Episode 103: Using 3rd Parties to Scale with Devin Elder – The Apartments Operators Podcast

Devin Elder is principal of DJE Texas Management Group, an investment firm based in San Antonio, Texas. DJE has been operating since 2010 and currently owns over 1,000 doors.

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Show Transcript

Welcome to the Apartment Operators Podcast, where you can learn from experienced operators what it really means to be an apartment operator. No fluff, no sugarcoating, just the raw, unfiltered truth of the ups and downs of operating multi-family communities. Welcome everybody to the Apartments Operator podcast.

This is Joseph Golan, and today we have a special guest, Devin Elder. And David Devin has past experience with flipping and he’s syndicating and he is really doing a lot of great things. Without further ado, welcome to the show. Hey Joseph. Thanks for having me. It’s a pleasure to have you. Why won’t you just take a few minutes and tell the audience a little bit about yourself, your company, what are you guys doing?

Give them a little bit of background. Yeah, sure. My company is based in San Antonio, Texas. I was born and raised here in San Antonio, and for the most part have lived here most of my life. Gotten a real estate back in 2012 doing the birth strategy on single family stuff in. Saw the opportunity and potential there and just started buying a ton of rental houses and really got the real estate bug.

And so after a while I wanted to replace my six figure W2 income. That was the next milestone. And I Was able to do that in about two and a half years. Looking back, it’s, it seems oh, hey, it was inevitable. But at the time it was just a ton of hard work and burning the candle at both ends and learning and buying.

But really for me, the goal was always to end up in multi-family. I had some friends early on that were doing it, but they were like they had a lot of money and that was a barrier for me starting out. I didn’t really have any money starting out, so I did the single family route for a number of years.

Built up some capital and a track record. And then got into syndication. And that business has grown a lot in the last few years. Started syndicating, a hundred plus unit deals all around San Antonio and one of ’em just outside. So that’s where I spend about 90% of my time today is syndicate, looking at b and c a hundred plus unit stuff in my backyard here in San Antonio.

Thank you. How big is your current portfolio? How many units? 10 70 at last count and we’re adding another 124 units in probably by the time this podcast comes out, we’ll closed on it. That’s phenomenal. That’s over a thousand units. That’s very impressive. So tell us a little bit about what kind of class you guys like and what are you looking for?

Do you buy value add? Do you buy stabilized? Is there always San Antonio? Are you looking at other markets? Give us a little bit of an idea. Yeah, so our criteria, which frankly, I’m considering narrowing a little bit cause I feel like maybe we’re. We’re looking at too many deals. Criteria is really important when you set out to do this because it’s gonna dictate everything.

It’s gonna dictate, what kind of investors you have, it’s gonna dictate maybe who your legal team is, who your property management team is, who your lenders are. So we’ve focused historically on just a hundred plus unit deals, and that’s typically a hundred to. Mid to high 200 s. We haven’t really underwritten any 500 unit deals.

Those tend to be those big institutional players. Maybe one day I’ll buy a 500 unit, in one shot, but it seems to be like a hundred to two 50 right now is what we’re focused on. And these are B and C assets. And I each. For different reasons. We’re looking at 1970 to 1990 construction for the most part, on a b asset, mid eighties in a good area, I think you’ve got you can make the argument that your tenants are gonna be a little nicer on the property.

You’ve got a higher income level with those tenants and and so forth. But then we’re also seeing some of these kind of seventies sea areas where. There’s just a lot of meat on the bone in terms of the property’s been neglected or you need to re-tenant the property. So I like both, I like both strategies and have done both.

And it’s really, the whole thing as is investor return driven. So we’re underwriting to hit a certain metric for investors and then we work backwards from there and figure out, how can we conserv conservatively underwrite these things and then go in and execute a value add strategy.

The. Typical value add that we’re doing is I would say probably 6k a door all in, inside exterior interior upgrades. I would look at something a little lighter or a little heavier, but there was a deal that we did that was, north of 15 k a door. Really wild experience.

Learned a ton, but not really jumping up and down to sign up for another one of those anytime soon. Yeah. 15 Kora. That’s a lot. Are we at I, I know we have a few very heavy lifting projects ourselves, and it’s very time consuming and there’s a lot of contractors and there’s a lot of balls up in the air.

