Episode 110: How to make money with your investors with JC Castillo - The Apartments Operators Podcast

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. Hey everybody. Welcome back to The Operators podcast.

Today we have a very special guest, JC Castillo. Thank you for joining. Hey, thanks a lot for having me. I appreci. Awesome. We start the program usually with just the guest giving last three, four minutes of who you are, what you’re doing what you’ve been doing so far, how your portfolio look like.

Give us a little bit of a background. Yeah, sure. Our company is called multi-Family Property Group and we’ve been around for the last 13 years. I started the company in 2006 and. We’ve transacted over a thousand units since the company was formed. And we are a vertically integrated private equity shop.

That means that we not only do we, we buy and reposition the apartment assets, but we also operate them ourselves with our own in-house management company. And we currently have a portfolio of about 725 doors somewhere around 70 million. In assets under management. That’s phenomenal.

That’s great. So b c class, A class, what kind of class do you guys, like, where in the country are you located? Yeah. So we are we’re based in the Silicon Valley. That’s where I’m located. But we operate and buy properties in the Dallas Fort Worth metroplex in Texas. And we’ve been there since the company was started.

That’s where we’ve been buying our deals and. And we are focused on B and C class assets. But I would say that as of the last few years, we’ve really started to migrate up in the asset stack class stack to B properties. And we’re shying a little bit further away from the C properties.

Okay. You just gave me the first question. Good. Why is. Because what we, we see happening in the market this point in the maturity of the economic cycle, and we’ve had a really great run, is that we see that the C class property and the C class demographic of renters are historically paying the highest rents that they’ve ever paid at these properties.

And if you look at the last five or six years actually, the C-class properties have performed the. Out of any of the asset classes, including A and B. However as we reach the point in the economic cycle where historically the C class blue collar folks are paying. The highest rents I’ve ever paid.

Then if there was an economic shock to the system or a small downturn, we feel like they’ll be a little bit less able to withstand that economic shock. Because let’s face it, they’re living a little bit more, let’s say, paycheck to paycheck. And so we wanna be a little bit more insulated from that C class stock.

And we wanna move up into the B class where we got a little bit more of what we would call a gray collar demographic or tenant base. So maybe not necessarily an engineer working at Google but certainly someone who is a little bit less prone to paycheck to paycheck type of situ. and also the quality of the B class asset too.

We wanna step up away a little bit more from that C class stock, which is typically gonna be your 1970s and earlier vintage. And, and on the A side we really don’t wanna be in the A space mostly because we feel like there’s been a lot of supply that’s come online. Over the last few years.

And so we feel like if you’re in the A minus stock you may be a little bit more in the crosshairs of a concessionary period where the brand new a class stock that’s coming online may be competing with you a little bit more. But in the B class side, there’s a definitely a much, much bigger of a delta between a plus rents.

And bres so that we’re not gonna be in the crosshairs as much for those concessionary periods. So really it’s more for us moving to B as more of a protective measure at this point in the economic cycle. That’s interesting. Before I ask you the follow up question about the B class assets, Just a couple of words for our listeners.

You mentioned concessionary hair, cross hairs, right? I’m guessing, and I’m assuming you, you mean. The new class that are being built as they lease up, they usually give a lot of concessions, like a free month or the first six weeks off or 50 bucks off, whatever the concession is for that market in order to draw the crowd in.

And that’s really where the A minus, which was the a of two years ago really. Or three years ago. That’s where they’re gonna be a direct competition. Why would I rent for $1,200 here when I can rent for $1,300 over there, but get a free month, which basically means it’s the same rent. You pretty much hit the nail on the head.

That’s exactly the point. And with a B class product and your same example, that’s probably gonna be more like a, let’s say like a $500 delta, which is just gonna be too much for the B class person to for the most part, again, this is all relative, but too much for the most part for the B class to go up into the A class and say, I’m gonna go ahead and take that, that highly con concessioned out brand new a product.

Yeah. And that totally makes sense. So I wanna go back to your decision to go to the B class and I usually hear that from experienced operators, right after they’ve done about a decade worth of apartment complexes, they wanna move from the C to the B. We had Andrew Kushman on the show and he had the exact same sentimental, but mostly we hear that people don’t wanna deal with the older asset class from the maintenance perspective, it’s the first time I hear someone talking about the economic side of things, which totally makes sense.

