Self-management is a recurring theme in the Creating Wealth podcast, and in this Flashback Friday episode, Jason Hartman was joined by Bill, who helps manage Fernando’s Austin and Atlanta properties, to cover some of the steps he takes and real estate management tools he uses in order to make self-management as easy as possible. He discussed his working background, the journey that he and Fernando took, and the way that management had developed thus far.
Hartman also took a close look at a Business Insider article stating that even though inventory is tight, pending home sales have increased. He covers why the title is written the way it is, what it means for investors, and what might be coming in the near future.
Hint at Future Episodes
Hartman opens the podcast from Las Vegas, Nevada, where he has been looking at properties and becoming an expert in real estate trends in the area. He mentions having several interesting revelations to discuss in a future episode, regarding things he has learned on price segments in the market.
He explains that in this episode, he is going to be covering real estate management tools and the property tracker, property shopper, and other iPad and iPhone applications from the company that he and Fernando acquired. The guest in today’s episode is Fernando’s assistant, Bill, who is going to be covering remote management techniques.
While this episode will not be an exhaustive summary of the topic, Hartman plans to have bill back on the show in the future to cover these subjects in detail. This episode is set to be a good overview on managing real estate portfolios, both by managing your managers and with self-management.
Unpacking the Business Insider Article
Hartman mentions that a Business Insider article states that pending home sales have jumped despite a painfully tight market. He warns that many times, these articles and statistics therein can be misleading because there are so many ways to peel back the data. One huge issue that was not mentioned is the geographic and price segmentation. Though overall, Hartman would agree with the statement in the article, these segmentations are important pieces that are missing.
He warns that if you’ve got some properties and you’re sitting on the fence thinking that there’s no urgency to build your portfolio, this isn’t a wise thing to think, especially if you’re counting on a housing drop in store.
Increase Your Income in Hybrid Markets
Hartman specifies that he doesn’t mean that there won’t be what the talking heads and generalists in the mainstream media call a housing drop. This might still happen, but it’s important to remember that in the twenty markets that make up the Case-Shiller Index, nearly ¾ of them are cyclical markets that aren’t recommended. If you’re wealthy and want to speculate a little, maybe a risky bet like this is okay, but Hartman notes that he doesn’t recommend it. It isn’t prudent investing. It’s a gamble.
There is a chance that you can win on these sorts of deals sometimes. Hartman recalls that he used to involve himself in speculative markets, and sometimes it worked out. If it didn’t, he kept properties long enough to force them to work out. Because income properties are a game of staying power, if you can sustain your portfolio long enough to reach the next cycle, you can usually win. Hartman has done this many times, and for decades he never lost money on real estate deals.
A Game of Staying Power
He explains that the IRS has defined a difference between real and recognized losses. The phrase “mark to market” was mentioned during the Great Recession, as various funds and banks had to mark to market their assets. Though there may be a paper loss, if one can sustain, they could usually win. There is an exception, being that sometimes there was no recovery. Detroit is a good example of this, as this city might never come back.
Hartman refers to the article, sharing a couple of thoughts on it. He mentions that the title was written the way that it was, Pending Home Sales Jump, Despite Painfully Tight Housing Market, because more properties went under contract, even though housing inventory was tight. If the market were looser, pending sales might have jumped more. The equation gets complicated when the market is about more than making widgets. Apple’s inventory isn’t constrained when they’re releasing gadgets, but real estate has a built-in scarcity by nature.
Pending home sales grew by 1.5% in September according to the NAR. Hartman reminds listeners to always take things that the NAR says with a grain of salt because though they do have good data, they tend to try putting a positive spin on real estate news.
Inventory Shortages
This jump brought pending home sales to their 5th highest level of the last year. The demand for homes is staying high, with increasing wages and tight labor makers that help support buyer interest, according to the article. Hartman asks, “compared to what” and points out that Americans have not had a real pay increase in many years.
He notes that buyer demand is holding up well this fall, and Realtors report stronger foot traffic in recent years. However, the search for housing is becoming increasingly difficult for buyers. Hartman points out that from a buyer’s perspective, they can be qualified and ready to buy, but they aren’t able to find anything that works. Inventory is so tight that everything is a trade-off and unless you’re moving fast, a property might be bought out from under them.
Another major issue is without a doubt the low level of inventory. Properties are selling much quicker than they were a year ago. Home searches have become more competitive and drawn out, and there is a lack of homes available at affordable prices.
Hartman points out that inventory is not very tight in the high-end markets, the McMansion world. In many of these markets across the country, we are seeing a dramatic increase in days on market stats for expensive properties.
Hartman’s Ways to Empower Investors with Real Estate Management Tools
Hartman welcomes Bill to the podcast and explains that the sound quality during this interview isn’t great, but it’s good enough to learn some valuable information about property management and real estate management tools.
He notes that he has had Fernando on the show several times, and the two of them purchased a real estate management tools software company. He is working on better ways to give investors options, manage their managers more easily, or self-manage their properties. On prior episodes, he has covered how he accidentally began self-managing a property when his manager got out of the business.
