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The Real Work Behind Real Estate: Asset Management, People, and Performance · The Academy Presents podcast

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  Did you know that 90 % of the world's millionaires
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  invest in real estate? Well, I'm Angel with the
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  You're already taking the first step. just by
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  joining us here today. Hey guys thank you so
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  much for joining us again and I am super excited
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  because we are going to talk about asset management
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  and asset management and management companies
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  and all of that stuff which if you have not had
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  the joy of doing those things get ready. Today
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  we have Greg Scully and he is going to share
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  with us some of what his experiences have been.
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  So Greg, I'm going to let you kind of intro yourself
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  and tell us a little bit about your background.
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  Thanks, Agile. Yes, Greg Scully, operating out
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  of Middle and Eastern Tennessee, almost exclusively.
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  We're apartment and RV park syndicators and joint
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  venturers, occasional house flippers and property
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  managers. Cut our teeth in the apartment space.
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  Still have a bunch of that stuff. I don't know
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  how many units we have. We're managing 65 of
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  them ourselves now for the past year or so. And
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  more recently got into the RV space, evolved
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  in a few parks there and are currently on point
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  operating a 50 pad park out of town in Tennessee.
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  So I guess that's part of our property management
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  as well, but not necessarily under the umbrella
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  of our company. Wow. Yeah. So we, um, we got
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  our first active syndication across the finish
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  line in December of 21 and it has been a roller
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  coaster ride ever since. Yeah. When you're, when
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  you're like super active in this stuff, uh, you're
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  super active. Yeah. So I don't think I think
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  a lot of people when they hear asset management,
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  they think property management Yeah, I know that
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  was kind of my thought when we kind of first
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  thought started like I understood was managing
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  the managers But I didn't really understand That
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  it wasn't like you don't have to be on site.
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  You're not interacting with everybody on site
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  all the time So when you're when you're dealing
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  with that third -party management company What
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  are some of the things that you do to try and
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  asset the man or manage the asset more effectively?
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  When you're working with a third party. So if
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  you're kind of managing the manager, I spent
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  a lot of time just looking at the reports that
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  were made available to me from the property manager.
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  So you're always looking at occupancy level more
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  important economic occupancy level you know where
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  delinquencies how much money is owed looking
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  for trends and that kind of stuff budget to actual
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  type things related to if you have a heavy rehab
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  component that you're staying on budget with
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  any capex spend you know you're kind of looking
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  line by line for things that look at a place
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  big numbers that show up out of nowhere following
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  up on, hey, what was this? Very often, there's
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  a very logical and fair explanation for it. Sometimes
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  there's just human error and you're catching
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  things that don't belong there. We spent a lot
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  of time doing our own market comparisons for
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  rental comps. We didn't necessarily lean on them
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  for that. So we were kind of trying to you know,
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  steer the ship a little more directly. We were
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  very active owners when we were using third property
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  management. Well, we still have third property
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  management on a couple of properties. So yeah,
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  it's less, you know, you're not answering the
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  phone or anything. You're just, you know, it's
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  more of the financial engineering type thing.
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  So when like, when they're not meeting maybe
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  your standards, your parameters, How do you handle
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  that? I mean, you just have open and frank conversations
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  about it, making sure that they have all the
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  resources they need. Sometimes they might need
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  a little more marketing budget than they have
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  asked for, or maybe that discussion hasn't even
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  been made. We would also do marketing side by
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  side with whatever they were doing. have our
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  own Facebook ads, you know, cause we would have
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  a business page for each property and things
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  like that. And ultimately that all just got pushed
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  to wherever they wanted the prospect tenant to
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  land. So you just, you just talk it out. You're
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  like, Hey, here's our expectation. It seems like
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  it's falling off a little bit. Is there a good
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  reason? If there is fine, you just work through
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  it. If they're like, oh, you know, like labor
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  has been huge. A lot of that has come down to
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  just rehab is slow because we're having trouble
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  finding labor, you know, or a lease up has been
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  slow because your dedicated property manager
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  quit. Yeah. We've had fun with maintenance. Yeah,
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  it's been tough. Yeah. Before on the call. I
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  was out out of property to 830 last night. Yeah,
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  I'm being on site for plumbing issue. Yeah, no,
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  we've we've been kind of fortunate because again,
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  I talked to everybody and as soon as I hear a
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  guy say or somebody female male whatever say,
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  oh, yeah, I work maintenance for XYZ company.