But what about the maintenance and the physical aspect of C class? Is that another driver for you guys moving away from the C class into the b? Yeah. I think it is a driver for sure. Absolutely. If you look at the B stock that we have versus the C stock that we have, we definitely see a higher percentage of the revenue coming in that’s being spent on expenses to upkeep the property.

Cuz let’s face it, it’s 15 to 30 years older. Than the B class product. So yeah, that certainly is a factor. However, I would say that it’s not a showstopper because ultimately we underwrite deals with the knowledge of it being a C class property. So if we know it’s a C class property, we’re gonna underwrite a certain increased amount of upkeep on the property for wear and tear.

And, we’ve got a pretty good system behind the scenes to take care of that c product. But yeah, all things being equal certainly it’s, it would be preferred to have something with less wear and tear on it. That makes sense. You mentioned earlier that you guys are vertically integrated and you have your own management company.

Did you start off with your own property management? We didn’t, because when we first started off we were just a little bit too small, but in the back of my mind I always figured that would be our path forward once we scaled out big enough. And I think that.

Starting Europe, our own shop. We started in 2013, so we’ve been going at it for probably about, I think six years now as a a vertically integrated shop with our own management company. And I think that, what we’ve seen over the last six years is we’ve seen some advantages in terms of a More of a predictable output from the property management piece or the operational piece?

I think that when we first started it, obviously we felt like we could build a better mouse trap, and in some respects I think that we have succeeded in that. But in a lot of other ways, we have the same constraints on the operational side as any third party management company. I think that while you may want to get into the third party management or, build your own shop out because you feel like it’s A challenge using third party.

I think that’s usually ends up being a little bit less of the perceived advantage once you actually do it. I think the bigger advantage is just there’s an extremely large amount of efficiency that’s built in when you have everything under one shop. And there’s also an extremely large amount of predictability because I can go back.

Whenever we’re gonna buy a new property, I can go back to all my records with all our existing properties and I can get very accurate in terms of how we’re gonna model. An operation with a new takeover. And all that goes back to our investors when we commit to a set of proforma financials for the investors, I feel and I’ve, what I’ve seen is that our predictability has increased sign significantly more with the shop in-house because of all the historical data that we can put into into bear.

And also the process is very strict and tight. Against our own process cuz it is our process. And so I think that’s really the big advantage because at the end of the day, what the investors care about, whether you use third party or you don’t, is can you hit your proforma model and is it predictable?

That’s what investors care about. So we lessen the risk by doing it that way. That makes a lot of sense. What was the threshold what was the trigger to start your own management? If I can think back in time, I think the biggest thing, the threshold was, the first threshold is especially when you’re like me, who’s gonna build out a property management shop that’s in, completely in a different part of the United States.

You think about it, I’m here in San Jose, California and I built a property management company in Dallas. So I truly am you. Completely isolated and removed from the property management. So the first thing you have to do is be ha is be able to find a superstar person that can build the team up from basically nothing.

And that’s a rare quality because if you’ve already got scale and you’ve got enough money to pay somebody big money to hire a VP of operations or an executive of operat, That’s actually probably in some ways a little bit easier because you can hire somebody to take over that’s already got a track record, but it’s like a startup company.

You, that big polished executive that can take over a big shop, that’s not the same person that’s gonna be able to build your shop up from ground zero. And at the same time you can’t just, get a person that’s managing your property as an onsite community director and expect them to be able to put together a property management company either because they have nowhere near the skillset.

So in a lot of ways I got really lucky. I found, I think I found the needle in the haystack that one person that could be both could be turned into that executive polished person, but also knows how to take a startup company’s approach and really build something from. And turn it into something along with, obviously I did a lot of heavy lifting too.

Really the magic of what we created, I think, really rests with that one person that really took this thing and ran with it. And so the second part of that is, what’s the number or the scale we need to be at? If you think about it, if you’ve got, enough of a revenue coming in from, let’s say, your typical management fees to pay for.

That one person that’s gonna start your company up, then that’s basically where you need to be at. Obviously, whatever that person’s salary’s gonna be, you’ve gotta be able to at least bring that into the company to justify starting your own place up. . What proceeded what the number of units or the right person?