So that’s a good segue with a portfolio of a thousand units. G try to give us a little bit of a picture of how your organization looks like. Do you use self-managed, do you use pr third party? Do you have asset managers? Just a little bit of your organization. Yeah, great point. So we do, at least at this stage, we do exclusively third party.

And I think that’s a very important part of our strategy in being able to grow, is that we’re not also building a management company Now I have lots of friends that have vertically integrated companies, and I think there’s I don’t think there’s a right or wrong way. For me, it’s definitely third party is the right way because I don’t have to do HR and build out a whole other company around that.

And that’s one of the key reasons key things that’s allowed us to scale, right? So I also want to be in a position, so third party property management across the board, whole portfolio we’re using. 1, 2, 3. Three different management companies and that kind of that may not, may not always be that way, but I feel like right now I get to learn a lot from and get different perspectives, but then I also get some, it’s some accountability for them.

Hey, nobody’s got the whole portfolio and they know Devin’s got other management companies on other projects, and I feel like that’s an advantage there to keep. Keep folks honest. So that’s a huge part of being able to scale the business. I purposely set out to build a large unit count portfolio, but I don’t wanna have a lot of overhead.

I don’t wanna be in a be in a position where I need to acquire two properties this year to make payroll. I just don’t wanna be in that position. And fortunately, I’m not in that position. I have a couple other revenue generating companies that I’m in, that I own. And so if we close a deal this year, Stellar.

If we close zero deals, that’s not gonna, I’m gonna be bummed cuz I wanna buy more deals, but, there’s no big payroll number that’s waiting. So really it’s just the third party management companies. Myself as a principal of the company, I have one full-time assistant that helps a lot with, All kind of admin activities.

And then I’m hiring an asset manager for one of our current projects, but on a project basis. So they’re gonna asset manage one asset for me. It’s not a full-time payroll and the property’s gonna pay for that. And that’s, talk to me in a year, 18 months and I’ll fill you in on how that goes, but that, I’m trying to do that experiment if they don’t work out.

And they, then I, and I let them go. And then I’m the asset manager. That’s fine. But my goal is to start bringing in some asset management resources to free up my time to really focus on, finding the next deal and making sure we’re lining up the equity. So I’m at a point where I need more asset management resources.

We’re trying it out on one property, on kind of a project basis. And we’ll, we’ll see if that’s viable kind of for continuing to grow the portfolio. Yeah so you have three property management companies that you work with. How did you select them? What was your criteria? What process did you go through?

And if you can, Pick one or two qualities that you really looking for in a third party property management. Yeah, for sure. So I think the first quality is just fit for the asset and making sure that they, the management company has done similar assets and that they’re comfortable and you’re not trying to take a, a b plus kind of management company and shove ’em on some just super rough C property where, They’re not gonna know what they’re doing.

So fit is number one. And then two is just is I guess could be boiled down to responsiveness. Are the financials coming on time consistently? And are they responding to our requests? Are they making all of our meetings when we’re having our, usually a weekly call with a PM to go over our KPIs?

And so the responsiveness is one there and then they need to have they need to have a local presence where we are and own other assets in the area. I think that’s that’s a requirement that, I’ve wanted to stick to for these. So beyond that, you know what a lot of it comes down to, like any vendor Who’s recommended them?

What’s their relationship like with other people? Maybe that I already know. And that’s holds true for any vendor. It’s like you can go look in the business journal or the phone book, but ultimately, I want a referral from somebody. Yeah. And that’s always a good start when somebody refers them to, right?

You have knowledge of firsthand experience with them. What I found and I’d love to hear your insights about that with third party property management. Everybody can run a software, for property management. Everybody can pull out reports. The most critical skill that I think a property management should have is a good hiring skill.

Because I’ve seen properties rise and fall over who are the people on site that run it. Hiring and supervising their people seems to me as the most important skill in the property management. I’d like to hear your experience, your insights about that. Yeah, I completely agree and I’ve seen that play out in a million ways.