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  I'm like, are you HBA? Are you HP certified?
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  And when they're like when they're like, yes,
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  I'm like, can I get your contact info? Are you
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  interested in doing any side gigs? Because maintenance
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  is hard to come by. Yeah. And I had no clue.
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  Yeah. We've done a fair amount of it ourselves,
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  unfortunately, trying to get away from that.
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  Yeah, no, it's been really crazy. I know whenever
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  we would be in our asset management meetings,
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  like our weekly meetings with the property management
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  company, I had to step back. So I was a teacher
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  forever. And it was so uncomfortable. It was
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  the weirdest thing. It was so uncomfortable for
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  me. I felt like I was getting onto a student
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  and the rest of the class was averting their
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  eyes. And I was like, I can't do this. And Jason
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  was like, oh, you're uncomfortable. You're going
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  to grow. I'm like, no, I don't want this. I can't.
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  This is not my lane. And I think that that's
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  one of those things that everybody here, everybody
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  say, oh, you're uncomfortable. You're growing.
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  Get uncomfortable. It means you're growing. I
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  was uncomfortable but like I just knew this is
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  this is not my lane yeah you could be uncomfortable
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  and grow but you could be also uncomfortable
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  and not uh performing to your highest potential
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  so I mean it's great point about not being in
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  your lane yeah yeah because I don't there's some
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  opportunity cost to it yeah you got the economics
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  background yeah You know, we've had this conversation
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  a lot. Whenever you hear people talking about
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  syndication, you're like, oh, anybody can do
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  it. And in your mind, you hear everybody can
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  do it, even though they said anybody. And I think
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  it comes down to, like, anything. Anybody could
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  do it. Not everybody can. Well, yeah. Can you
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  do it well? I can skateboard, but how well can
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  I skateboard? Hopefully I won't get hurt. Yeah.
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  And I just, there was a period of time where
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  I was on site a whole lot more and there's a,
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  even amongst adults, there's just a level of
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  drama that takes place. And I just, I don't know.
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  I can deal with, I can deal with a lot of drama,
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  but it was just different. It was a different
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  drama. And I was like, And I really, that when
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  I saw my first hoarder unit, that was a weird
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  feeling too. Because I, I'd always called our
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  house the hoarder house. I will never again call
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  our house a hoarder house. We just have a lot
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  of stuff. Yeah, there's a difference. Yeah, there
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  is. And I just had never, I mean, the first day
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  I walked out of it and I called Frank on her
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  GP team and I was like, I don't know how anybody
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  could live like that. And it was like this. feeling
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  in the pit of my stomach and I was just like
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  that's that's really that's that's mental illness
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  like that's sick that feels like the back bedroom
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  was like a foot maybe a foot and a half deep
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  of just trash the whole bedroom I was just like
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  I couldn't believe there weren't bugs in there
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  so yeah you're lucky yeah I could not believe
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  there were not bugs and she the person had been
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  in that unit since 2007 Yeah, I mean, it's dynamic.
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  You're dealing with humans. A lot of times you
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  just are an ear for them. They call you with
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  all kinds of things unrelated to maybe you're
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  just trying to get a renewal done and might be
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  on the phone for 45 minutes. Yeah, it was mind
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  blowing just to And I guess it's not just drama,
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  but it's life, like what you said. But you're
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  getting it from all sides. And for us, it's like,
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  we don't want a bunch of people knowing that
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  those are ours, because we do live close. Our
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  daughters go swimming at the pool there. Yeah,
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  I mean, that's an interesting thing. Some people
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  don't want to be known as owners. which I get,
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  especially in smaller communities, because there
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  could be some reputational exposure related to
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  that, because you're running a business. One
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  aspect of that business may be raising the rates
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  on units. And that can, it does affect people.
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  I mean, I'm not going to say. may, it does affect
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  people, and it can create some backlash. It's
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  a little bit different than when you raise the
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  price of your club sandwich. If you own a restaurant,
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  you're probably not going to get in the news.
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  But effectively, as business people, we're all
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  doing the same thing. You know, and it's, it's,
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  it's different being in the community too. So
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  the, our property is like 15, which from our
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  house and I kind of got spoiled to having it
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  close. And so we're really continuing to look
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  for properties that are close to us. But then
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  at the same time, like price levels are pushing.
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  So price levels are going up and I sit there
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  and I'm like, these are people in my community
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  and I can't control what they're paying for transportation.
