Latest / The Academy Presents podcast / Mastering Property Management and Protecting Your Multifamily Investments

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Mastering Property Management and Protecting Your Multifamily Investments · 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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  Academy Presents Real Estate Investing Rocks,
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  and I'm here to help you if you want to go for
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  your piece of that pie. Are you new? Are you
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  new to this and you just don't know where to
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  start? It's okay. Are you someone that has invested,
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  but you feel stuck, you feel like you've lost
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  momentum, you don't know where to really head
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  from here? Are you a seasoned real estate investor
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  who is doing great, but maybe you just want to
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  hone a few skills here and there? This is the
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  place for you. The Academy Presents Real Estate
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  Investing Rocks podcast will connect you with
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  industry experts so that you can save time, avoid
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  costly mistakes, and begin living the life you've
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  dreamed of all through real estate investing.
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  You're already taking the first step. just by
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  joining us here today well and also um there's
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  so sometimes a property management company will
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  require that there be a minimum balance and this
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  was the situation that we ran into was we met
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  the minimum balance but an invoice came in that
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  was greater than the minimum balance and it paid
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  out anyway and so we were in a conversation with
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  them and they were like well you know it went
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  it went into the red And my sister -in -law is
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  amazing at details. And she's like, but we met
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  the minimum requirement. So this should be on
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  you. And that, I mean, she said it in a much
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  nicer way. Actually, I think her husband, Alan,
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  probably said it the best, but he's really good
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  about saying these negative things and people
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  don't get upset. I don't know how he does it.
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  I like, I'm just kind of in awe. I sit there
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  and I'm like, oh, how does he say this? And people
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  aren't like jumping down his throat. I think
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  I will borrow this next time I have a bad deal.
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  No, I'm kidding. For real, like for real. But
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  it's, we've had issues. And so that was where
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  we said, if it's something over XYZ amount of
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  money, we need to approve it. And like you said,
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  it's not that it's not going to be approved.
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  It's that we just need to know. Like we had to
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  replace all the gas lines at one of the properties.
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  It was $40 ,000. We had to approve that because
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  even if you've got a loan that's helping you
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  cover some of the capex or you're able to put
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  it somewhere where you can get a draw on it You
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  still have to front the cash So you front it
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  and then you get reimbursed So that that's really
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  the reason why you need to know but aces what
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  choice do we have gas? That's how people like
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  take hot showers and like cook the food because
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  it's gas gas stoves I mean, you're not gonna
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  say no but it's more just to keep you on top
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  of what's going on because I don't know about
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  you, but when I'm looking at some of those reports
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  and some of them are cash, some of them are cruel,
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  and I'm just like, I didn't do that well in accounting.
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  Looking at all these reports, I'm just like,
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  I don't understand. It's just easier if you stay
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  on top of those big ones. That way, at least
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  you've got a mental note. what you're looking
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  at for that month or maybe the next 30 to 60
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  days. So those are all I screen shotted your
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  little list of things because I thought it was
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  really good. So guys, for those of you out there,
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  yes, I am learning right here alongside of you.
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  I'm taking my notes. And like I said, I screen
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  shotted her list because that was awesome. So
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  absolutely be taking notes. And I mean, you're
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  you're hearing real life examples. um and it's
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  it's not for the it's not for the faint of heart
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  no definitely is nothing so no and i like we've
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  had calls here recently too where um like the
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  proposed budget isn't being met but it's not
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  like on the expenses side it's on the revenue
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  side so like with rent increases or additional
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  streams of income and that's hard too because
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  you're trying to address it and you want people
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  to be on proposed budget and on that revenue
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  side, but at the same time, we've had so many
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  changes in the economic landscape over the last
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  six months to a year, and we'll continue to have
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  them for the next probably 18 months, that some
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  of those projected budgets are just going to
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  have to be set to the side a little bit. I mean,
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  do you know if you can as a team and the problem
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  is going to come back together and do like an
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  amendment or a revised kind of projection? Because
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  I know that like there's I know that there are
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  people on our team that are like, no, you have
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  to be with what you projected, but there's really
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  no way to because well, number one, it's a classy
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  property. But number two is the economy is crazy.
