REAL ESTATE

The Pro’s Guide to Property Management

21


If there’s one thing that’ll make or break your real estate portfolio, it’s property management. When done correctly, property management can feed you consistent, passive income without the everyday stressors of being a landlord. Whenever you hear people talking about bad tenants, midnight phone calls, or surprise maintenance problems, they’re really talking about property management gone wrong. So, how does a rookie real estate investor, with even just one rental property, start managing the right way so they can scale their portfolio faster? 

Amelia McGee and Grace Gudenkauf, authors of The Self-Managing Landlord, did it all wrong initially. They were picking up every tenant phone call, placing every service request, taking rent payments every which way, and here’s the thing—none of it was working. As they scaled their portfolios, things only got more difficult until finally, one day, they stopped and developed a system, and like that, their businesses took off.

Now, only a few years into real estate investing, both Amelia and Grace have dozens of rental units to their names and less stress than ever before. How did they do it all WITHOUT hiring everything out to a property manager? In today’s show, they’ll share the self-managing principles they used to explode their rental portfolios while staying sane! And if you’re a new investor or are about to be one, these tips could save you YEARS of headaches!

Dave:
Henry, when you first became a self-managing landlord, would you say that you knew what you were doing?

Henry:
Uh, yes Dave. I absolutely did not know what I was doing. I was terrible at it.

Dave:
. Okay. ’cause I was about to call BS here. If you said you did ,

Henry:
I was terrible. I was just so excited that somebody actually wanted to pay me rent. Uh, that I would take their money however they would give it to me no matter what that meant for me down the road.

Dave:
Alright, well I’m glad I’m not alone and we’re gonna dig into this topic a lot on the show today. We’re gonna cover everything that you need to know as a self-managing landlord. Hey investors and welcome to the BiggerPockets Podcast. I’m your host Dave Meyer, and with me today is Henry Washington.

Henry:
Today we’re going to be talking to Amelia McGee and Grace Gudenkauf. They are two young investors who both scaled to 20 years to piece with no systems or processes in their real estate business. And today we’re gonna learn from their mistakes and give all of our investors a toolkit to become excellent. Self-manages.

Dave:
I think this is gonna be a really cool episode because Grace and Amelia make a compelling case. And I personally agree with this, that you should start your real estate investing journey for most people. Not for everyone, but most people should consider being a self-managing landlord because you learn so much that you can apply over the rest of your investing career. And today Amelia and Grace are gonna share with us how they did everything themselves in the beginning parts of their careers. And we’re able, because of that, we’re able to scale their portfolios to the point where they are hiring in-house property managers and are on this incredible trajectory. And one of the cool things about these two guests is they’ve actually written an entire book on the topic of being a self-managing landlord. It is called The Self-Managing Landlord. It’s published by BiggerPockets and if you want to get it, you should check it out at biggerpockets.com/managingbook. That’s where you can get all the book itself plus all the bonuses that they’ll be giving away. With that, let’s get into it and invite Amelia and Grace onto the show. Amelia and Grace, welcome to the BiggerPockets podcast. Thanks for joining us.

Amelia:
Thank you so much for having us. We’re super excited to be here.

Dave:
Yeah, thank you. Amelia, let’s start with you. You believe that starting off as a self-managing landlords makes you a better investor over the lifetime of your investing career. Why do you recommend this approach over hiring a property manager?

Amelia:
Yeah, so we’re both of the maybe controversial opinion that when you buy probably one of the biggest assets of your life, you shouldn’t look to immediately hire out something that could absolutely make or break your business. So when you’re a self-managing landlord, you have way more control over who you place in your property, which is huge. You save money so that you can in turn scale. We also think that it’s a really marketable skill that you can use in future partnerships and we think that if you eventually hire out a property manager, you’re still gonna have to train the property manager or know what goes on behind the scenes. So it’s really good to have that boots on the ground experience. Right. When you get started

Dave:
And grace, do you share the same opinion or do you come at this question the same way?