Bill explains that his background was originally in public accounting, and most of his clients were financial institutions. After many years of traveling and being away from home, he decided that he didn’t want to do that anymore. He states that he sold the firm, then managed a community bank for nearly two years. He decided that he didn’t want to do that anymore as well and moved to Atlanta, working with HomeVestors.
Bill’s Work in Assisting Fernando
Through this line of work, he got to know a number of franchisees and in 2008 when the recession hit, many of those franchisees got into property management. Bill notes that he did accounting work for different property managers for 7-8 years and then got into all phases of property management five or six years ago.
When asked about what tasks Bill performs when it comes to Fernando’s properties in Atlanta and Austin, Bill explains that he initially met Fernando through a property management company. That company managed Fernando’s properties for almost two years, and the two of them left it to move on to another. Bill explains that Fernando decided four or five months ago that he wanted to self-manage, and he agreed to assist in this new method.
Real Estate Management Tools: Using Rently Lockboxes for Self-Management
Bill states that Fernando’s properties are now managed with Folio software, and the lockboxes placed on the doors are by the Rently company. Each box has its own address, and the boxes are set up with Rently and pushed to different sites for potential renters. When an individual is interested in viewing the property, they are given the box code, and they let themselves in. They’re then sent a questionnaire and an email with an application link if they decide they’d like to apply to rent the property.
When asked how the boxes are installed, Bill explains that if the property is in Atlanta, he’s close enough to install the lockbox, and if the property is in Austin, he has a handyman that usually handles the installation if the property is vacant. If occupied, the tenants will receive the box and instructions so that they can perform the installation.
Bill notes that thus far he has not had any problems using this system, which he has been a part of for years. Before Rently, he used contractors’ lockboxes and a potential tenant would have to send a copy of their photo ID to have a look around.
He also mentions that in order to ensure that a property is move-in ready, he has an HVAC technician visit twice a year to perform a checkup, and he also uses these professionals as his eyes on the ground to give him an idea of what sort of condition the property is in. They help him figure out what needs to be done, and a lot of them happen to have friends in the rehab field. Angieslist is another useful website to find handymen and contractors.
When asked about the technical side, bookkeeping, insurance, and the like, Bill explains that he uses Cozy in Austin, and Folio in Atlanta as his real estate management tools of choice. The tenants are given access to a tenant portal where they can send rent payments and submit work requests. Some tenants also prefer to mail in their rent payments, which is acceptable.
The Benefit of Vested Interest from Tenants
The work order procedure allows the tenant to explain what’s needed and Bill checks his email to decide what’s going to happen regarding the service. Once repairs have been done, each contractor has to send in a work order that’s been signed by the tenant.
Hartman agrees that it’s a good idea when the tenant’s motivation is in line with the landlord’s. When a tenant lives at a place, they want to get an issue fixed.
Bill states that clients are not inclined to or interested in falsifying information, and on the same token, vendors shouldn’t want to either, but they may. He notes that he doesn’t get a lot of work orders, but when he does, he will call some of the tenants to check in and make sure that everything has been done to satisfaction.
Tenants are More Responsible with Self-Management
Hartman mentions a theory that he’s operated with, as it seems to align with Bill’s statement. He recalls that when he started self-managing, he developed a theory. When a property is self-managed, it seems that because the tenant has the pressure of maintaining a relationship with the landlord and sees them as a person rather than a company, they tend to be more cooperative and helpful. They don’t complain about tiny things and handle some repairs on their own.
When asked about his opinion on whether it’s easier to self-manage or manage a manager, and the conflicting interest that property managers often carry, Bill agrees that self-management can help develop a relationship with the tenants. Most property managers aren’t good at that, he says. He states that he has found that if you talk to tenants and try to understand their problems, you get a lot out of it. It’s much easier when you’re developing a real relationship with human beings.
He mentions that with this relationship if a tenant is going to be late, they are more willing to let the landlord know. He adds that he is willing to work with people if they keep him informed, and he’s more willing to work something out that’s within reason.
Property Management Software and Back-Office Work
When asked about back-office work, Bill notes that he does very little insurance and mortgage work for Fernando. He receives and posts rent payments, pays bills for repairs done, refunds deposits and the software makes all of that much easier. It has a built-in accounting function to where Bill can cut checks or make payments to vendors either by check or debit card. The accounting side has become very simple over the years, he says.
Leasing Process and Requirements
Bill explains that on the leasing side, once an individual has completed an application, they get screened and Bill reviews their financial information. He then recommends to Fernando whether he thinks they should become tenants. He weeds out a lot of the negative applications beforehand, sends Fernando the good ones, and together they converse about the decision.
If the tenant does not have great credit, they will try to work it out with possibly a bigger deposit. They’ll also take holding fees for up to 30 days if the tenant is not ready to move in. Once they’re ready, they’re sent a lease electronically, as well as an inspection report.
Hartman closes noting how great technology has become and congratulates Bill on the great work he has done for Fernando, thanking him for sharing his insights.