The right person starts everything. Okay. Without the right person, it wouldn’t have mattered whether we had enough scale or not. We just wouldn’t have done it because that, that, that’s the make or break. That sounds great. How did you come about to find that person? That person was working at a different management company and I had met that person a couple times and I guess one of the strengths that I have is I’ve always, I think I’ve always been able to identify superstar talent and really, our company.

less about me, it’s more about the team that we put together. And I just, I saw the potential in this person almost right away. And so I just pretty much, I was hell bent on putting together a plan to get this person on the team and thankfully we were able to make it happen. Okay. And I’m gonna keep asking question about that because that’s a subject that interests a lot of our listen.

Yeah. And we get a lot of questions about that. So you found that superstars of yours and what’s next? I think the first thing that you have to do is you’ve gotta basically standardize around a a set of tools that you’re gonna use and implement in your company. For example, first thing we had to do was standardize on a software.

That we were gonna use to build out our company. The second thing that you need to do is start to build out a set of procedures and processes for, how you’re going to operate the company, how you’re gonna manage the properties. And how you’re going to service the customers, which we call our residents, our customers, because we think that’s a better name for them because they do have a choice when it comes to living at our property or not.

But those are the, some of the high level things that I think are super critical to putting together a company like that. Obviously, there’s a lot of blocking and tackling. You’ve gotta have a significant buffer in place for reserves because you’re gonna carry a payroll now because you’re paying all of the staff.

and you, even though you bill back the property for most of the payroll, you’ve gotta be able to float that for, a little bit until you can bill back. Liability’s a big thing. You’ve gotta be able to set up your your insurance companies all the liability that you’ve gotta carry for the property.

And also super critical. You’ve gotta make sure that your management agree. Are airtight all around a lot of different things, but inclu, including making sure that the the named insurance companies that are carrying the coverage on the properties also are required to co insure. Your property management company in case something really bad happens because obviously you want that protection as well from on your management company’s side.

Absolutely. So that leads me to another question. Do you fee manage or do you just manage your own properties? So that’s a strategic dis decision I think that everybody ha has to make when they when they endeavor to do this. We have decided to only manage our own properties. And the reason why is because, We figured out that the management property business, unless you scale it very large, isn’t a real big profit center.

It’s just not. If I could look back the last six years, I really haven’t made all that much money having our own management shop. But what we do have is we have greater predictability, which I believe has increased our our ownership profits both operationally and also exiting the property with with good equity.

Really for me it’s less about the property management company and more about the overall vertically integrated private equity shop and how we’re able to do, I think, a better job by doing it This. That’s really a good, very good lesson. Most of the operators we talked to that have built their own property management company did the same decision that you made, but you’re absolutely right.

It’s a very strategic decision. And I’ve always said that property management is more brain damage than a profit. The only reason most of the operators chose to open their own property management is brand control, quality control, like you said, predictability earlier. These are all great.

Good examples. Yeah. And I think that eventually if you keep growing your company, eventually you come to the crossroads of having to make that decision. There’s only a few companies that I’ve seen that have gotten really big, that have been able to leverage a third party strategy and make it work.

Typically, what I see that happens and the only way that you can do that and keep growing to a very large point. If you become strategically a much higher percentage of that property management company’s business . So meaning if I have, let’s say, 5,000 or 10,000 doors under my company and I give all that to one management company to manage third party, and I am probably like 60 or 70% of their revenue base.

And obviously that’s almost like having your own shot because you call the shots. The problem becomes when you’re that, and you’re only, let’s say 25% of their business, then it’s really hard to have that predictability, have that control, have that customer quality control that you’re talking about.

In a lot of rare cases you can, but it gets a lot more challenging when you ha when you get diluted as a total percentage of that management company’s business. So where I’ve seen operators be successful in it is where I’ve seen them. Partner deeply with one shop, and they just become a huge piece of their business to where that guy is basically modeling their company after whatever you need him to do.

Yeah. We just recently recorded a podcast with Kenny Wolf, and Kenny was at that point where he wanted his own shop. He made a little bit different strategic decision. It’s very much in line with what you just described, but instead of just being the big percentage of the business, he went in and he bought 49% of somebody else’s property management companies.