I’ve seen it play out on our own properties. I’ve seen it play it out on properties where that we’re looking to acquire that are. Are good assets. They’ve been running the ground by a couple of bad people that are, not to, everybody’s got a role to play, if somebody’s that’s an hourly person.

It, it has this massive impact on the property. I’ve always marveled at that, that we raise millions of dollars for these assets. The bank gives us another 5 million. We’ve got a million dollar CapEx budget and it’s all riding on. Can the leasing agent close a deal? There’s a lot riding on that person.

And so I completely agree. It’s the real estate’s the easy part. The numbers is the easy part. It’s having a person in there that can execute. And of course, that all comes down to what kind of hiring and training program does the property management company have. And that’s another thing that I personally just don’t wanna build out cuz I know how much work that takes to build a talent bench.

And so I think one of the advantages we have, With some of the management companies that we use, they’re active in this market. They know the assets in the market, and they’ve got a talent bench so that when we buy a property, they could say, Hey, we already have a. A bunch of applicants we’ve talked to that we didn’t hire for the last property, but we can bring them right in.

So you gotta have that deep bench of talent, and then you gotta have a regional manager that’s gonna be able to stay on top of those folks and get there. But it’s all about the people and it’s amazing how important it, let’s say a leasing agent is to, to the success of the entire investment.

Yeah, the leasing agent, the manager on site. And I’ve seen properties go, like you said, they get tanked real fast if it’s the wrong person that runs the show there. How do you, I heard you say you have a weekly meeting with them. How do you, or how deep are you engaged in the day-to-day?

Are you talking to the onsite team? Are you going to visit the property? If you do, how often? Give us a little bit of how you manage the management company. Yeah. I hired the management company and then I have some expectations of what they do, and I’ve, for the most part, Wanna let them do their jobs.

So we have the weekly call with the regional and go over our different KPIs. What was traffic like? What did what traffic sources Did those, did those leads come from, what are our conversion rates? Just kind of standard sales stuff, right? What are the conversion rates on those leads?

And then, what are we looking at in terms of open tickets for maintenance? What are we looking at as far as occupancy projections over the next, 30 and 60 days? So there’s a standard set of metrics that I wanna see if we’re doing renovations on a project, how are those coming along?

Where are the budgets coming in, what. What rent premium are we getting for our renovations and just stand on top of that at a high level. Most of that can be handled in my experience and with our existing portfolio. Most of that can be handled on those calls. And then we’re really just looking for outliers, right?

We’re looking for anomalies and those numbers. We know we said our, we’re gonna rehab X amount of units per month. Are we. Is there an anomaly there or we, or are we hitting that right? So there’s a lot of data, a lot of KPIs we’re looking at, but mostly I’m looking for the anomalies. Why is wire leads down this week?

Or, wire leads up, just anything that’s outside the norm. So that’s how I approach that piece of it. But then I also approach it from another angle that, to keep the property management company on their toes is just to go visit the property at. Unscheduled intervals and just drop it on the staff, and check in. And I’m very clear, it’s not my role to motivate the staff or to, give them, dictates I work through our regional to, to let them do their job and there’s that hierarchy. But I also do want everybody to know that Devon’s gonna pop up and be walking through units on any property at any given time during the week.

So I spend a fair bit of time doing that. I’d say there’s at least. Once or twice a month, I’m on site at every property doing that and just going through, and I like to talk to the maintenance staff kind of one-on-one and not necessarily grill them on anything. I’m not there to crack the whip.

They don’t report to me. The management company reports to me, but that individual has their, it has their chain of command and I wanna respect that, but I also want them to know that I’m on site. I’m not looking around. Or I’m not some California owner that’s hasn’t been to the property in three years.

Although I love California owners. If any anybody wants to sell me a property, by all means give us a call. Yeah. California owners and California investors, right? That’s right. Yep. Okay. And you sometimes it’s the former becoming the latter. So you are onsite once or twice, you talk to the team.

Do you bring ideas to the table or are you completely hands off with Letting the property manager do their thing. Because I can see how working with three companies, you’ll see one company do, let’s say a pool party, and you’ll suggest the other two, Hey, that works great for retention, why won’t you do the same?

