into the legal side of things a little bit and then managing the manager KPIs, leasing and marketing, renovation management, all those things and tools to use in order to get the best out of your asset management.
Rod: Very nice. All right, guys. Well, “Best in Class” is the name of the book. And this will probably go live right when that comes out. So, it’ll be perfect. In fact, I’ll make sure it comes out after you’ve gone live with that. So that’ll be perfect. And what didn’t I ask you that I should have? But this is short and sweet, but I just want to get your book some traction because it’s really well written and it deserves it.
Kyle: Yeah, I appreciate it. No, it’s just about there’s a lot of talk out there and about getting your first deal and raising capital. Which are all things you need to learn about. But don’t forget about the business side of things. About the operations and management side of things, because that is really where the real money is made. And it can make or break your deal if you’re not managing your operations properly. So, either have someone on your team that has a background in management operations or go get the training from other people. You know, get with people like Rod and other people who are already doing it and learn from them on that side because it is such a huge piece when you’re faced with like even like a covid-19 over the last 12 months. Right? If you don’t know what you’re doing, man, you will get absolutely crushed. And so, it’s really important to understand that operations and management side of things.
Rod: Love it. Well, thanks. Good to see you. Say hello to your bride for me. It’s great to see you, my friend. And we’ll talk soon, brother.
Kyle: We’ll do the same to you. Thanks, Rod.