Grace:
Absolutely. Especially if you’re somebody who wants to reach financial freedom quickly or scale quickly. You really need to work every dollar in your business. And when you’re hiring out immediately at 10% of your rent, that could be a third, a quarter half of your actual cashflow at the end of the day after reserves and your pity and all of that. So when I know I can do it better and put in systems and processes, I don’t know why I would ever look to hire it out. And I think that that works for a lot of people.

Henry:
Yeah, I mean I think there’s definitely something to be said for needing to understand how to manage a property before you hire someone to manage a property because how do you know what you’re looking for? Right. And uh, I think when you’re first starting out, you’re right, the margins are slim sometimes in rental properties in general. But when you go ahead and you hire someone to take on 10% and you don’t quite know what it is they’re supposed to be doing, then it can be, it can, you can really paint yourself into a corner pretty early. So I think that that’s definitely a good idea so that people understand what they’re doing. But you mentioned uh, grace that you, once you figured out you need to have the systems in place, right? So paint a picture for us. What moment did you realize, oh no, I don’t have the systems in place to scale as a self-managing landlord?

Grace:
Yeah, I think a lot of landlords are like, if you’re paying me I’ll chase you down for it as long as I get it. And that’s not a good systemized way to handle your rental properties. For me, I scaled to 15 to 20 units in about two years, Amelia as well. So I just ran around doing everything like a chicken with my head cut off. And there was one particular instance where I realized, oh my gosh, I’m relying on emotional decisions, not actual procedures or systems. And it was February in the middle of Iowa, I had a turnover, if you know anything about Iowa, you know nobody wants to move in February. And I let myself four go all of my tenant screening just to get somebody in because I was emotional about it, right? I wasn’t looking at my workflow or these are the exact requirements I have. I was making it up as I went along and I got burned very quickly. She stopped paying about three to four months. That’s the only tenant I ever had to evict. And you know, right then and there I wrote out my requirements and they are on one piece of paper and they’re the same for every rental moving forward. And I don’t ever make an emotional decision anymore.

Henry:
What about you Amelia? Do you have a similar moment when you realized, oh crap, I need to do this in a more systematized way?

Amelia:
Absolutely. I would say paying rent any which way is a trap that most investors fall into. I was accepting rent via Venmo, the property management software I was using checks people depositing at the bank and it was so hard to actually keep track. And when I eventually hired it out to a bookkeeper, they also hated me for it. And then when I hand also hired a property manager, they were like, what the heck is going on here? I can’t tell you if someone is late. I can’t tell you this, that or the other because you’re accepting rent in too many ways. So that was a huge turning point for me just to make it easier for others in my business as well.

Dave:
I’m so embarrassed to admit how many times I just like lost checks when I first started being a landlord and had to like go back to my tenants with my tail between my legs and be like, can you pay me again? Because I’m a super disorganized person, I can’t keep my together. .

Amelia:
Yeah. And that’s a great way to present it to the tenant too is as a benefit for them. So you can say, I need to accept rent in this property management software because then I can provide a receipt then I’m not chasing you down even though you’ve already paid. So always present something like this as a benefit to the tenant.

Dave:
So you’ve, you’ve made clear and I think we all agree that having a system for rent collection is obviously important but grace, what are some of the other processes or tasks that a property manager needs to do regularly that necessitate a system?

Grace:
Absolutely. We’re huge proponents of having a property management software. Even if you have one rental. And there’s a few key reasons why. Uh, as Amelia talked about, you wanna collect rent the same place the same time every month to keep it easy. You also want the same with maintenance requests. If you don’t have your tenants trained to put everything in the system that you use, for example, they call, they text, they email, then you can’t keep track of everything. You can’t serve your tenants quickly and you can’t make sure that you’re getting things done in time and being able to reference those requests moving forward. For example, if something keeps breaking, you know you need to replace it, not fix it for the 10th time. And I had a instance once where Amelia and I both have now internal property managers, so not a company, somebody who’s on our payroll.

