The Real Estate Preacher Podcast

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Transcription

Speaker 1:

[inaudible]

Speaker 2:

If you’re looking for honest, real world, no BS advice on how to create income, build wealth and achieve true freedom with real estate, your in the right place. Welcome to another episode of the real estate preacher podcast show where your host Randy Lawrence shares with you, his experiences and strategies from over decades as a successful real estate investor. This episode is sponsored by prosperity capital partners. Learn more at prosperitycapitalpartners.net now onto the show.

Speaker 3:

Oh right. Hey, I want to welcome you here to today’s show got an exciting episode that we’re moving into. I want to begin talking about operations now. It’s like, Whoa. Yeah. You know, a lot of times people are not kind of pumping their fist up and getting super excited. You know, it’s probably a lot more for people they get fired up about, uh, you know, plans, strategic vision and stuff like that. But operations is critical because, you know, you can have a plan, you can have a vision, but then now you got to execute it. And your daily operations are going to be a significant contributor to whether you have success or not. And so want to talk about that. We’re going to talk of course, focusing here in a, what we do in the multifamily arena. But again, realistically, it can have merit, no matter what you’re doing.

Speaker 3:

So maybe it is you run a law firm or maybe it is that you are a private practice doctor or dentist, or, you know, you run a plumbing company, no matter what it is that you do in terms of the business that you, uh, operate, uh, operations are critical. Right. And, um, that’s just the truth, right? So you’re not going to escape that. So let’s talk about it. Let’s dive in. So very first thing is you gotta establish what really, what is your goal? You know, what is the goal that you’re trying to achieve now? And again, if you’re in a bigger company, maybe that is part of your department is aligned with the overall mission of the company. And so, you know, for us, we look at a particular complex and we know what the goal is. Okay. So the goal may be that we want to renovate the property over a 18 month period.

Speaker 3:

Typically with a most of our properties, they’re well occupied, uh, you know, 85, 90, 95% occupied at acquisition. And so we’re executing a renovation plan, uh, across the turns, meaning that we’re managing the cashflow, managing the occupancy in renovating the units as we go through the lease renewal process. So various strategic focus as we do it. But so what is the goal? The goal is to, uh, execute the exterior renovations, execute the interior renovations, you know, the exterior within the first 90 days, the interior within the 12 to 18 months, and then to really begin to improve the overall, uh, operations and quality that is there at the complex, really thereby transforming the complex, you know, improving, uh, the maintenance and, uh, you know, we’ll go into diving into all the different sections, but again, so the goal is in doing that, now we have a better quality asset, a better quality community, a better place that people want to live.

Speaker 3:

And then it’s also meritable for the rents to be supported by what’s going on in the sub market. Let’s say if the sub market rents for 900, but then this property was in, you know, not good form or in disarray and those rents, or, you know, uh, seven 5,800, then now we’ve gone in, in an effective way, really improved the quality of the tenants that are in there, improve the quality of the home that it provides for them, and then improve the return that comes to the investors. So that’s really, you know, a very clear thing that we have as to what our goal is. Well, the second part is once you have a goal established for, you know, what are your operations, then the question becomes, excuse me, how are you going to measure it? If you don’t measure it, it’s not going to get done.

Speaker 3:

Right? That’s one of the downfalls people have encountered where you’re dealing in business and you say to one of your team members or to somebody, you know, Hey, let’s get this done and you give them this assignment, right? Like, so whatever that assignment is, you give it to them and you come back two weeks later and it’s not done, or it’s not fully committed, um, or completed. Right. And it’s yielded frustration to you. That’s happened to me in years past. Right? And the truth of the matter is it’s because there’s no measurement, right? So you always have to have a measurement of what is the goal to be accomplished. And so now for us, we do that on a weekly and monthly basis, right? We want to have a very tight pulse on what’s going on with our assets. We take it very seriously because in the, uh, apartment arena, what happens on a weekly basis then in turn impacts what happens on a monthly basis and then the monthly financial results of course impact the quarterly results.

Speaker 3:

Right? And so it’s much better to begin to measure things, see what’s going on, see what’s happening on a weekly basis. So, so what we do is we have a measurement each week that we look at, and again, I’ll just kind of walk through what are some of the things that we look at? Uh, we have a report that comes out that it shows immediately, okay, for this property, what are the total number of units? So let’s say there’s a hundred units. And then how many of those units are vacant right now? Okay. So there’s X number of units that are vacant. How many of those units are either a model unit, a down unit or an administrative unit. So, and again, it’s denoted, if it’s a down unit, a down unit could be that maybe there was a foundation repair going on at the building.

