Multifamily Asset Management with Anna Myers

This podcast guesting of Anna Myers is hosted by J. Darrin Gross of Commercial Real Estate Pro Network Radio

Multifamily Asset Management with Anna Myers

by Anna Myers | Commercial Real Estate Pro Network Radio

Featured

Anna Myers  0:00  

So these are all very important things you need to know because if you’ve got a unit that’s down for two months because they took two weeks before they even got in there after the lease ended that took them two weeks to even get in there to start renovating. And then there was some type of a delay. And so instead of 14 days when you’re tracking it, you’re like, wait, it’s not taking you 14 days it’s actually taking you 57 days What is going on here? That’s money last

Intro  0:25  

Welcome to C R E P N Radio for influential commercial real estate professionals who work with investors, buyers, and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney, or accountant We are here to learn from the experts.

J Darrin Gross  0:44

Welcome to Commercial Real Estate Pro Networks C R E P N Radio, Episode Number 250. Thanks for joining us. My name is J Darrin Gross. This is the podcast focused on commercial real estate investment. Risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio. Let’s get into the show today. My guest is Anna Meyers. Anna is an apartment syndicator with Grocapitus based in the San Francisco Bay Area. They currently have over 1800 units. And in just a minute we’re speaking with Anna about asset management. But first, a quick reminder, if you like the show, C R E P N Radio, please let us know you can like you can share or subscribe or and subscribe, you can do it all. And as always, we’d love to hear from you. If you want to leave a comment. We’d love to hear from our listeners. Also, if you’d like to see how attractive our guests are, be sure to check out our YouTube channel and you can find us on the commercial real estate pro network. With that, I want to welcome my guest. Anna, welcome back to C R E P N Radio

Anna Myers  2:06 

Well, thank you. Thank you for having me back. I really enjoyed our first conversation. It’s a lovely place to hang out with you and your Zoom Room. And I’m glad to be back.

J Darrin Gross  2:16 

Well, and that makes the two of us it looks like I’m glad to have the chance to talk to you again. Before we do get started in the topic, if you could take just a minute and share with listeners a little bit about your background.

Anna Myers  2:32 

Sure, so so my family is a commercial real estate family. Three generations My grandfather was started out flipping and became a developer in a commercial developer in Southern California. We had a commercial real estate office, we had shopping malls, etc. So that’s kind of how I grew up in that era. My my father’s an architect, so I grew up in that but I did not pursue it myself. I actually went into it as my first career. I was the program And then worked my way into becoming a systems architect, like my dad and architect but different type of architect and back and then ended up at this later in life going back to commercial real estate because I really saw based on my, my grandfather’s evidence that real estate is really what scales, especially commercial real estate. So I did different things in life had a couple different careers. I always was an entrepreneur, by the way, I always even when I was a programmer, I had my own S corp and ran ran it through my own company writing off as much as I could along the way, just like any good good grandchild of my of my grandfather. So, so yeah, so I’m back in commercial real estate, I see it as the the way to scale my future and give myself the life that I want for myself and my own grandchildren.

J Darrin Gross  3:49  

Awesome. Well, before we get into the topic, I also want to just comment to the listeners. If you are not aware of Anna and Grocapitus I highly encourage you to come in and check them out. I’ve had the pleasure of attending some of their online presentations. And before we wrap up here at the end we’ll give you guys the how to connect and you know find out more about them but but be sure to stick around for the end of that and get all that because I cannot encourage you enough to check out and Neal’s presentations

Anna Myers  4:37  

Thank you very much for that we we take a lot of pride in that and we really enjoy it.

J Darrin Gross  4:42

Well in there’s a couple that I I have notes here that I remember watching one was the one with Jay Scott about the economy.

Anna Myers  4:52  

That was a good one.