Grace:
And a great example of why you need to have a property management system is I had a maintenance request come in outside of the system, tenant cloud is what I use. Well my property manager went outta town and I had to step in and handle it, but they were texting. I can’t see those texts. I have no idea what’s been said. It ended up being an emergency HVAC repair the day after Christmas. That’s very, very expensive. So I’ve got emergency repair guys knocking at her door 8:00 AM on a Saturday in the middle of a blizzard. She’s at work, she’s gonna be at work for the next eight hours. But I didn’t know that ’cause she, her phone number was outdated in tenant cloud ’cause she wasn’t trained to use that system. So how the heck is somebody else supposed to step in and make sure that that gets done. And then the last thing is late fees. We always say make the management software the bad guy, make the management software issue the late fees. So it’s like, hey, sorry it comes out automatically. I’m not texting you saying, Hey by the way you actually need to pay me another $30.

Dave:
Nice. So it seems like a a a good system and yeah, I do like having sort of the automation and it just sort of smooths the whole process. Okay, so Grace and Amelia have laid out a clear case for what can go wrong if you aren’t managing your own rental portfolio well, but are there ways you can learn these lessons without getting burned first And what systems do Grace and Amelia recommend to make your life easier? We’ll get into all of that right after the break.

Henry:
Welcome back to the BiggerPockets Real Estate podcast. We’re here with Grace and Amelia and they are schooling us on how to manage your rental portfolio like a pro. If you’re finding this conversation valuable, go ahead and push that follow button so you can never miss an episode. Let’s jump back in.

Dave:
I’m curious though, because you’ve both mentioned uh, these new systems and sort of being burned before adopting a new system and it seems to me that every investor sort of follow this pattern where you’re like, I’m gonna do the cheap thing or I’m gonna do the lazy thing and then it just, it always happens. You get burned, you get what you pay for and you learn your lesson and then you start to adopt the systems. But Amelia, are there ways that people can be a little bit more proactive about it and not wait until something bad happens and just start picking up best practices maybe a little bit earlier in their vesting career than probably the four of us did?

Amelia:
Yeah, we actually think our biggest lessons learned and our best systems and processes come right after we’ve gotten burned. But if there’s one thing that we’re big proponents of, it’s to start your systems and processes with your very first property. And this can be as simple as writing down what you’re doing. So when you’re onboarding a tenant, walk through the steps of how you’re doing that. Where are you listing it, what is the listing description? This is important because you don’t wanna have to rewrite that listing description every time the unit comes up for rent, which is a mistake I’ve definitely made and this has started to save me so much time. Write down your requirements for rent. How are they applying? What does the walkthrough process look like every little step of the way. It can be as simple as just a Google doc but start writing down what you’re doing even if it seems like I’m gonna remember this, I think we’re all guilty of that. I have a lot of things in my head that I know that I can remember, but once you’ve scaled to even five different properties, it becomes a lot harder to remember what you need to get done for every property. If you have a checklist, it’s so much simpler.

Henry:
Yeah, it almost sounds like you are from day one creating like a standard operating procedure and I think that a, that’s a wonderful idea. I wish I had done it. Uh, but BI think one of the things I wanna clarify for people too is I don’t, I don’t think I hear you saying on day one go out and buy the most expensive sophisticated piece of property management software there is out there ’cause it’s gonna make your life easier. You’re just simply saying document a process and then follow it repeatedly. And then as you grow and scale, maybe you can bring in a more sophisticated piece of software, but a process doesn’t always mean an expensive tool to track it. It can literally mean, uh, a spreadsheet or a Word doc, but something that you reference repeat and keep updated because I promise you you’re still gonna make mistakes, right? I I still make mistakes today. So that document needs to live and breathe. Is that, is that what I’m hearing?

Grace:
Absolutely. Your SOP should be living breathing documents that are always updated. I tell my team within real estate and our team in wire all the time, hey, it might say to do it this way right now, but in four days it might change and I’ll update the document because I’m all about learning quickly and changing and adapting. But as you have to have that one source of truth and that’s where a lot of investors get tripped up. They have a source of truth in their texts, in their emails written down on paper, whatever they’ve said verbally to their tenant. A standard operating procedure is a way to have one answer, this is how we do it, this is the answer. And like you said, it doesn’t have to be complicated. It could be some bullet points in a Google sheet.