He gets a little piece of the action, but the most important thing for him is being part of the ownership structure, gives him that control. And then all the benefits that you just mentioned. Yeah, you’re, that’s just another way to do it. You’re totally right. I know Kenny and and I’ve, we’ve we talked about this before, during, and after, and you’re right, that’s exactly his mentality and I think it was a great move on his part.

Yeah. Absolutely. They’re actually buying another property management company in Ohio, which is a new market. They started expanding. So he’s gonna be very big very soon. Yeah, he’s gonna be, he’s gonna be really busy too. . Oh yeah, that’s for sure. So that’s a good segue to Owning your own management company, and I’m assuming you probably have a team members that help with asset management and you have investors relations.

Give us a little bit of a highlight of how does your organization look like today and. How did you build it up? Because I’m sure you didn’t hire multiple people day one, right? Yeah. Yeah. How does it look like I say Yeah. I say that I’ve been at this for 13 years and I’ve, I think I did the math and I’ve found about, on average, about one superstar every four years to five years.

Right now I have three principal partners at the company. And in each person it’s taken. It took me a long time to find each person. So yeah, over 13 years, you, you’ve, you and I’m not touch. Obviously we have a lot more people that work for us , but I’m saying, the real, the key people those really come around very infrequently.

But one of the things that I think strategically that you have to think about when you’re gonna build out a private equity, Like what we do, like an operations shop is you gotta think about what you want to be and how you’re going to, you go about doing your business. One of the things that’s unique about us is we are we’re one of those few shops that doesn’t turn deals very frequently.

We tend to buy deals and we wanna hold them for, 10 to 12 years if we can. That’s not to say we won’t sell deals and exit early if the numbers make sense, because we always, we’re always looking out for our investors’ best interest. But because we’ve been through a recession and I started buying properties before the 2008 recession and I bought ’em, during the recession and after the recession we learned a lot, I think a lot more from the recession than we did from the recovery.

And one of the things that, that I personally learned is that going long with investments typically turns out. Really well, but also protects you from the risk of a short-sighted approach if there is an unforeseen downturn. And so when we built out our company, we really built it with a long-term approach to investing.

So we we specifically look to partner with private equity or investors high net worth clients that are looking to go a little bit more longer in the tooth when it comes to investing. Like they think like us, Hey, I want to be in a deal for a long time. I want cash. Equity’s great and equity’s gonna be there, but equity’s gonna be there in 10 years, just like it’s gonna be there in five years.

And on the on the shop side, what we did was we were very careful about putting people on the payroll just for the sake of being able to have somebody that’s under asset management, somebody that’s under underwriting. So all these people with payroll means when you’re an operator, you’ve gotta pay the payroll no matter whether you’re transacting or.

Yes, and but if we’re a long-term minded company who’s really focused on just doing quality deals and letting ’em sit for a while, it doesn’t make a lot of sense for us to have a high amount of payroll that’s always transacting deals, cuz that’s why you need ’em if you transact a lot of deals.

. So for us, what we instead did was we decided to go really light on people that were on the payroll and instead only really partnered with people that, in a way had a partnership stake and really know. Tangible payroll really on the private equity side. So that we weren’t beholden to have to turn deals because we ha because we have to keep the light bills light, the light, the lights on.

And so what you’ll see with our shop is we’re pretty lean when it comes to the the private equity shop side or the operator side. And that’s intentionally done so that we can sit on we can literally not do a deal for the next year if we don’t want to. And there’s, nothing’s gonna change about our company, but if it’s a great deal and we like it, we’re gonna do it.

So that’s the way we’ve set up. But other people that may be transacting deals every three to five years, exiting a lot quick. , that’s really not gonna be as easy to do because it takes a lot more people to, turn the crank when that’s the way that your company is set up. So really, it really depends on how you build your your shop out is what type of a syndication or operations company do you wanna be?

Interesting. Okay. So what does it mean for you on the current status? Do you have, you mentioned three, four superstars. What are their roles? We’re very simply broken out. I myself am the managing director managing principal. Basically, I, I oversee the day-to-day operations as well as all of the acquisition reposition efforts.