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  Inflation is crazy. Disposable income is Basically
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  gone. So is there, do you know if teams do that?
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  Do teams get together with the property management
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  company and like reassess? Well, I know that,
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  you know, on our property, it hasn't been done.
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  I personally think that you need to. I mean,
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  ideally you don't. You want to set a budget for
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  the year and you want to go and be able to manage
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  to that budget. But if you know for a fact, like,
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  you know, just as an example, you know, everywhere
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  across the country, insurance is just blown through
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  the roof. But when you hadn't necessarily put
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  your budget together, you didn't know when your
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  new policy was gonna come up, it was gonna be
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  20 % higher. Well, are you just gonna not pay
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  it? No, of course not. So you've got to be able
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  to like find either money in the budget where
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  you can. accommodate for that increase, or you're
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  going to have to reevaluate your budget for the
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  year to factor in and see how that's going to
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  impact your overall numbers. It's not anything
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  that you could have planned for. It's just the
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  climate of what's going on across the country.
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  There's so many insurance claims. basically everywhere
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  in the United States that I think the lowest
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  insurance is going up is 20 percent. And then
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  if you live in Florida like I do it's a little
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  tripled between last year and this year. So there's
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  no way on the planet when you bought a property
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  that you could have expected a 300 percent increase
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  in your insurance and that's definitely going
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  to impact your budget without a doubt. So yeah
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  I know and we we're in Texas our properties are
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  here in our backyard and taxes went up insurance
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  went up and then um if you're wondering about
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  insurance you can listen to JT's presentation
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  um because we talk about all those things too
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  and the last summit he was saying that some of
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  the major insurance providers have totally left
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  Texas and Florida yes they've just decided that
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  they're out or some of them aren't even um insuring
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  apartments anymore they'll do industrial they'll
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  do industrial flex they'll do other things but
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  they will not um insure apartments or multifamily
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  at all So that's kind of crazy. So you've got
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  reduced supply because you don't have as many
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  people offering insurance or providing different
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  providers. And then you've got people that are
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  still demanding it. You still have to have insurance.
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  And so that's going to put upward pressure on
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  the price too, because that's how the market
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  stays where it needs to. The less competition
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  you have, the less competition you have than
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  the people that are providing it just go, oh,
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  we don't need to just go up by... three or 4
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  % this year, we can go up 25 % because they don't
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  have any options. Well, and because of what did
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  they call it? It was like the cash basis thing.
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  Like, so if you needed to replace something,
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  they were still using old costs. So if you needed
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  to replace something, so something happens, flood,
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  whatever. instead of them covering 100 % of it,
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  they were only covering like 60%. So they revamped
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  like the per foot reimbursement or coverage so
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  that it's closer to the 100%, which also means
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  it has to go up and you get risk pulled. So if
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  you're in a place like Texas or Florida where
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  there've been lots of claims, even if you're
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  in an area that hasn't had claims, you get risk
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  pulled with the other people because you're gonna,
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  what you pay, helps cover what happens to them
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  even if you're you know even if you don't make
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  a claim so and it's like that with cars like
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  that with all insurance risk pools that's what
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  they do and they allow you to self -select because
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  i'll ask you things like do you want a high deductible
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  or a low deductible well if you know you're going
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  to get a whole bunch of car wrecks you want the
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  low deductible um so you self -select into these
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  risk pools so just putting it out there for you
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  um but though the way the apartments work is
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  different because it doesn't follow the owner
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  it follows the property So the insurance will
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  in fact be higher in a property that's made more
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  claims. But if you're in an area where lots of
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  claims have taken place, even if you didn't make
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  the claims or your property didn't make the claim,
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  it's still going to be higher because of the
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  risk pool. Yes. So a lot of things working against
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  people who are trying to invest wisely. It's
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  definitely a tough environment out there. I heard
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  I've only ever heard of one other. Property management
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  company in Texas that another one of two that
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  we're doing the umbrella policy. And it was it
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  was actually Houston property that every other
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  insurance company was saying that it would be
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  like 1800 a door and they were able to get in
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  on an umbrella that was like 900 a door. So that's
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  what's good about the getting into those umbrella
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  policies, but not all property management companies
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  have those. That's why that's why I left it as
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  the last bullet and I said it's a great to have
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  because I do know that a lot of them don't have
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  it but if you can get there you know outside
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  of you owning over a thousand doors you're not
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  going to be able to get an umbrella policy that's
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  worth it so if your property manager can do that
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  that is a good thing and it'll help you save
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  some money. Absolutely and you know I just want
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  to thank you for sharing this information and
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  putting it out there because property management
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  and asset management can seem really overwhelming.