Dave:
I really like that ’cause it it, at least in my experience managing people at BiggerPockets not in my real estate business, I think it’s very difficult to try and standardize how people are organized. Like some people wanna use Trello, like really complicated software. Some people just write it down in a book. I personally use Evernote for everything in my life, you know, and it’s difficult to say like there’s just this one play way that you can be organized but it sounds like grace, what you’re saying is like figure out what works for you and certainly try and use best practices and and adopt them. But there doesn’t need to be this super complex system and everyone can sort of figure out what resonates best with them.

Grace:
Absolutely. There’s a million ways to do every single process we’re talking about. Whether it’s renting, maintenance request, whatever. The idea we’re trying to tell you is that, think about it like a business, make sure there’s a source of truth and know that you can execute that however you want but do what makes sense for you so you actually use it and stick to it. Otherwise it’s all gonna crumble and you might write out this huge long operating procedure and never follow it. That’s useless.

Henry:
So let’s take kind of what you’ve talked about and and put it into practice, right? So let’s say an investor, they just closed on their first rental property, they’ve been hounding BiggerPockets for months now and they’ve been doing all the research and they finally did it. They pulled trigger, they closed on their first rental property. What should be their first or some of their first steps to get themselves organized?

Grace:
One of the first things you should do as a first time landlord, and this is something Amelia and I did very, very wrong, is start quick guides. These are little keys to the different important information in your business. So it might be utility numbers, it might be banking account numbers, it might just be addresses. But as I was talking about the different sources of truth earlier, that’s how we started. So whenever it was time to go find a utility number, I’d be scrolling through my email or looking through my text messages trying to find whatever it is I was looking for. Whereas you, if you just make a quick guide, and this could be even for tenant communication or onboarding communication, you know that is the source of truth and everything gets organized and it’s crazy how a little bit of organization is really the foundation for an efficient business that gets things done the right way the first time.

Amelia:
I would add to that, even before you buy a property, while you’re going through the like escrow process, you should be doc documenting everything that you’re doing reaching out to insurance agents. Grace and I are both guilty of the day before closing.

Henry:
I’m so bad about that.

Grace:
. Yeah, we love to forget it.

Amelia:
Oh my gosh I still do it to this day . I’m like, oh man, it’s even on my list. I forget to get an insurance quote and I’m like what the heck am I doing? So put that on your list. Uh, put all of your contacts that you’re gonna use for that specific property in your quick guide. Um, don’t forget to change out utilities into your name. Also super guilty of that. So just before you even even closed on the property property, be documenting what you’re doing.

Dave:
You’ve both in the, in our conversation so far referred to your properties as a business. And I’m curious if you think one of the barriers here to setting things up is that people, particularly when they start out don’t see a single rental property or you know, a couple of properties as a business and are just sort of treating it sort of as this side hustle or thing that they do on the side and that sort of prevents the professionalization that you both are recommending here.

Amelia:
Yeah, we’re both extremely guilty of this as well. We’ve done a lot of things wrong, which is why we’re so happy to be sharing because these are,

Dave:
This is turning into a confessional . This is

Grace:
A tell all,

Amelia:
There’s such common traps that lots of investors fall into. So we, neither one of us started calling our rental portfolio a business until we were probably over 20 doors a piece. But starting with your first property, it is a business. Even if it’s a side hustle, you can have a part-time job and that’s still a business. So that also helps you manage your tenants. If you have a business email, they’re gonna take you more seriously if you say this is how business does things, these are our procedures, they don’t know. They have no idea that you own one property. They don’t know that this is your first time doing this. So if you start treating it like a business, you will see that your tenants respect you more, you get things done better, you make more money in turn the whole thing. So even with one property, this should be a business to you.