J Darrin Gross  4:53  

It was very clear. And so if you are concerned at all about the kind of What is the what is the state of the economy? And how’s it going to affect real estate and all that? I encourage you to check that out. And, you know, because I think there was a lot of wisdom and insight and reasons for, or, you know, support given as to why the current situation is expected to continue as a

Anna Myers  5:23  

Yeah, very interesting conversation because Neal was on that one, too. So lots of interesting back and forth between Neal and Jay Scott, and just throwing in there that Neal does a new presentation every year brand new rock presentation called real estate trends, which is all about macro and micro economics. And then he predicts, and then they talks about markets and make some predictions about best markets, so that all new presentation is coming up. You don’t want to miss that one. And if that one’s coming up in early February, I’m not sure when this is going to, or sorry, first of March. If if this is posted later, it’ll be up on the site and you can watch it. And I know you don’t want to miss that one. I look forward to having you in the audience. Hey, Darrin,

J Darrin Gross  6:05  

No, I will be there. And then the second thing I wanted to point out, or the other presentation I saw was one you guys did about a new construction that you’re doing in Utah. And one of the things that struck me is unique, and I haven’t heard anywhere else is the opportunity for 1031 exchange money to invest in that that project. And if you could, I’d love to just talk a little bit about that before we get into asset management is how that opportunity plays and if you could just speak a little bit to that.

Anna Myers  6:45  

Sure so so I, you know, again, based on my family being strong commercial real estate family, I have done a lot of 1030 ones myself. In fact, I just completed my seventh 1031 and when I was going to sell some stuff Small condos I didn’t want to just 1031 into another like duplex or multiplex, because I have now as a syndicator. I’m an asset manager for large complexes. And I was like, I want to come into the big projects. I don’t want to be, you know, messing with a property managers on the small. It’s just a headache. So I said to Neal, I want to 1031 into our syndications. He said, I don’t think you can do it. I said, Oh, yeah, Neal, I think I can. He said, Well, if you can figure it out, then you can do it. So I figured it out. And I connected with, you know, lawyers and did a lot of research and yes, you can 1031 into a syndication. If the 1031 structure in addition to the LLC or LP whatever the entity is, that investors are buying shares in, you have to add another structure as well. And that structure is a tenant in common structures, often called a TIC structure. Once you have a TIC structure that is an eligible replacement for a 1031 person And to come in and what they do is they 1031 in and they sit under that TIC structure. And they they so in our projects, they are the opposite just like passive investors. So they are, they’re, you know, not doing anything active, they’re doing everything just like the passive investors are, but they get the huge advantage that they get to 1031 out of the project at the end, because they’re in that tick structure. So they come in, are avoiding paying the taxes on their gain, right. And then on the exit, they’re again, avoiding paying to exit the taxes on their gains. So huge advantage to people that are 1030 wanting in now, we, we can’t lenders aren’t in love with having a lot of 1031 participants or TIC participants on a syndication project. So because of that we have to limit the number that we can bring it so we’re not looking at bringing in 20 people, we pretty much are looking at bringing in five to six Because we don’t want to limit our potential lenders in the future on the project by overburdening the project with 1031 participants, now we still have our LLC participants. So that means that the 1031 part is, you know, not not a very large part, it might be 2 million $3 million out of a, you know, 12 to $15 million raise. So it’s not a huge part, but it is a piece of it. And it’s a great advantage to those people that get in and are able to 1031. So the way we do that is we have a process where people connect with me and my team, and these are people that know they want to do a 1031 in the future, or they’ve got one going on. And they connect with us to say, hey, do you have anything coming up? That’s 1031 eligible, because not all projects are going to be 1030. When eligible. For example, we just did a self storage project. We didn’t do 1031 on that one. We tend to do it on new construction, not all value added. So it’s just going to be the right mix. And it has to support you know, we have to have the time. Add the extra tick structure, etc. So because of the timing and timing, so specific on 1030, once you’ve got a, you got 45 days to identify 180 days to get in, we have what I call my 1031 Club. So these people engage with me and my team and get into our list and we let those people know because we understand their timing and then we let them know when we’ve got projects coming up that meet their timing. So it’s pretty good, pretty good deal for them, they that it’s their choice if they want to, you know, come in or not come in, but it’s a great opportunity to scale from you know, many people are selling like a single family or condo in the Bay Area. They’ve got all this equity, they know they should go multifamily, but they don’t have time. They don’t you know, they don’t know how to get there. So this is a really great way to leverage a professional asset management team, professional team sponsor team that’s taking care of the asset full time and you get to be you know, passive on it and still get your tax advantages that 1031 give.