So do you try to cross pollinate between the companies? I absolutely do. And that’s the, one of the reasons that I like this setup is because you’re getting different perspectives from folks. And granted if a management company’s got 10,000 units, they’ve certainly seen a lot and they’re gonna teach me a lot too.

But I feel like there’s a lot of opportunity for cross pollination in any business. Where you’ve got the opportunity to maybe get outta the rut a little bit, explore some different ways of doing things. So that’s certainly been the case for me in property management. So if I’ve got, I don’t care where the idea came from.

If it’s a good idea, let’s implement it. And if I can share that’s gonna make. Our portfolio do better. That’s gonna make, that’s gonna be a nugget for the property management company to pick up and implement elsewhere. Absolutely. I think there’s an advantage there. Now, in the future we may streamline and consolidate and maybe that’d make the asset management piece a little easier for us to have one throat to choke.

But it’s also a lot of eggs in one basket, right? So we’re. We’re enjoying that cross pollination idea right now, and we’ll see if that’s, viable in the years to come. But right now, I think we do see some of that. I’m, it’s a two-way street. I’m always willing to provide ideas, but at the same time I’m amenable to hearing stuff too, because look, if a company’s been in business 20, 30 years and they’ve got tens of thousands of units, I’m gonna listen to what their suggestions on stuff, right?

That’s what I hired ’em for. Yeah, of course. And that’s one of the big benefits I like with working with third party property management, is I get to learn a lot. Yeah. So that opens the door for me. If sometimes somewhere in the future we decide to do self-management, then I have the opportunity right now to absorb all that knowledge, all those procedures, all those ideas along the way.

Absolutely. With that said give us a few examples of just things you guys do onsite for retention or for leasing or just activities that are a little bit unique and interesting. Yeah, so we’ve done different things. We did a property. There’s the obvious stuff, right? It’s usually we have some CapEx dollars upfront for either a rebrand or some kind of exterior improvement, right?

Solar screens are one of my favorite things. It’s relatively low cost, creates a lot of uniform look on the property just to make people feel. Like they’re living in a little bit nicer place, right? Or maybe even a much nicer place in some cases if we’re doing a heavy lift. So in terms of just retention and creating the nice feel there other things like making it safe and clean, right?

That’s the standard. So if there’s a safety element there that’s been an issue, we wanna fix that as quickly as possible. And sometimes on these properties, there is so we need to go back through, and that’s not necessarily like a. Retention policy. It’s just an overall community policy. We want this to be a safe place for people to live and it, some folks just have to go to, to facilitate that goal.

So just making sure that we’re, a lot of times, amazingly, these management companies or if it’s. Self-managed when we’re taking it over. They’re not doing the screening. They’re not doing a three, three times income requirement for rent, and so you can get a lot of undesirable folks in there.

And so we gotta do a lot of times we gotta do that on the front end, just clean it up. So if that’s gonna help make. That’s gonna help facilitate that clean and safe goal. Make the property nicer. A lot of times we’ll go in through and remodel the office, make the office really nice, and so we’ll do those kind of things.

Then there’s things like resident events. We’ll do pool parties or barbecues, or sometimes we’ll pick a theme. I don’t think any of that stuff is rocket science, but, we’ve got pretty good weather right now in Texas, we’d do a spring party or a, we had a rodeo theme event.

There was a property that we was a pretty big lift. We did in a really relatively small town, and we had the Chamber of Commerce come out, do a ribbon. Ribbon cutting ceremony and everything and so just things like that to just show people that they’re that the ownership group is interested because, a lot of the times these things are just neglected and, people are carrying out their lives in a subpar environment.

So just going in. A lot of it comes down to money, right? You just come in with some CapEx dollars, make the improvements, fix what’s wrong, and then try and set up the system so that if somebody’s got a broken fan, they don’t have to, they don’t have to put up with it for that long. It’s really like super basic, but just staying on top of the stay on top of the work orders and getting those things taken care of.

We’ll also do different things like on renewals. Maybe we will offer to upgrade, a fan in a bedroom or little things like that because, it’s obviously easier for any business to keep. An existing customer than to go acquire a new customer, right? So we want to try to keep folks on that are qualified as much as possible.