And we have three people that work with us. Three three, three partners. So we’ve got the vice president of Capital Funding and Acquisi. So that person is in charge of investor relations, raising money for deals and finding the new deals. And then we have a vice president of Repositions. So that person is in charge of, once we close the deal up and the keys get handed over to us, that person takes the keys and they do everything at the property, including rebrand.

Renovations unit upgrades everything that goes hand in hand with how we take the property from whatever it is to what it’s gonna become. , that’s what they’re in charge of. And then we have the v vice president of operations. And so that person is in charge of the management company and they basically oversee all of the operations once we take over the.

So three people very cleanly laid out. That sounds very logical. Split. And so from what I hear, your person in the middle, the one that’s in charge of repositioning it sounds like you’ve built around value add, right? Finding a property that is underperforming for whatever reason, doing some value add and then stabilizing it at a much higher noi.

Give us a few things that you guys like to do on the properties you buy other than the obvious race. Cause that’s the easy one. That’s what everybody’s trying to do. But usually it requires something right to be done. Whether it’s renovating, whether it’s management play give us two, three things that are not as common that you guys like to do.

Yeah. I think, the one’s not as common. I think we, we take a very high level, simple approach to a reposition. And we don’t call it a renovation, we call it a reposition, because reposition includes a lot more things than just slapping some paint on the bricks and making it a different color because that everybody can do that.

At least I should say most people can do that. But reposition includes three things. One, it includes rebranding the property. So that includes things like renaming. Coming up with new signage, new marketing, a brand new website, a brand new look and feel to the sales collateral, all that stuff, right?

Number two is gonna be your rehab, and that’s gonna include things like rehabbing the the amenities changing the exterior changing the look of the leasing office, maybe we will blow out some walls. Maybe we will change the outside of the leasing office so it’s more inviting.

And then the last thing is which I think is really important that I think some people take it to the right level, but a lot of people don’t. Is the unit upgrades themselves because we get so caught up in, the amenities, race wars, as I like to call ’em, but we forget that the renters.

Gonna be more interested a lot of times in how their unit’s gonna look. So we actually get pretty detailed and specific about how we upgrade units. We actually have for e each and every floor plan, for example, we come out with an Excel sheet that is a specification that calls exactly out what happens per floor.

To, like I’m telling you, like to the penny, how much we’re spending and what things get done to each layout so that we have basically a repeatable format for the upgrade so that the quality is there every time we do an upgrade. Because the worst thing, if you’ve ever, especially if you’re in the operations piece like we are, so we have a management company, is when you put a model unit together and that model unit looks amazing.

let’s say that it has granite countertops and it’s got, stainless steel appliances and all this other stuff, and then because you’re not detailed or because you just don’t think it’s a big deal, you start doing things to the upgrade units that are less quality finish out. Like for example, let’s say that you’ve got stainless steel in your model unit and then your regular upgrade units that you’re actually renting out they’re black appliances, or let’s say that they’re not granite countertops.

You just spray the countertops and the ones that you’re renting out. The prospects, they actually see that stuff right away. And it’s people can see right through that kind of like fake sales stuff. And that’s where you get blown up on your bad reviews online and stuff.

And that’s where it all spirals out. And I think a lot of people don’t understand that when you cut those corners, it’s really a short-sighted approach. And so when we’re specific, when I say about the unit upgrades, that means that when you walk into our model unit and you walk into yours and you’re gonna live.

there’s not supposed to be any difference whatsoever. Everything is there, everything’s the same, everything’s repeatable. And I think that’s really what kind of that’s the magic of the other piece that we do with our upgrades is that we’re very, I would use the word maniacal about how we make sure that the upgrade units are done to specifications throughout the life cycle of the.

No, I totally agree with you. It’s, it goes beyond just the getting a bad review. It’s starting a relationship on the wrong foot. Because when you bring we call ’em residents you call them customers, we never call them tenants, right? When we get them into the unit, when we move them in, it’s gotta be a happy day.

It’s gotta be a smooth transition. It’s gotta be a good experience, cuz otherwise you’re starting the whole thing on the wrong foot. And then there’s gonna be complaints, and there’s gonna be bad reviews, and they’re not gonna refer anyone. And the and that’s just a kind of a domino effect of everything dropping from this point and on, versus if they come in and it’s an amazing moving experience and everything as promised, then that relationship is gonna start.