J Darrin Gross  11:01  

Yeah, no, I in the whole 1031 thing, I just think that the, the, the opportunity for anybody that’s held a, an asset for a long time is so much more appealing.

Anna Myers  11:12  

Yeah.

J Darrin Gross  11:13  

And you know, maybe they’ve thought, Well, I’m just gonna go buy another, you know, small property or something like that as opposed to turn it over, or get into something more professionally managed and larger scale. I just really, you guys kind of presenting that.

Anna Myers  11:29

Yeah. And to find out more about that just if I could add, you could go to Grocapitus.com and we have a 1031 page that has a lot of information on it as well as a webinar that I did with our lawyer that explains how to 1031 into a syndication. So it’s all the nuts and bolts how to 1031 whether you’re 1030 wanting into a value add which is existing apartment building, or new construction because it’s different, and we’ve done both, and there’s nuances and so we talked about what the documents are that are required, what the process is like it A very you know, like you were saying our presentations are very fact filled and we believe in deep rich content. So that is there for anybody to go and check out and then they can you know if they want to proceed, they can go ahead and set up an appointment with my 1031 team.

J Darrin Gross  12:15  

Awesome.  So let’s move past that just for a second here and and talk a little bit more about asset management. At Grocapitus, you guys find deals analyze raise capital acquire dispose of the asset.

Anna Myers  12:37  

Eventually, yeah, eventually.

J Darrin Gross  12:38  

Yeah, that’s that’s the eventual right there.

Anna Myers  12:41  

Yeah.

J Darrin Gross  12:42

And in the in the middle of that is managing the asset.

Anna Myers  12:46  

That is right.

J Darrin Gross  12:48  

And I think that, you know, so much of the the talk and the energy that I find in most conversations has to do with finding the deal. You know, I can’t find any deals. I can’t find any deals are looking for the deal, the broker relations, the financing, and then Congratulations, you’ve got the deal. And at that point now you’ve got time to put your plan to work and

Anna Myers  13:14  

That’s right

J Darrin Gross  13:15 

And make it work. Can you talk a little bit about where Asset Management begins for you? Is it is it as soon as the properties identified you can or you start or is it once it’s acquired or?

Anna Myers  13:34  

Yeah, that’s a that’s a great question. First of all, you know, I as the lead underwriter for the group, I you know, I always say that underwriting is an iterative process that, you know, never really ends and some people think, Well, once you underwrite a property and you buy it, then the underwriting is over. Right? Well, no, now the underwriting becomes your asset management plan, because that is your business plan. You said this is what you’re going to do when you create When you do underwriting, you’re you’re putting together projections, you’re, you’re creating assumptions about rent growth, and you know, various, you know, various elements, how you’re going to renovate, how you’re going to be able to push rents. Those are all projections that you made to create a business plan. Well, now once it’s acquired, that business plan is what you need to put in motion. So as part of that business plan for likely at the end, you were working very closely with your property manager to establish budgets. So you are going back to your operating expenses and narrowing it down and saying, Let’s get this right. Let’s make sure you know, what, how much are we going to spend on repairs and maintenance or what’s payroll, all that? So you come into the asset with a really good sense of your budget, and now it’s time to run it to your actual so asset management, you’re now taking that plan? And on a monthly basis? We’re looking at budgets versus actuals to make sure are we off? Are we on us, you know, the very first important thing about finance right? Once you’ve got a plan, you got to stick to that plan or understand if you need to pivot, right? If you’re wrong on some areas, and you’re saying, you know what, we didn’t realize that insurance was going to get raised, we did our best job we could we did our best due diligence, but the insurance is going to cost us so much more than we thought. So where else are we going to find it? Where Where are we going to dig in this plan to make it up? Because we want to still follow this plan, but you do so. So in order to to really stay on top of an asset, you’ve got to dig deep and you’ve got to dig regularly. So we have Asset Management meetings are every week with our property managers. So we meet with our partners.