And so we might have little incentives to keep them on board for, another lease renewal cycle. And then maybe that’s a unit that we don’t have to actually go in and do a full, $4,000 rehab on or even a turn on. You can just keep ’em in place.

So we’ll do little things like that where you’re offering. A relatively minor upgrade, they live there so they’re gonna benefit from it every day. And that can be a good relatively low cost trade off to keep them, to keep them in their. Yeah. So many great nuggets in this.

I want to just to emphasize a couple of things that you said, safe and clean, that is extremely important in especially a c-class environment, but in any, really any environment. We’ve had a few properties that we bought that were pitch black at night and it doesn’t cost a lot of money to put up lights and strong l e d lights everywhere.

And that immediately helps the residents feel safer and at the same time reduces your liability risk of somebody falling in the parking lot. And clean doesn’t cost money, right? You make sure that your team do grounds in the mornings and so on. So clean doesn’t cost you anything, and it really changes the atmosphere in a community when there’s trash everywhere on the floor or when it’s clean and there’s nothing on the floor.

So just wanted to reiterate what you were saying. It’s really important safe and clean. The other thing that you mentioned was making sure they get their work orders done on time. And that’s really comes down to people want to feel taken care of, right? If I’m here and I’m paying rent and something doesn’t work, I want someone to address it fast and get it done and leave the apartment clean when they leave.

So that’s definitely another important piece in, in what you were saying. And then lastly, I like what you said about the renewal. We take it a little bit further out and we look at the major items that are in the apartment and if the carpet is torn or something is not working and they just never report it to us, right?

We try to walk the unit to our 90 days out before the expiration, so when we do have the conversation about renewal, it’s talking about. Okay. We saw your carpet is torn. We’re willing to go ahead and upgrade that for you or change it for you. If you renew with us for another year, and the math is very simple.

If they move on, you’re gonna have to do the carpet anyways. Yeah. So might as well go ahead and do it. Give them the feeling that you take care of ’em and get a renewal for another 12 months, hopefully with a little bump in rent. Yeah, absolutely. Yeah. If they move, they, you’re doing the carpet and you’re probably doing a lot more than that.

Exactly. You may capture that rent bump, but you just spent a thousand dollars, or three or $4,000 for a nominal rent bump. It’s definitely worth it to take care of your people. I like that. Yeah. You do a lot of value add, right? So can you tell us a little bit about one project that you had what, how did it look like when you came in?

What did you guys do to the property and what was the outcome of it? Yeah, man. I find myself as the years and the projects go on going after things that are less and less value add, right? Like they’re all value add, but I’m like a five or 6K a door guy Now. We’ve done some stuff with heavier lift.

So the, there was a project we bought. Last year I was closer to 10 K at door. Was I have to pull up my numbers, but it was around there really interesting property. It’s gone we’re stabilized now, so I can, laugh at this stuff, but it was a freaking heavy lift man. It was lot of section eight.

It was Sh you just cut to the bone expenses from the ownership group, right? It was a It was a family type deal. The uncle was doing the plumbing and the son was running the management. The dad was cracking the whip but, very little expenses. And then it was also a, it was 106 units at a takeover, but the property was built in 1974 as 130 unit property.

So somebody had converted it ostensibly to capture some kind of section eight. Rent deal on a four bedroom. They’re calling it a four bedroom. But you had these crazy units with spiral staircases in between ’em, and it was just a circus. So bought that. Long story short, converted it from, a lot of Section eight, all bills paid property to at, 106 unit Section eight, all bills paid to 130 unit market rent.

Residents paying utilities. And so there was a lot, there was a lot to change during there. One of the nice things about that particular project is we got the loan, but we actually had the CapEx, was was cash. So we were able to go in like really quickly and not worry about bank draws and just knock out the rehabs.

But it was an interesting project taking, doing all the unit conversions and everything and having a re-tenant the property during the process. So it was pretty wild. Pretty wild ride, but it’s stabilized now. It’s producing. Good cash flow, we’re, we’re hitting our proforma that property we ma may actually sell a little bit sooner than the five year projected hold period.

And that should do real well for investors if we do that a little sooner than anticipated. But it was everything. I think you just, you have to budget for a lot of economic vacancy when you do a project like that because, the property was 92%. Physical when we bought it.