Grace:
I think that’s something that a lot of landlords get wrong is they think that self-managing is a job and it can be if you make it a job, when you call it a business, it forces you to think about it of oh I own this business, I’m the CEO, do I need to be cleaning my properties? Do I need to be doing the sit and think where I reinvent the wheel every time I go to list that rental property? Or can I consider myself a business owner and then put myself in the shoes of how do I work on my business not in it and not reinvent the wheel and work on finding deals and things that are money making rather than the things that just take a lot of time and don’t make you any money. So it seems silly and I always felt silly saying my business for a long time, but it really is a mindset shift that helps pave the way for a lot of different things that you need to do within your business to make it easier so you can have more profit, more time with less input.

Henry:
You know that’s a great distinction and I don’t know that I’ve ever thought about it like that before when, but you hear it all the time. People are like, oh you’re a landlord, you’re just giving yourself another job. No, absolutely not. I own a business, right? And there are jobs to do within my business and I can choose to do those jobs. I can hire someone to do those jobs or I can bring in a piece of software that helps me do those jobs, right? But when you picture it as a business and not a job, it forces you to think more like an owner and not an employee, which is what we all need to do with our businesses. But with that, like I said, you can bring in technology to do some of these jobs and for me, like I said early on I realized I needed to bring in some piece of technology to help me but it was overwhelming. And I have a technical background like I did software analytics, software development like as my career. So if it’s intimidating to me it’s gotta be intimidating to somebody who doesn’t have that background. So what types of technology do people need to be looking for and implementing early on in their business?

Amelia:
Well the first one is your property management software. If you haven’t already picked up on that, grace and I are huge proponents of a strong property management software. We both use tenant cloud but there’s lots of softwares out there and you need to do your own research and decide what’s best for you. But you should have a software that at least does online lease signing, collects rent, has a really robust maintenance system and a strong tenant messaging system. So those are our minimum requirements for property management software. And this is so that you can keep everything in one place. We don’t want our tenants calling us or texting us or emailing us with maintenance requests or thinking they can contact us outside of business hours. And that’s huge for our property management software. It makes you look professional, it puts a barrier between you and the tenant so you don’t make those emotional decisions. The second that I would recommend for new investors starting out that wanna have some sort of a tech stack is a bookkeeping software. This is huge Grace and I didn’t have one to get started. I think we were both using Excel spreadsheets or maybe Sessa

Grace:
Or nothing,

Amelia:
Or nothing. Grace was using nothing. She can tell that story but this is huge. You have to be able to show how much you spent every year, document what you’re, what you’re even spending money on so that you can know if you’re even running a profitable business. And then the third is a project management software, which we, we can talk more about but just to give you the top three, those are what I would say.

Dave:
Given that you’ve both scaled to the point where you were self-managing, you did all the things yourself, then you’ve started to bring some things in-house. Like what is the difference between what you’re doing and someone who’s not self-managing at all? Like where do you see the distinction of what self-management is?

Grace:
Yeah, the people who who continue to treat management as a job are gonna crash and burn, not be able to be proactive. Earlier we talked about how do you increase your profitability with the same rental portfolio rather than always focusing on acquiring, acquiring, acquiring. And if you have the systems and processes to do that, to review your finances, to be proactive with your turnovers and who you’re leasing to, you’re gonna have such a more streamlined and hands-off business than if you are stuck in the job of self-management.

Dave:
I, I was making that face ’cause that is a lot of money, but I’ve also been there Grace I the, the last straw for me before hiring a bookkeeper was I set up my own property management software and I accidentally put one unit into the wrong bank account into the other bank account and like at the end of the year I was like, this property is killing it. I am doing amazing and then this other, I was like, wow, this deal really sucks . And it took me like way longer than I care to admit to realize that I was just depositing two sets of red checks into the wrong property and similar to you, I don’t think it was eight grand but it, it definitely took a lot of time and a lot of money to fix that up. And now I have a professional bookkeeper who does all this stuff for me.

Henry:
Alright, at this point you all know maybe a little too much about Dave’s and my early mistakes, but you also know what to do to avoid them After this break we’ll get into some of the best ways that you can both find and manage tenants and we’ll talk about how these strategies pay off in terms of your time. And you’ll also learn at what point do you need to think about starting to delegate some of this work as you scale. So stay with us.