First. We have a meeting with the the sponsor team, the partner team, and we collectively look at the data for that week. And we identify what we want to address with the property manager because you can’t just go in there and spray shot everything you need to go in there focus we want to go in there with a common message and Make sure that we’re all on the same page. So all the partners, we’re not, you know, we’re all together, then we have our regular property management meeting with the partner, that then we’re driving these ideas that we that we want. We’re looking at certain trends and driving them of course, there’s things we look at every week regardless, you know, like occupancy, physical occupancy, economic occupancy, delinquency. We look at the leads that are coming in. So try incoming traffic, and what that’s how, you know, what, how are those converting? So definitely, we have we have a whole spreadsheet again, we’re very data oriented, right. So we’ve got a magnificent spreadsheet, that is called the Monday morning report, otherwise known as the MMR. I think our property managers have different acronyms we call it but we require them to fill out this data and they get the data out of their software, their property management software, whether it’s AppFolio, or yardie, or rez resume in or whatever it is, they pull their reports and they fill in our data. So it’s a it’s actually it’s an Excel spreadsheet, but it’s like a Google Sheet. So it’s easy for us to share online that all the partners can look at it. And each week is a different tab. It’s the same same data format, but a different tab. So we can easily look back through the tabs and see the trends. So we can just tab back through time. And then the other thing we do is we have a charts tab at the beginning, which is pulling data from all of those tabs to create charts so we can see the trends. We can clearly see what occupancy doing what occupancy, economic, winter delinquency, all of these trends were all about data. And data does isn’t that good. If it’s just sitting on a spreadsheet, we’re always trying to bubble it up to a visual format that we can say, Aha, this is look at this. You know, and notice where things are going right and notice where things are going wrong.

J Darrin Gross  17:58  

I love that that you are Actually, you know, make the picture out of it, you know what settled saying a picture’s worth 1000 words, the Yes, just the ability to get the concept instantly when you can see, you know, trend lines.

Anna Myers  18:13  

Yeah. And because we’ve got that consistency of the consistent MMR that we’re using, we’re able to have that across all of our projects. Many people say to me, Well, your your property managers are all using different software. So how do you do that? Well, we do it by having them input into a consistent, you know, vessel, which is our MMR. And then people say, Well, how do you get them to input that? I mean, I don’t think my property manager would do that work. And we say, you know, if my property manager is not going to do that work, then I’m going to get a next property manager. It’s it’s not optional, because we have to have data to make decisions. And if the property manager is not willing to put the data in the format that we need it then we are looking for another problem. Manager. There’s no two ways about it.

J Darrin Gross  19:02  

So, you know, you mentioned that the consistency is the report that you guys produce, or that you provide your Monday morning report that the property managers can use whatever software they they are, you know, subscribed to,

Anna Myers  19:18 

yeah, best best practice. There’s several really good ones out there.

J Darrin Gross  19:21

Right.

Anna Myers  19:21  

Don’t mind which one

J Darrin Gross  19:22  

Right, but it’s not it doesn’t require that that everybody you work with Have you already or make it they can use different programs. But you mentioned I think the questions worth revisiting there just a second is the the property managers. Have you found much pushback or most of the property managers recognize, you know, the importance or do they need to be encouraged or