And that looks good. And the broker’s gonna trumpet that and you might be able to get a loan on that too, right? But ultimately, if you’ve gotta in on a property, a lot of times you don’t know how you know how low you’re gonna have to scoop on that occupancy. And it’s, it can be pretty wild, so you’ve gotta really understand how low you’re gonna take that occupancy and make sure you raise enough money.

If you’re doing a syndication to float any type of occupancy challenges that you’re gonna have while you turn it around, cuz rule of thumb is it’s gonna take longer and cost more than you thought, right? So you try to pad that as much as possible and it could be a real balancing act.

When you’re doing a retenanting like that, you’re doing a lot of construction. You are you’re still trying to run the business. So you’re just adding like layers of complexity and I think you just have to be up for that. One of the things in my background was I started out flipping houses, and I was flip one, two, and I got up to a point where I, I had 20 flips going at a time, and so I had to really develop a lot of systems and processes and tolerance for that kind of craziness.

And I have that tolerance and that skillset. So I think that translated well to doing like these big big renovations on apartments. That sounds like a hell of a ride. You touched about two different terms in your answer here, and I want to take it back a little bit for the people that don’t know the terms.

You mentioned physical eco occupancy versus economic occupancy. Can you give the audience a couple of words about the difference? Yeah, physical just means that let’s say a property is a hundred units and it’s 90% physical occupancy. That means there’s 90 of those units have a person in them, so they’re being physically occupied.

They’re not empty That seems good. And I think, sometimes the conversation stops there, but really, who cares how many bodies are in units? You wanna know who’s actually paying rent. And so that’s economic occupancy. And you could have a property that’s 90% physical occupancy and 70% economic occupancy, and that’s the real number.

In fact it’s almost better in some cases to have an empty unit. Then to have somebody in it that’s not paying, because they may trash it, you’re, or you’re gonna have to go through an eviction process that costs time, money, and energy. So sometimes just having bodies in there is not enough.

And on the buy side, you gotta watch out for that too, because sometimes owners will just fill up a property with bodies that are. They might be paying their rent today, but they don’t really qualify. And then you got a lot of what I would call professional tenants. They know all the ins and outs of how to skirt the legal system and drag things out as long as they can.

And so you just gotta be aware of that stuff. Physical occupancy, that’s great that there’s bodies in there, but you really need to know what, how many of those people are paying rent. And sometimes on the value add deals, those numbers are very far apart and it’s can be a shock, I think, for some people to take over a property and just watch that occupancy go.

We had one property that was 75% physical at takeover pretty bad already. And economic was a little lower than that. And we had to take the property down to 58% occupancy before we started climbing back up. And so you’ve got a model being able to go down. To, to that occupancy before you bring it back up.

And so on that particular project, we modeled 30% economic vacancy for all of year one to say, Hey, we’re gonna have to take it from 75 down into the fifties and then back up and over a whole year we’ll be, we’ll be better than s than 70%. But it could just be, it’s just gotta be some something you gotta be just ready for, if that’s the kind of property you’re gonna take over.

Yeah we’ve seen that before too. And in case the audience doesn’t understand, why would an owner do that? Th there’s two main reasons. One, as you mentioned evicting people, cost, time, money, energy, and so on. And then the other side is when a buyer wants to get an agency loan, they usually require property to have 85, 90% occupancy.

So the sellers know that. So intentionally, They don’t evict people. And unfortunately we see that a lot more in the C class environment. And the only way to mitigate that, like you said, Devin, is to underwrite for that, underwrite a 30, 40% economic vacancy in year one, knowing that not only all these people will have to go because they’re not paying, but there will also be elements on the property that you don’t want to keep, you don’t wanna renew.

And you’re gonna have to evict those two. So we also had a property that when we bought was in the low nineties occupancy and very fast we got to 64% occupancy. Yep. Between the people that we showed the door to and the people that left. Big jump if you model for it.

It’s okay, but if you didn’t model for it, that’s, that could be big trouble. Yeah, exactly. So that’s a really good distinction. So tell us a little bit about three ways that you guys like to increase income that is not raising rent. Yeah one, one that we did on the property that that I mentioned that was a heavy lift, we actually didn’t model any rent increases.