Speaker 3:

And so it affects that unit. It could have been that maybe that was a unit that there was a grease fire, or, you know, who knows there’s any number of reasons that a unit would be down or again, sometimes we’ve taken over properties and the owner has kind of Rob Peter to pay Paul. And what I mean by that, if they’ve taken components out of the AC system, they’ve taken the appliance. If they’ve taken some cabinets to fix another unit, which again is not a smart approach, but they’ve done it, I’ve seen it. And so we take over and there’s four or five units like that or a down unit. So again, we focus on getting those backup as quickly as possible. Then, you know, the other thing we want to see is out of those total number of units or total vacant units, how many are rent ready?

Speaker 3:

I mean, meaning like how many people could move in right now today, and then ultimately how many are occupied. And so now we see on a weekly basis, what our occupancy rate is, what our vacant units are and how many are rent ready? And then also how many are being turned or renovated. Right? So that we see that, uh, in a, in a snapshot picture immediately. And what that does is it gives us the, the health or the indication of the health of the property. Now, in addition to that, we’re looking at how many units are pre-leased right? And then also how many units are on move out notice and how many units are under eviction. And then when you tabulate those factors, it comes up with what are the net available units, right? And so, and again, we’ll dive into each one of these, uh, in a manner that really kind of breaks them out.

Speaker 3:

But, uh, really what it is is cause why look, look, our goal for the property on a weekly basis is to have it full right, as full as can be. And then our goal is also to be renovating units, right? Because again, like I said, in the outset, if, you know, we’re able to improve the quality of the property and the rents are able to go from seven 5,000 to 900, and then now we’re providing a quality place for the folks who live there. Um, they’re appreciative of that. And that’s also bringing a better quality product into the marketplace for that sub market. So again, that’s something that we have to look at on a weekly basis. It’s like, okay. And then additionally, I said, we want to manage the cashflow, manage the occupancy. So we’re also looking at delinquency on a weekly basis, you know, that’s kind of like your accounts receivable.

Speaker 3:

It’s like, okay, who has not paid because it’s important that we have to collect that money. And so even now when we have been in, as of this recording, we’ve just come through the last couple of months with the COVID-19. And so we have had to take additional and extra steps in working with tenants. You know, we were very proactive and I’ll, I’ll probably do just an entire episode talking about what we did. Maybe it is, we’ll dive into that next week. But so with the delinquents, we, we look at that each week because then with our asset manager looking at and speaking with our property management team, then now we can say, well, Hey, there’s five units on here that are delinquent. One is 60 days. One is 30 days in good Lord. There’s two that are 90 days. We can see the balance amount.

Speaker 3:

Right. So it’s again, it makes, okay. So the 90 day guys, you know, still behind $250. Um, and so he’s catching up the 60 day guy has not paid and we unfortunately have to move forward on eviction. And the 30 day guy, uh, you know, is going to pay this week. And so again, what that does is it helps to, I’m sure that there is just a measurement going on with respect to collections. And then also the other component we look at is the lease expirations, right? So because every month let’s say on a a hundred unit property, you’ve got, you know, on average, you know, eight units that are, um, coming up for lease renewal now. And again, it’s not exactly eight, but again, you can do the math yourself and see. So what we do is we also want to stagger the lease renewals.

Speaker 3:

And what I mean by that is typically November and December are not your best renewal months because why everybody’s focused on, uh, excuse me. Not, not, not, not your best renewal months, your best leasing months, meaning why, because people are, you know, focused on Thanksgiving, they’re focused on Christmas. You know, people realistically don’t want to move at the holidays, just cause there’s a lot of other stuff going on and you’ve got the expense of Christmas and the holidays. You don’t want to incur additional costs of having to move. And so, you know, we want to, as we take over a property, sometimes you see on the upcoming November, December lease renewals four or five units each month, something that we want to offer them a renewal that brings it out, you know, maybe it’s a nine month lease or 13 month lease or whatever, but it’s, it’s a lease that gets it where November, December does not have a lot of renewal activity that just helps you to not have a lot of vacancy, but also in the lease expiration report, we also have the ability to see in real time what’s going on with, okay, this person’s lease is coming due.

Speaker 3:

They were paying seven 50 and then, you know, they’re being offered a renewal at, you know, eight 25. And let’s say the new market rent would be 900, but we’re offering them because they’re an existing tenant that lives there. The ability to stay for eight 25 in the current unit they’re in. And then in many instances, the folks who say, Hey, you know, yes, I would like to do that. Or, you know, if the offer is eight 50, it all depends apartment by apartment, market, by market, uh, or excuse me, complex by complex and then market by market. And, um, you know, so then with that, we are able to see in real time, how many units are declining? Some people say, well, no, you know, the seven 50 is what I want to pay. I don’t want to pay the eight 25. And so I’m going to move.

Speaker 3:

And then, so that unit becomes a property or a unit that we’re going to then put into the renovation to then now make it upgraded and then make it available at the 900. So, and then the other, uh, that we look at is the unit vacancy detail report. And the unit vacancy detail report really speaks to, uh, how long has the unit been vacant, right? Because again, we have parameters that require people to get renovations, duck, excuse me, within a few days, realistically, they need to be done within five days on a standard, uh, type of renovation turn where we’re changing the cabinet, faces, uh, painting the cabinets, putting in new flooring, new lighting, those kinds of things. You say my goodness. So how has that, well, again, being strategic upfront, we are planning ahead where we know what the type of cabinets are, what the faces will be, and then what the materials are.