Anna Myers  19:49  

We’ve had, we’ve had one property manager that specifically that couldn’t wrap their selves around the data that we were asking for and We ended up replacing that property manager about, you know, we worked with them for about five months trying to get them to provide us the data they needed that we needed. And it didn’t happen. So we replaced them. And I also want to say that in the interim, that they weren’t providing us the data that we needed to do our job. It turns out that there was things happening that we weren’t aware of one thing we haven’t talked about, yes, yet is our CAP X tracker, which is another very important tool for us. That’s a weekly tool as well. So because we weren’t getting the data, we had no visibility to the data that we were asking for. Things were that there was way too much money being spent on the unit, the unit turns, but we didn’t have the visibility to it because they weren’t filling out our trackers. So So let’s talk about that for just a second. We’ve talked about the Monday morning report, which is you know, occupancy and all that type of stuff. But what’s really amazing And Donna value also is tracking your expenses related to unit turns and the exterior improvements that you’re making. Again, you created a plan when you were coming into the project to say this is how much it’s going to cost me, this is my budget. And this is the rent bumps I’m going to get when I do this. So now on a weekly basis, or in the cap x tracker, again, it’s the property manager for each unit that they’re turning. They’ve got lines on the cap x tracker to say what’s in progress. And they are inputting what how much they’re spending, actual spending on each item. So they’ve got the budget broken down by you know, the kit that’s coming in, how much for the vanity, how much to resurface the bathtub, this is the budget for it, what was the actual cost, okay, and then the cap and then we also have date so they say, they say okay, it’s gonna cost again, this your property manager from the very beginning. They said we’re going to turn the unit it’s going to be $6,000 to renovate for the Premium renovation for this two bedroom, two bath, and it’s going to take us 14 days. And we’re going to get $175 rent bump or $200. Rent bump. Okay, that’s what you hold them to. Now when you’ve got a tracker, you’re able to see it because they’re putting in the data. And because they’re putting in the dates, we’re looking at the dates. When did the unit become available? When did they start renovating? When did they finish renovating? And when did a new lease occur? So these are all very important things you need to know because if you’ve got a unit that’s down for two months, because they took two weeks before they even got in there after the lease ended, it took them two weeks to even get in there to start renovating. And then there was some type of a delay. And so instead of 14 days, when you’re tracking it, you’re like, wait, it’s not taking you 14 days. It’s actually taking you 57 days. What is going on here? That’s money last right. And then you tracking the budget to say you said it’s fixed. thousand dollars. Now sometimes you’re going to have, you know, of course, we’re going to average it. But if you’re looking over time in something it’s costing you 80 $200 to turn these units, and we’re not getting a $200 rent bump, we’re getting a $75 rent bump. Now we need to pivot, this is too expensive. We need to pivot. Let’s look at other options related to our unit turn and see what makes the most sense. Should we do a modified upgrade? If we’re not getting the rent bumps we need? Let’s modify it and try and take the the budget back from 6000. Or you know, the over you’re spending too much, but let’s try and take it back to 2500. What can we get for 2500 on a rent bump on a renovation? And can we get the same rent bump that we’re getting? So you see by having the data, you’re able to see all these things very clearly. But if you just let your your property manager just go and be like, oh, they’re just like, yeah, we’re turning units. We’re getting people in there. It’s great. How do you know if it’s great?

J Darrin Gross  23:57 

Ya know the if you Don’t inspect here, your, you know, be careful, you’re gonna get what you’re gonna get kind of thing.

Anna Myers  24:06  

Right? And then there’s the physical inspection, of course, but then there’s also tracking the numbers. Right, right, and making sure that they’re holding true to it. And sometimes it’s not their fault, the cost went up, right? It’s not, it’s not like property managers are evil. I mean, many of them all, you know, they’re just doing their best. But by looking at the numbers, we’re able to make decisions as the asset managers, as the sponsor team, to make the best decision for the asset. So we don’t get you know, six months into it, and then get a surprise and go like, Oh, my gosh, what happened to the CAP X budget? It’s like gone.

J Darrin Gross  24:40  

Right, right. No, I think that the other thing that that’s kind of ringing loud and clear for me is the the fact that if, if you are paying attention to this on a on a regular frequency, not just random, you have that that opportunity to pivot. Like you said, If They said can take 14 days and it’s 57 days. Well, if at the end of two weeks, and they still haven’t got the thing turned ready for rent. In worst case, you should be two weeks away from having it done. If you’re paying attention, if you’re not asking the question, you know, you may be waiting till it’s done and find out it is 57. Like, so do you get 75 when you were promised 175 that’s math doesn’t work there.

Anna Myers  25:27  

That’s right. That’s right. So we talked about that every every meeting as well. We always visit the cap x tracker for the interior renovations and then looking, of course, there’s, you know, at the first year or so of a project, there’s exterior renovations, whether you’re painting or rebuilding fences, or there’s always things and so you’re looking at budgets for that and timelines for that anything related to the lender when you first buy a project. The lender often has many requirements that they need you to complete within a certain timeframe. So you’ve got to stay on top of those and make sure that you deliver are the items that you are, you know, legally required to do to your lender, you don’t want to get in trouble with your lender. So the cap x tracker helps you keep on track track on top of those projects as well.