I couldn’t agree with you more. The other tip that I’ll give you, because I think that, Joseph, you understand a lot more than most people about the idea of starting off a customer relationship on the right foot and. And I think it gets lost in the noise. A lot of people think about these deals as, how am I gonna flip this deal?

And they forget about the customer in which the customer drives all of our business. But the other thing that we do with all of our properties when we take over is we don’t ever raise the rents. When we take over a property, because we believe in the idea of giving before you take . And so what happens is we typically give about three to four months for the exterior renovations to happen.

And that, that three or four months gives us some time to show the residents when we first take over that, hey, we’re gonna invest in the property before we’re gonna start asking you to pay higher rents. And so once we’re done with all that, and in five months or so after we’ve we, the property completely transforms.

That’s when we start pushing the rents on the classic units and obviously the upgrade units. That’s, when people are moving out, obviously that’s a little different, but. You gotta be really careful with the classic units, with people that are already paying rent when you buy a property and take over.

Because if you are not sensitive to giving before you take, I think a lot of times you can see your occupancies drop really for no apparent reason. Then you just wanted to get ahead of the curve on your rental race raising before you were able to show the customers that you’re willing to put something into the property before you ask for something back.

Yes. And like you said earlier, the customer have a choice and they chose that property before you bought it because it was lower price. They knew they were getting less, but they were okay with that because of the lower price. Now you come in, they’re not getting any more, and they’re gonna have to pay more than they have other options at that new price point that might give them a little bit more.

So you’re absolutely right about. So on the flip side of that coin of everything that we do to increase the income and generate more income, there is. Saving costs. And just the way multifamily formulas look right? The No, I is insensitive to which side of the equation? You increase income or you decrease expenses.

Your No, I is gonna move in the same direction. What do you guys like to do in order to reduce costs? That’s always a loaded question. What I would say is, the first thing we always like to understand is that, certain things have a run rate and there’s not much you can do about it.

Expenses to repair the property and to keep it in the shape that it’s supposed to be in are gonna be what they are. As long as we’re not wasting money and doing unnecessary things. But, you gotta fix stuff when it gets broken. . So there’s some things that we, that we are gonna assume that are gonna continue on at a.

A good run rate, but there’s other things that you can absolutely do to save cost. One of the things that we found is a lot of properties that we take over are spending a lot of money on marketing. What we found is the best Customer is usually referred by an existing customer if you’re doing your job right and you’re really focused on treating the customer the right way.

And so you might be surprised, but we don’t spend any money with advertising at any of our properties with any of the big sites like apartments.com, et cetera. And the reason why is because we have a really good word of mouth with our properties in terms of the way that we. Now, it’s not to say that we’re, that we are perfect.

We’re really not perfect, but I think we do a good job of also apologizing where we make a mistake and making it right. And so I think one of the areas that we have seen the ability to save money is in reducing excessive marketing expenses. Another area that comes to mind is, We’re actually I would say pretty good about the cost model that we have in place for things like management fees and and management related costs.

We pretty much try not to pass off a lot of the, Things that we may see other third party management properties or companies passing off to to the property itself. So we keep it pretty lean and mean and pretty, pretty pretty bare bones with without sacrificing the quality of experience.

Some of the other stuff, insurance, taxes, that stuff’s kind of, you just gotta really work hard to. Make sure that your property tax consultant, if you’re in Texas, which is a non-disclosure state, make sure that your property tax consultant is doing a good job of getting your taxes down.

Insurance. You’ve, especially nowadays, insurance is going up. There’s just no doubt about it. You really have to beat the bushes every year to get the best quotes you. If you just set it and forget it with insurance you are definitely gonna pay a high premium right now. So those are some things that come to mind.

Yeah. Especially with the insurance. I want to second that one. You really have to push, even if it’s with the same agent don’t just. Automatically take the renewal, have, ask them to shop around for you and look at what the other options are. What is your coverage? Do you need that coverage?

Are you missing coverage that you really should have? What is your deductibles? All those questions should be asked every single year because just the way the weather has been in the last few years, there’s more and more. Damages for the interest companies to absorb and then they are a business.