Dave:
Welcome back investors. We are here with Grace and Amelia swapping some of our most embarrassing early landlord stories to hopefully spare you the same costs. Let’s pick up where we left off.

Henry:
I wanna move to something that I think really what a lot of people want to hear about from you guys and that is tenant selection, right? So when it comes to finding tenants and managing tenants, what is it that you guys do or recommend or has worked for your business because that is where everybody feels like they get kicked in the teeth sometimes.

Amelia:
Yes, this is absolutely the biggest part of your business and our opinion is finding the right tenant because they will make or break your property, they will make or break you as a landlord emotionally. Uh, no, I’m just kidding. But we, we are huge proponents of choosing the right tenant waiting until you have a good applicant to move forward with them. So I’ll take you through our uh, tenant onboarding process. So obviously the first thing is listing it. We pretty much solely list on Facebook marketplace in the markets that we’re in. That is where most of the tenants are hanging out. But we all know that there’s tons of, is this still available messages that come through ? I know it’s like the bane of my existence as a landlord. So right off the bat we have saved in our notes app or Google Drive an automated message that gets sent back to these tenants and it says or possible applicants, it says hi, the property is still available until it’s no longer listed.

Amelia:
If you’re interested in the property, here’s our pre free pre-application and it sends them to a Google document. So this is huge because we wanna make sure we’re pre-screening tenants before we’re even moving forward or wasting any more time with them. Are they even qualified? So that’s gonna collect their name, their income, and obviously check your, you know, the fair housing laws in your state to make sure you can collect this information. But just basic information, previous landlord’s name with their contact information and the reason why they’re moving. So just a couple basic things from there. From the pre-screening application, uh, we go through if you’re qualified, we set up usually an open house or one or two dates that they can go on to our Calendly schedule and book a time to view the property after they’ve viewed the property. We have them submit a formal application that checks their background credit score and eviction history.

Amelia:
And while that process is going on, we’re also doing their employment verification and pay stub verification and previous landlord checks. Now this is huge and pro tip just because someone writes down their landlord’s name is John Smith, that doesn’t always mean their landlord’s name is John Smith. So do a little extra research if you can look up the owner of the address that they say they’re in, verify that it matches up with that person. When you call the landlord, we like to use a little trick that says do you have any rental properties available? Instead of immediately going into, Hey I’m calling about Sam Jones. Is Sam Jones your current tenant? Well if it’s that person’s friend, they’re gonna know that they need to lie for Sam Jones. So if you just say, Hey, do you have any rentals available? If they’re actually a landlord, they’re not gonna be super confused by that question. So landlord reference checks are huge because you wanna make sure that they treated their last landlord kindly, make sure they have employment history and credit check comes back. So those are the basics of screening and we don’t skip on these processes anymore because we have been burned too many times by placing the wrong tenant.

Grace:
And I just wanna add in that if you’re busy running around, barely keeping your head above water, you’re gonna realize your tenant or your property needs to be rented a few days before it needs to be rented. ’cause that’s what I used to do. If you can get proactive and that’s what working on your business is, is getting proactive, you have a checklist that says, okay, the day my tenant gets notice, I start my pre-leasing, I start the listing. So now I know tenants are gonna be looking when they’re one or two months out, not three days. And you can be more proactive, get better quality tenants, a bigger tenant pool and place somebody who’s gonna be higher quality in your house, stay longer and pay more rent with less turnover, which are all good things for you and your business.

Dave:
Now I, I wanna move on and sort of talk about sort of how you both manage your time here because you’re both trying to scale, you’re both managing your own portfolios, but how do you decide what ports of port uh, property management are worth it to you? Because there’s so many different things, you can do everything yourself, you can get software, you can get hire out, uh, people internally. Amelia, how do you think on the return on time and what is the, like how do you decide what’s worth it to you?