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  We meet weekly with our property management company
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  and sometimes it gets really redundant and it
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  seems kind of foolish to be meeting every week.
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  But then when something happens like the gas
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  lines need to be replaced and the water main
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  getting busted and all of these other things,
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  I'm really glad that we meet weekly because you
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  kind of get slammed sometimes. So I definitely
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  think that as long as you can have those weekly
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  meetings, it's really good. And you also gain
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  a lot of experience from it. So yeah, that's
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  the part that I like because sometimes I get
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  on the calls and those of you that know me, you
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  know, I don't do numbers. I don't like the numbers.
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  It's not fun for me. And sometimes we get in
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  a meeting and that's all it is, is numbers. And
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  I promise you, I don't want to be there at those
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  meetings, but I am. And I've learned more about
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  the numbers than I ever wanted to learn. But
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  there's other things I've learned too, like your
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  property management company is not, or hearing
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  about a property management company doesn't mean
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  that every single regional and every single person
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  that is employed by that company is amazing or
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  that they're all horrible. Our experience has
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  been, which I know is limited, but our experience
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  has been that it is absolutely determined by
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  the regional. So if you have an amazing regional
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  manager, most likely you're going to have a pretty
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  amazing experience. Now we looked into ours because
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  we just kept the management company that we used
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  on our first property and some crazy stuff happened
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  because that property management company actually
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  dissolved. But the regional and all of our onsite
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  people remain the same and she found another
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  property management company to bring all them
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  on. Wow. Okay. Yeah. So it worked out really
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  nice. Um, and she's just amazing. So Elizabeth,
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  if you're listening, I think you're amazing,
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  but she just does it's she's made, she makes
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  it smooth. Like I said, I mean, when there was
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  an issue on one of the properties, she identified
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  it, replaced it, took care of it, everything,
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  and then came to us and told us about it after
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  it was fixed. and we didn't have to worry. We
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  didn't get involved with the, why is all this
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  crap happening? Like, she just took care of it.
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  So I think those are things that you really want
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  to watch out for. The accounting, I think it's
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  probably a nightmare regardless. We've got a
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  property management company for our residential
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  stuff that the accounting, I mean, we still get
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  reports and stuff, but like we had a house that's
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  been sitting empty since like January and we
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  didn't know. And with residential, especially
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  like the single -family homes, when it's empty,
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  it's 100 % empty. Yes. And so we just, it wasn't
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  on the reports. And we were just like, dang,
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  and we don't meet with them at all. We text back
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  and forth every now and then because it's smaller
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  properties. It's just not the same. When we were,
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  the first company we were with, the one that
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  dissolved, their accounting was wonky too. And
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  when we're with now, it's like, I don't know
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  how to run the reports. I think my sister -in
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  -law does, but that's her lane anyway. But like,
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  I don't know how to run the reports and look
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  at the reports. And I'm just like, so when you're
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  talking there at the beginning, you're like,
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  what you were being told wasn't matching up.