Speaker 3:

So all of that’s planned in advance. But again, with that, we look at this and we have a measurement of what’s going on. And with each of these elements, we can dive a little deeper to get answers, right? Because again, we have a particular goal that needs to be achieved. We’re using these tools to measure it. And then now we can do the third piece, which is to hold accountability, right? That’s, that’s part of the reason why you’ve got the measurement, not only to understand where you’re at with the attainment of your goal, but you can also hold accountable. So that then for example, I look at these reports, uh, on a weekly basis with my asset manager and then dive into it like, okay, where’s this, where’s this, where’s this in terms of getting results orientation. And in this very same on a weekly basis, we’re able to hold accountable, our onsite property manager in our onsite regional manager.

Speaker 3:

And so what does that mean? It means that when we see deviations, let’s say for example, in the renovation turn where our standard is five days. And we look at that and we see there’s two units that are now in the renovation turn status for, you know, eight days. It’s like, well, why is that? What’s the reason for that? And then can find out, okay, they were out of cabinet faces or back order, or, you know, whatever the reason is. And then with that, you can either determine when it was legitimate or two, it was not legitimate. Right. And, you know, because either look, Hey, you’re going to get the result or you’re going to get an excuse. Right. That’s the truth. And that’s our standard when we look at these things, right? So, and, and we’re pretty dogmatic about it, right? I mean, we have a high standard of excellence.

Speaker 3:

We have a high standard, I believe God’s put us in this position of responsibility so that we can transform investor’s lives and working Americans by providing them quality, affordable, clean housing. And so we take that mission very seriously. And as it relates to the accountability piece, we hold fast to it. Right. So that when we’re going through this report and we’re going through these various pieces, there’s an accountability. So that again, like, okay, if we have too many vacant units that are rent ready and they’ve been rent ready for an extended period of time, we have an expectation that they’d be rented within 10 days. And if they’re not, then we’re asking, well, why not? And then from there, we’re looking at a weekly tracking. And again, this is another area of operations, but we’re looking at the weekly tracking of what’s going on with the marketing.

Speaker 3:

What is the, the feedback from apartments.com from rent lingo? What’s the feedback from Zapier? What’s the feedback from the website? What’s the feedback from any drive by traffic? What’s the feedback from our website? What’s the feedback from Facebook? What’s the feedback from Craigslist. You can see that there is a robust list and approach of what we do. What’s the feedback from at folio premier position. There’s all kinds of things that we do that we have a weekly measurement that are a lead measures, not lag measures. What I mean by that is a lead measure is that the person’s required to do so much proactive activity with those type of marketing and media type posts in, uh, outputs in order to then generate so many, uh, prospective tenants. And then we look at that on a weekly basis. So I think what we’ll do is that with respect to, and again, hopefully this is one, a helpful insight for your own business.

Speaker 3:

And again, what I would say that you need to step back and ask, what is your goal? What are you using to measure it? How are you using that for accountability? And let me just add one last piece or the accountability is that even the best accountability is then having financial metrics tied to those measurements and performance so that you have an agreement where, whether it’s a bonus structure, a compensation structure, whatever it is that the person is responsible to get those outcomes. And then in the responsibility of getting those outcomes, they’re going to experience a financial reward, or if they don’t get the outcomes, then they’re experiencing, you know, a financial, a financial pain, right. That they’re not getting the reward. And so that’s something with which I want to encourage you to implement as well, which we have and, or do, and continue to refine.

Speaker 3:

So, all right, well, Hey, I look forward to it. What we’re going to do is we’re going to continue on this series over the next several weeks. And we’re going to one talk about, uh, the things that we did during COVID-19, but also to, we’re going to dive into induce specific breakouts on each of these different areas and really dive into that, then dive into renovations, you know, all the various areas of operations, uh, and I think it will be a true blessing and a help to you. All right. Hey, thank you so much. I want to encourage you to, to take the opportunity to like us on iTunes. Give us a review, a five star review, preferably if you believe it, praise God. And I also want to encourage you to share this with other folks. I mean, the more people that hear about what we’re doing, the more people we can hopefully bless.

Speaker 3:

All right. Thanks for listening to another episode of the real estate preacher podcast. I hope today that you learned something that you can immediately apply in your life or business, make sure that you check us out on iTunes or at therealestatepreacher.com for more information, if you want to find out more about partnering together with me personally, on real estate deals, including apartment complexes, go to the real estate, preacher.com and click on the invest with Randy link. I look forward to talking with you personally, have a blessed and victorious week four. This is the week God has ordained for you.

Speaker 1:

[inaudible].