They’re not doing it for philanthropic reasons, right? When they absorb a cost, they’re gonna roll it over on the customer, which is us. So you really have to pay attention to these things. You got that right and I’ll give you another tip on the insurance side. And anybody that’s been in the suspicious long enough will know this.

Insurance brokers are notorious for sending you the pricing literally like the day before your policy renews. And of course, there’s, they always give you a lot of reasons why it got delayed and coming to you. But at the end of the day, if you’ve only got a day between the time that you see the price and the time that you have to renew your policy, guess.

You’re probably gonna have to stick with that same company cuz there’s not enough time to do any due diligence with anybody else. So we always start, three months to four months ahead of time getting quotes from other brokers and getting things done. So that we’ve got a long runway of pricing so that we know that we’re not gonna get bamboozled at the very end and get a last minute quote and have to have that as our only option.

That’s another tip I can tell you right away that, that’s a wonderful tip. It really is. It, I learned that one the hard way too. Yeah. We all did and you just gotta listen to your podcast and the next person probably, hopefully won’t have to go through what we, you and I. Yeah. That’s why we created this podcast to talk about the real hard truth.

Do you have any interesting horror story, funny story 13 years in the business? I have no doubt you have a lot of each. Gi give us a little A few stories. I’ve got a lot of horror stories. Some of them I just don’t want to expose publicly. But here’s the thing. If you’ve been in this business the way I have long enough anything that can go wrong usually will at some point.

And I’ve always, I’m a big believer that you know, and investors with us should always know this, is that you, you never pitch perfect. I think what you try to pitch is you pitch a very good amount of analysis. that’s gonna show what you think is gonna happen with a very high likelihood of it happening.

But it really matters what happens and what you do when the speed bumps or the problems do pop up , that’s where you really make your money with your investors by showing ’em that you are committed to problem solving and figuring out how to solve it, and then actually making it work.

One of the things that comes to mind for me that I can tell you is we we bought a property several years back and we decided that we were gonna go ahead as part of the renovation. And we bought this knowing is that we were gonna have to rip out window units. This property was older and it had window ac.

And they were a big problem for many reasons. Including the fact that they were noisy very inefficient and they dropped a lot of water on the exterior of the property. So it’s constantly causing trouble with the wood rot. We decided we were gonna replace them with mini-split H V A C systems inside the units.

. So we bought the property, went ahead and did that. And it was a complete nightmare. And the biggest thing that we learned from that whole experience was when you go into to do something to a unit that is invasive to the tenant’s lifestyle, that’s where it becomes a really big deal, if you’re gonna upgrade a unit when the person moves out, that’s one thing because you can do whatever you want to the unit while it’s vacant, nobody cares, right? Maybe the next door neighbors might hear a little bit of noise, but for the most part, not a big deal. But when you’re gonna replace, let’s say H B A C systems at every unit of the property you buy.

Imagine if your property is 95% occupied, there’s only 5% of the units that are vacant where you can go in and do whatever you want and not interrupt anybody’s life. But there’s 95% of the units when you go in and you are creating a huge lifestyle deal to your residents, and you are gonna lose a lot of people and have a lot of.

Pissed off residents when you’re doing that reconstruction to those u AC units, even though your intention is good, and even though the output’s gonna be good eventually, it’s that super painful point of getting from A to B, that’s gonna be a nightmare for you. So one of the things that we learned through that process was we are very adverse to taking on projects where we have to do Repositions that include things that are very invasive to the lifestyle of existing residents right out of the box, we’re probably gonna stay away from stuff like that.

And based on that experience, I think for us, that’s the right move. And I’m not here to say that you can’t make it work. Obviously we recovered from that. The property’s doing fantastic and. In hindsight, I’m glad we did it because it’s a huge difference between window units and completely efficient and indoor mini split systems.

But I tell you, for crying out loud, that first year was just, it was very painful. Yeah. , I can imagine. And that the reviews should follow up with this and . Yeah. I’m glad we’re over it. . Yeah. Okay, great. Any funny. Funny stories, gosh, a lot of funny stories happen all the time.