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  I can't control, you know, what they're paying
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  for groceries. I can kind of control what they're
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  paying for housing and so there's like this weird
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  kind of a like a I don't know like a dichotomy
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  or like a fight of do you push rent knowing it's
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  a blanket solution when people are going to be
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  affected differently or do you like try and find
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  those alternative income streams that's my goal
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  is to find alternative income streams so that
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  people that can afford to pay more basically
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  self -select and they purchase into the amenities
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  or they purchase into the upgrades. And so it's
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  not just a blanket across the board. Hey, we're
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  increasing everybody's rent, 50 bucks. Yeah,
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  that's a great point. I mean, you can have...
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  We often think of our units in a certain categories,
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  legacy, mid -term and fully rehab. So within...
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  within a complex, there can be different price
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  points. You don't have to just go in and say
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  everybody's going up $200 or whatever. It can
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  be relative to the condition of the unit. Because
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  just occasionally you get a unit back that it
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  may be outdated, but is sparkling clean. And
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  there's necessarily, you know, there's no reason
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  to go in there and rehab it anyway. But you may
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  be able to just put it back on the market as
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  a legacy unit at a you know, a more affordable
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  price point than if you had gone in and redone
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  everything, so. Yeah, well, I think that that's
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  a neat way to look at it almost. It makes me
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  want to kind of rethink like should we not keep
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  a couple of units? Just not quite as. Not even
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  like necessarily classic, but like if they're
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  clean, let's not worry about redoing the flooring
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  or. you know, putting in new countertops. Let's
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  see how it goes. I mean, if somebody's going
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  to push back at a certain price point, can we
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  offer that one? So, yeah. Yeah. Yeah, because
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  I think that it's very dynamic. I mean, you know,
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  just getting into this conversation a little
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  bit. It's that that's that was one of the things
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  that, you know, starting out using third party
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  managers, getting education is like, oh, we're
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  going to do this, this and this. you know, once
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  you're operating it on a day -to -day, there's
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  much more fluidity to this business. You still
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  need to box it in. It's like this is the range
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  we're working in. There's some caveats about,
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  you know, fair housing and stuff. You can't just
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  like change the prices all the time. You have
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  to have some consistency so that you're not exposing
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  yourself to any claims of mistreatment. Yeah,
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  I have a lot more respect for third party management
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  now that we're doing it ourselves and it's difficult.
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  Yeah and so like it's we're making the distinction
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  for those of you who listen, third party management
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  is an outside property management company. Like
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  for us we have a regional that she manages. the
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  onsite personnel for a few different properties.
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  And the other thing Greg has done is they've
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  created their own property management company.
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  And so we can kind of shift into that because
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  I'm a little interested in that just because
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  of some of the headaches that we've experienced
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  in the past few months. And just being able to
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  get some personalization to the reporting and
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  to the information and Yeah, I mean, you know
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  first trade -offs steel trade -offs thing we're
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  largely in tertiary markets So they're this limited
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  supply of third -party management to begin with
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  Generally speaking they all do a pretty good
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  job but they also have lots of units and lots
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  of owners and so We, in particular, wanted to
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  do things that they had not implemented yet,
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  things like rubs, even just online leasing. And
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  for them to change a system for one or two owners
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  is a really good business sense for them. They
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  need to have consistency across their portfolio,
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  and it would be very difficult to manage different
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  expectations from you know, a hundred different
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  owners. So the trade -off was, okay, we're going
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  to do it ourselves. We're obviously, you know,
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  we're charging ourselves less. And it's in terms
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  of management fee with the anticipation that
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  most of that reward will be at the backend, you
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  know, on evaluation. So I would say our management
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  company is a profit center, largely is self -sufficient.
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  It runs itself, it pays for itself. One of the
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  biggest things we were trying to do is control
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  the clock a little bit more. You're about expenses
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  quite a bit. Pretty major expense when you're
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  doing a major rehab project is the loss of release
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  on the clock, just how long things are sitting
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  vacant. We've done okay with that, probably not
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  as good as we expected to. Some of that might
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  be related to labor. A lot of growing pains.
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  We have a pile of checklists. We're constantly
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  adding stuff to a checklist for moving procedures,
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  move out procedures, ready checklists, just all
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  of that stuff. So third party management will
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  cost you more. You'll have a whole lot more time
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  on your hands to do whatever. you