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  So now that I've heard your story, I would know,
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  hey, this is, okay, this report says this was
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  our gross rents. So this much should have been
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  deposited. Now I would know to look. But I wouldn't
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  have known to be looking for that if you hadn't
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  said that in your presentation So it's um, it
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  makes me a little concerned I'm sure Sarah's
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  looking at it because she's that detail person
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  but how much could be hidden and It also has
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  me wondering about these properties here in town
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  that I know of that are the whisper is 20 25
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  too much per door and I'm wondering What expenses
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  are not being reported? Something is up Just
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  something is up because that same company two
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  different properties in the last year and a half
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  The accounting the accounting the accounting
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  and it can kill you if you're not paying attention
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  to it It's really not your enemy. But we if you
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  don't ignore if you ignore it for too long. It
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  can be Something you will be very sorry that
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  you ignored So I will say So I don't remember
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  seeing it on the list, but because of insurance
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  and taxes, at least for us in Texas, you also
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  want to make sure that your property management
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  company is escrowing those. Like I know it's
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  not a true escrow because there's not an intermediary,
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  but setting them aside, because that's another
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  thing that happened to us, is so the one property
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  management company dissolved, we got the new
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  one, and they weren't setting aside taxes and
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  insurance. So we had to come up with like a little
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  over $100 ,000 over a three -month period. So
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  your lender wasn't escrowing them? Because our
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  lenders escrow those. Okay. So it's the type
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  of loan you got. You have Freddie Fannie loans,
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  you have to escrow it. So the only problem that
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  is, is one of my properties, we had it escrowed,
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  but then again, we insured the new insurance.
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  It wasn't enough. 20 % higher. So we ended up
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  with money deficit in our reserve. So. Well,
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  we have we have fixed rate bridge on the first
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  property and then the second one is a bank loan
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  okay so just a little bit different so putting
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  it out there for you guys make sure that stuff's
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  being set aside or you're gonna have some really
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  rough months yeah especially if they come in
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  at the same time which hopefully you don't have
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  but god forbid you get your insurance all the
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  senior taxes in the same month ouch that's painful
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  Well, and it's, you know, it's really funny because
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  when the first, when that first property management
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  company dissolved, of course all the money's
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  locked up, right? So like six figures of money
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  was locked up because they were, they were going
• 17:30
  to be taking like the remainder of whatever we
• 17:32
  owed them or whatever. So we set up a second
• 17:36
  account for all that money to be transferred
• 17:39
  into. And it took like a month and a half or
• 17:41
  something. It was insane. Um, but I put that
• 17:45
  into like a second operating account. that we
• 17:49
  had control of. And thank goodness that was there
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  because it was like, I think 66 ,000, I think
• 17:55
  was in it. And that helped cover the fact that
• 17:58
  the insurance and taxes weren't being escrowed.
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  It didn't cover all of it, but it covered a substantial
• 18:06
  amount of it. But those three months were still
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  horrendously difficult. I bet. I've heard from
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  more people also that it's important if your
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  property management company has control of the
• 18:19
  operating account to have a second operating
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  reserve account that your team has control of
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  for those times when something big happens, especially
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  if your loan is LTV and you don't have any draws
• 18:33
  to reimburse on capex or unforeseen. We've learned
• 18:44
  in just a few years, and I can only imagine what
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  we're going to be learning over our lifetime
• 18:50
  of being in this space, so. Absolutely, but that's
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  fun in a way. Fun, challenge, all of, you know.
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  We don't want it to go smoothly, do we? Because
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  that would just be like too easy, and then everybody
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  would want to do it. Yeah. No, it's insane. But
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  you know, I thank you for being here and for
• 19:14
  your list, your presentation and for chatting
• 19:16
  with me now after. This has been great. And I
• 19:19
  did take screenshots and notes and thank you.
• 19:24
  Not a problem. Thank you for having me. Appreciate
• 19:25
  it. Absolutely. Guys, remember, you can join
• 19:29
  us on the live side. You can stay over here.
• 19:30
  There's tons of info here. Whatever you choose.
• 19:33
  Until next time.