Actually, one of my biggest things that I get a kick out of is I get a kick out of maintenance requests. I actually, if you can believe it, I still get carbon copied on the maintenance requests to come through. I don’t have a chance to read most of them, but, I try to pay attention where I can just to make sure that we’re doing a good.

but I invariably see some pretty funny maintenance requests that come in. I can remember this one person that wrote in and the email said, it said, ah, like a H exclamation point. It said, there’s a mouse running around in my kitchen. I need it fixed immediately.

And I just thought that was so great because they took the time to capture the experience of what they were thinking right when it happened. And then they, because they obviously, they didn’t submit that work order like in the heat of the moment. They actually took I figured that they had to take out like maybe 30 minutes later or an hour or two days.

and go back and relive that experience in their mind and then submit the work order. And so I just to no end w and I still laugh at myself to this day, looking at the work order and I see the, ah, , like literally like you can picture them like jumping up and down with the mouses. And I just We don’t wanna have mice in our properties, but I thought that was a really innocent but hilarious take on a work order that I saw that came through

That’s funny. Yeah. Awesome. I wanna be conscious of your time. One question that we a couple questions that we like to ask our guest is, one is what would be a really good advice that you would give someone that is just getting into. It’s the first property they’re gonna operate. Maybe they just purchased it or they’re in the process of purchasing a property.

What would you give them? It is an advice. My advice never changes. It’s been the same as long as I’ve ever been around and got started. It’s go long. Not short with your investment horizons. Always think long term. Real estate is a slow man’s game. It’s a slow and steady winsor race type of deal.

And then the other thing is always focus on relationships before deals. I see too many people that are focused on the shiny object and they go after it at all costs, even if they burn bridges with people that could help them do five or six deals after the first one. Build relationships and place that above everything.

Because in the down times, in the tough times with relationships, you can make it through. But if you’re out there and you burned all the bridges and you’re just isolated out in the ocean by yourself, you’re the first person that’s gonna get picked off when something bad happens.

Go along, not short, and build relationships and prioritize that over deals. That makes sense. Thank you for that. And then the other question we ask everybody is if you could go back in time and meet yourself as a younger person what advice would you give yourself? And no, you cannot tell yourself that 2009 was the bottom of the recession.

If I could go back in time to myself getting outta school. I think that I would’ve given myself a copy of Rich Dad, poor Dad even sooner than what I was blessed enough to be able to read it as a younger person, but certainly not right when I came outta college. And I wish I, I wish that I had a, read that book, but b actually.

Read it with enthusiasm, with the understanding that it could change your life. I think that a lot of concepts in that book did change my life looking back and and I think that had I seen it sooner, Probably even would’ve been saved me even a couple other headaches that I had along the way.

That’s awesome. JC I wanna say thank you again for your time today. It was a great conversation. We got a lot of really good advice and nuggets for our re customers. If our listeners wanna reach out to you invest with you, ask you questions, how can they find you? It’s really easy. All they’ve gotta do is go to our.

They can go to multi-family property group.com. Again, multi-Family Property Group, just like our name, multi-family property group.com. And they can literally go to the contact us section of the website and request a free 50 minute consultation with me. I’m always willing to give my time. A lot of people have helped me along the way and if anybody else out there wants some.

Or some knowledge on what I’ve been doing and how I can help them. I am always happy to do that. And it doesn’t mean by the way that they have to invest with us. That’s not the objective. It’s really to be a source of information first. That’s fantastic. We’ll make sure to put a link in our show notes.

Thank you so much. It’s been wonderful. Joseph, man, I really had a good time. I gotta say that. I really enjoyed your questions and this I’ve done a few of these and I’d say that you’re actually pretty phenomenal at it. And I’ve, I really have had a good time and I would say that your show is gonna be awesome.

Awesome. Thank you so much. All right, bud. Thank you. For the listeners, if you want to listen to more of our podcast our website is apt, o r.com apartments operators, and we’re on iTunes. Stitches anywhere you want. Just subscribe and leave us a review. Thank you so much and we’ll listen to you le later.

Thank you for listening to our show. If you wanna enjoy more episodes, please subscribe on iTunes, YouTube, Stitcher, or SoundCloud. For questions or feedback, please visit our site at www.aptopr.com.