We modeled some modest year over year rent increases, kind of inflation type stuff. But we basically, the business opportunity was to shift the utilities, so it was effectively raising rents. But we went in and did a rehab on a unit and said, we wanna be able to lease this for the same amount.

But just have the tenant pay the utilities. So that wasn’t strictly a rent raising play there. Although effectively for the tenant, they’re paying their bills so their rent did effectively go up. But, we’re able to market the property at a pretty affordable rent. And then also that shifted like, $200,000 a year off the property’s expenses.

Right? Which is a huge impact on our net operating income. So that’s that was one way that we did it on one property that Was not strictly raising the market rent or raising the advertised rent. One of the other things is just trying to tighten up utility expenses that might be switching over to l e d lights things like that or doing some kind of the water saving shower heads or low flow toilets, those kinds of things.

If the property’s in, if the property’s paying any of those utility costs, trying to reduce those as much as possible. And then just trim, trimming fat on the expense side. I think the question was on increasing n O I or was just increasing income. Increasing income. There’s a follow up about expenses.

Okay, gotcha. Yeah. So income it’s tough cuz it’s, a lot of it is just really about that rent number, right? And trying to get the product to where it’s gonna support a higher rent based on that renovation. So there’s there’s not a whole lot I would say that we do, that are big secrets in terms of raising income.

There might be little things like covered parking that we could do. For example, we’re buying a property right now that’s got ma, overwhelming majority of the parking spaces are covered but they’re not assigned and they’re not charging anything for it. So that’s an easy revenue opportunity.

It’s not gonna be huge, but it’s a revenue opportunity that’s already in place and we don’t have to. Build the covered parking like it’s already there, you just didn’t have an owner. That’s paying attention to those kind of things with the level of detail that we will, because at the end of the day, we gotta make the money for the investors.

So we gotta watch all that stuff. Whether it’s trash valet service and we can get a couple more dollars here, or it’s covered parking and at the end of the day, it’s not trying to nickel and dine tenants, it’s trying to provide value. How do we provide value for people so that they wanna stay, they wanna refer their fin, they wanna renew.

So if having a trash valet is a valuable thing for residents it might be not much skin off their nose to pay a couple of bucks for that, but times a hundred units, 200 units. You start to see a real impact on the net operating income. So little things like that. Covered parking, trash, valet. We’re starting to look at some storage options.

I think we’re gonna pull residents on one property where we’ve got some space to maybe build some storage and see if there’s, I’m not gonna go build it and then try to sell it. I’m gonna. Pull the tenant base first to see if there’s any desire there to pay a couple of bucks a month for some onsite storage.

But we haven’t implemented that. So I, I’ll have to follow up with you and see if there’s a revenue opportunity there. Yeah, that’s a good idea. It also increases the stickiness of the residents, right? Yeah. So if that resident has a, an apartment and a storage unit and he thinks about moving, now he needs to realize that he is gonna have to move the storage unit as well.

And it’s a lot more painful to move out so that, that helps with retention as well. Yeah, that’s right. Great. What advice would you give a new operator. Yeah, I think depending on what kind of asset class you’re going for I think it can be real important to try to get in a deal with somebody else that’s much more experienced.

And I think there’s there’s certain things you’re just gonna have to learn on your own, but if there’s a lot of other things I think you can learn by. Partnering or at least having somebody on the team that has a lot more experience. Maybe it’s just bringing somebody on and bringing somebody into your deal really as more of an advisor.

Or maybe it’s just getting on somebody else’s deal that’s running it in a smaller capacity, just so you can start to learn the ropes, because it’s not rocket science. It’s not a, it’s not an incredibly co complicated business. It’s just math and, Just housing and some construction and stuff like that.

But there, there is a lot to learn for somebody that’s new. So I always recommend that people don’t try to go out and do a big deal on their own. Try to get into a big deal as a, in a small way, if that makes sense. So get on a big deal in a small way. In some way, shape, or form. And then that’s gonna give you, going through that is gonna give you a level of comfort.