Amelia:
Yeah, that’s a great question. So there’s so many components that go into owning rental properties and the way that Grace and I look at it is in terms of money making activities versus activities that we can hire out that aren’t worth our time. So moneymaking activities for us is acquisition, reviewing financials every month, making projections and determining which properties are performing well and which aren’t. Um, determining which properties maybe need some deferred maintenance to make them hold more value or appreciate and non-money making activities for us at this point are those maintenance requests that come in at midnight that need to be taken care of. Those can easily be outsourced. We have processes written down for our property managers at this point where they can do those tasks. Little things like scheduling with handymen or anything like that that doesn’t directly bring in more money for the business or help us with projections in the future has been hired out at this point.

Dave:
So then Amelia, that’s interesting you say that ’cause would you consider that approach still being a self-managing landlord?

Amelia:
I personally do consider myself still a self-managing landlord. Even though I have an internal property manager, she’s only working for me. I have 41 doors at this point. She just self-manages for my portfolio. But I am still heavily involved in the operations of my rental portfolio. So I’m not doing the day-to-day communication with tenants, looking to make sure everyone’s paid their rent serving notices if that needs to happen. I’m looking at big picture, I’m the CEO of my business, I’m making sure that the rental portfolio is operating as it should.

Dave:
Yeah, that that makes sense. You know, I actually like to divide my management of any particular deal into two different categories. One I would say is operational management, which is sort of like the day-to-day stuff. So you know, if you’re renting a property out, uh, yeah, it’s all the stuff we’re talking about might work with tenants. If it’s short term rental, it’s managing guests. But there’s this whole other side of managing a rental property, which I would personally call asset management, which is like, what are you doing with the physical asset to maximize its value? And that is stuff like, you know, are you gonna do a BRRRR are you gonna do a rehab? What’s the scope of that rehab? Are you gonna, you know, reposition the property, are you gonna subdivide it, whatever comes up in a particular property? And to me that part I’ve never figured out a way to outsource, like you can outsource sort of like the day-to-day stuff, but asset management and sort of like being the, the last line of defense and the, the person who’s like really ultimately responsible for the success of any individual deal. Like personally, I don’t know if you can outsource that, Henry, are you sort of the same way?

Henry:
Yeah, absolutely. I mean I think that that falls into exactly what Amelia and Grace defined as moneymaking activities because I think this is a, and I, and I think this is a part of management that people don’t do enough, even experienced operators don’t do that enough. And, and I’ve been guilty of this because we get so focused on acquisition in order to scale that we forget that we’ve got scale in our current portfolio if we monetize the properties to their fullest potential. And I think that that’s something only that’s, it’s really only something you or some sort of like COO that you hire would be able to do. Somebody who’s specialized in understanding your portfolio, the intricacies of your portfolio, and then specialized in the industry. ’cause if you’re in short term rental, there are things that you can do that you can’t do in long-term rental that can maximize your, your monthly, uh, income, right? And so it’s really, you really have to have that specialist point of view. But this is the like far less talked about part of growing and scaling a real estate business that I think needs to be more on the forefront.

Grace:
And if you don’t refer to it as a business, you are only looking at that little sliver of property management. It doesn’t even occur to you that there’s an overarching manager, the asset management, what we’re all talking about. And so you never think about it, you never do it. And one of those proactive things that came to my mind when you were talking, Henry is my internal PM handles all the leasing and turnovers, but as the asset manager, a question I might bring to him is, Hey, how do we eliminate winter turnovers? And I focus on the bigger picture. Okay, we only offer six month leases if it’s, you know, if they start the lease after October, it has to be six months. So things like that that are the bigger picture, preventing turnover, which makes me money that I’m talking about as the asset manager, but I’m not going doing the nitty gritty. I don’t at this point even know my tenant’s name. I might look them over, but I don’t talk to them on a day to day. He does that.

Dave:
Got it. So it sounds like both of you sort of started as sell, you know, doing a hundred percent of the management, everything from deal, you know, picking up the phones, uh, you know, signing the leases yourself. Amelia, at what point did you decide that you needed to hire someone internally?

Amelia:
That’s such a great question. So I was at 36 doors before I hired someone internally and I have a mixture of long-term, midterm and short-term. So there’s a lot of moving parts. And one thing that held me back from ever hiring someone out was the fact that I wasn’t even organized enough myself yet at that point that I felt I could train someone else on it, but I hired someone so that they could start documenting the things that I hadn’t yet documented. But to go back to your question, how did I, what was the turning point? It was when I really started to dig into my books and realize that I was losing money because I wasn’t able to focus on the asset management and I, the $500 a month that I pay my property manager, I save just by being a better business owner. That was the huge turning point for me. There was, I was doing bookkeeping, I was doing property management, I was doing acquisition, I was doing every, every single thing in my business, uh, monthly rent, uh, payout to my partners, all of that was me. And I was losing money because I was trying to do too much. So I’m very money motivated and that was the turning point in my business.

Henry:
Yeah, there’s, there’s really two schools of thought when you think about when is it time to, to bring someone in to help with some of these tasks, right? There’s a school of thought that where you need to have enough income coming in that you can afford to pay for somebody. And then there’s also the school of thought to where, uh, am I taking on too much where I’m losing money? Those two points can be different, right? Because each person’s capacity to manage things is different based on what’s going on in their life. And so, um, I think when people ask this question, they want to know like, you know, when’s that point? Is it 10 doors? Is it 20 doors? Is it 30 doors? When can I truly afford to hire somebody? But more importantly, like how did you feel, and this can go for both of you, how did you feel when you hired somebody? Did you feel like, oh my gosh, yes, this, I needed to do that? ’cause that’s what I felt when I hired somebody and that let me know that I should have done it a lot sooner.

Amelia:
Yes, 1000%. I, it was such a huge relief for me and I said, I’m, I have to sign out of this. I will no longer be looking at this software. Sarah, my property manager manager, it’s on you now. If you need me, I’m here, but I can’t be in here anymore. It’s too emotional for me.

Grace:
I just wanna add, for me, I’m very logical and numbers driven and while yes, emotionally I knew I needed to hire somebody and it was an immense relief when I did, I looked at it as if I bring somebody on, what can I now do in flips to pay for that person? And I was doing maybe a couple of rehabs a year and now he’s been with me six months now and we’re doing six flips right now, which I never, ever, ever would have thought possible. So you don’t have to look at it, at it as how can I make this such this much money and then drop my income ’cause I hire it out. You can also look at it in a safe way. How can I leverage this person to make more money?

Henry:
Yeah, it’s definitely, uh, I don’t know if double-edged sword is the right way to say it, but it definitely, there’s, there’s definitely two things to be thinking about because yes, for me, I was very similar to you guys where I didn’t want to hire somebody, I didn’t want to hire somebody and then someone pointed out to me that I was losing more money by not staying on top of my turnovers by not getting to, uh, by not getting to three day notices on time and by not collecting on time, then I would of just paying the salary for someone to stay on top of those things for me. And on top of all that, I get that time back to grow my business more. So I think that’s a, a, a fantastic perspective and approach and I’m glad that it’s, you’re right, it’s all about the data and it’s all about understanding what’s going on in your business so you can make those decisions.

Dave:
Alright, well thank you both so much for sharing your stories and knowledge with us. This was a very, uh, cathartic exercise I feel like for all of us, just to admit a lot of the mistakes that we have all made as real estate investors. So it was a lot of fun. Grace and Amelia, thank you so much for joining us today.

Grace:
Thank you so much.

Dave:
If you wanna learn more from Grace and Amelia, definitely make sure to check out their book, The Self-Managing Landlord, you can do that at www.biggerpockets.com/managingbook. That’s biggerpockets.com/managingbook. And of course, as always, if you want to connect with them individually, we will put their contact information in the show notes below. Henry, thank you so much for joining me, man. I know you enjoyed this a lot. It seemed like you, you enjoyed getting some stuff off your chest over the course of this conversation, ,

Henry:
It was like looking in a mirror. So thank you for making me realize the flaws in my business.

Dave:
Hopefully that’s behind both of us at this point in our careers.

Henry:
Amen.

Dave:
All right, well thank you all so much for listening. We’ll see you soon for another episode of the BiggerPockets podcast.

 

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