And it’s, I always say that there’s like a, in terms of learning something, you can get about 50% of the way there from books, podcasts, coaching seminars, all these things. But you’re really never gonna get the other 50% of the learning until you go do it. So if you can get into a project with somebody, or even a step before that, if you can just passively invest in somebody’s project.

You put $50,000 in somebody’s project, that’s not gonna give you an all access pass to call them twenty four seven and ask every question. But it will give you a look at the deal and the financials and you can ask the sponsor a reasonable amount of questions. And that’s the easiest way.

And then I would say try to get onto a deal. On the management team in some capacity, and then just grow into it. And then eventually, a person will understand that they, where they are and are they ready to take the next step into a full-blown, operating of the apartment complex.

I also do recommend third party management because there is so much to learn in property management that I just don’t think you’re gonna learn from a class or a course or anything like that. And I think it’s too, My personal opinion is it’s too much to go out and try and figure all that stuff out on your first deal.

Figure out property management, figure out raising capital, figure out all asset management, all this stuff. Those are all like, skills that take time to learn. And so I, I always advocate a third party management company so that you don’t have to learn all that stuff and reinvent the wheel.

Yeah I tend to agree with you. I would say if it’s a 10 unit or a 20 unit, maybe you can take on self-management. Yep. But if you’re going over there to the big ones, definitely take somebody that has experience with you. That’s a really good advice. Soho, I like to ask my guest is if you could go back.

10, 20 years in time. And you met young Devin, right? What would you tell yourself, what would be the best advice you would give yourself? Yeah, there’s two tracks. One is or two options. I guess one would be, Hey man, keep having fun. Doing what you’re doing while you’re young, cuz you know you’re gonna have a lot of responsibility one day and now’s the time to freaking live it up.

And I did when I was young and I have no regrets. And now I do have a lot of responsibility, but at the appropriate time in my life, I’m 40 years old. I have all this stuff that I need to manage, but I, I enjoy it. That’s what a four year old guy does, business, that’s like my favorite thing to do.

So I think, Youngme. Had a lot of fun and I, I leave that in the past, but, if in terms of imparting a nugget, I, real estate wasn’t even really on my radar until about 2012. And I had just a massive learning curve and I didn’t start with any capital. So it was like a ton of work and nothing wrong with hard work.

But, if I would’ve known when I was 20 years old that, hey, you can start learning this multi-family business, learning different aspects of raising capital and managing properties, and then starting to. Network partner, meet other people. You don’t have to go out day one and have a 10 million net worth and a million bucks in the bank to go buy a property.

A lot of times you put these things together with partnerships and you can learn and grow through that. So I think. That’s what I’m teaching my kids now is with some single family stuff so they can at least start to learn the business, to give them tools to build their own portfolio.

I think if I would’ve had those tools a lot earlier on I think that could have shaved a lot of the heartache and learning curve. But at the same time I don’t regret anything in the process. All the challenges and everything. That’s just all part of the journey.

Yeah. And we grow and we learn from every one of those, right? Yeah. Yeah. No, I keep saying that. If I could tell myself that 2008 was the bottom right, that would be great. But no. If you’re not allowed to say that, then I would just tell myself to skip the singles. Cause I also started singles.

Just go straight up to multi-family. That would’ve completely changed the trajectory of where we are today and where we could be. Totally agree. Everybody has this natural knee-jerk reaction to start small or even start with I’m gonna start like, I started with a six unit. It’s just, it’s, it felt like that was the natural thing to do, but there, you could spend a lot of time in, in that and it’s maybe sometimes not even necessary.

I agree. Great. I want to thank you so much for being with us today and can you tell our audience where they can find you if they wanna talk to you or invest in one of your deals? How can they find you? Sure, yeah, I’d welcome a call. You can go to the website, which is dja texas.com. Not to be confused with another great website that you operate, Joseph, but ours is delta, juliet echo texas.com.

That’s the company you can see, all kind of stuff, videos, everything. And then there’s, if you spend enough time on the site, you’ll figure out how to book a call with me, and I would welcome that. Great, and we’ll put links in the show notes for that. Thank you so much for being with us today and we’ll look forward to talking to you again in the future.

Excellent, Joseph. My pleasure. Thanks for having me on.