J Darrin Gross  26:13  

No, that’s great. You know, the in projects, I mean, there’s there inevitably there’s some sort of a surprise, you know, clearly in what you’re talking about just turn in units and stuff. It seems like it should be fairly routine. Can you can you speak to a surprise that you’ve had and how that was addressed based on you know, the your ability to be so focused and in regular communication? Is there one that stands out in your mind here and well,

Anna Myers  26:46  

In general, and I would say that that there’s, you know, a lot of us asset managers have been talking just across the board. The price of renovations is definitely higher than many people are underwriting for And so don’t let that one surprise you. Many of us were underwriting renovations at you know, 5500 6500. But the actual renovations are coming in these days more like 7500 to 8500. So that’s, that’s definitely something that people should be aware of is in labor as part of that, and construction prices are part of that. But I just encourage everybody to really look at the numbers and underwrite correctly. So we’ve had, you know, because of that we’ve had our cap exposures were challenged on one project because the the renovations the assumed renovation wasn’t correct. So we had to start doing some other things. Fortunately, the property’s performing magnificently. So in that case, but you don’t want to be in that situation with an underperforming property and you don’t have enough cap x budget. So that’s definitely something to Look out for. I say another thing that is interesting is, you know, there’s just things that happen, you have roofs that you weren’t aware of, you know, at the time you you bought things happen. We had one property where we knew we had some leaks in the ground, there was some underground water issues going on. But once we actually acquired the property, it turned out we had to make the decision about replacing all of the underground pipes. And we did not expect that we were going to have to do that. But that was a decision that was made because it was a 10 year project, it was a longer loan loan on that one, and so it’s a longer hold. So things are going to happen along those lines. And then sometimes rodents can surprise you infestations of different types can definitely come into play. And again, if it was actually the same, same set of partners, same project. We have issues with rodents encroaching into the galaxy. In the building, because they’re trying to like get out of outside and then getting trapped in the walls. And that’s not a very nice thing to have happen if you’re a tenant and there’s like a rodent in the wall. But so so we learn things all the time. And there’s a cost to that it’s not cheap to get rodents out of your walls, people, you know, and then you have to block off. And these are these encroachments, these areas that they’re getting into are gaps in the building that are made to let the building breathe. So it’s not like it’s a mistake, right? It’s just that particular style of building was more conducive to rodents getting into so now there’s a whole How do you prevent them from getting in? So lots of interesting things happen with asset management?

J Darrin Gross  29:45  

I was gonna say I’m assuming those are lessons that you carry forward as you go to the next property that yes,

Anna Myers  29:52  

You look at that style of building and go now I don’t think I want that style of building anymore. There’s something about just the way the roofs are set and stuff that’s like yeah, That one gets pricey.

J Darrin Gross  30:01  

Yeah. But and you mentioned that the underground pipes was that unique to a vintage of property or have you?

Anna Myers  30:11  

Yeah, I think definitely the older properties. I mean, that one, that one’s a 1970s property. So, you know, there’s there’s good value that you can get out of them, but they’re, they’re expensive. You know, we’re, we’re actually looking more at Class B properties now. And I clearly work we’re actually constructing Class A, so we’re doing about 50% of our portfolio is new construction in the white markets right now.

J Darrin Gross  30:38  

Right. Now, I think that, you know, most investors that I’ve talked with the lessons they’ve learned on some of the early properties and and, you know, they’re they’re valuable because you didn’t, you wouldn’t have learned them otherwise, where they didn’t seem as valuable when you might have read or somebody inferred Do you on doing Your underwriting now, are you getting like a hard cost estimate from a contractor on your terms are you relying on your property managers for those numbers,

Anna Myers  31:09 

We typically rely on the property manager for those numbers because they’ve got the connections in the market. And, and sometimes they’re using in house, right, they’re just getting the material and we’re using in house staff to do to do the term so but if we want to do a lot of turns at once, then that will bring in an external person cuz there’s, you can’t just have your one maintenance guy turn 16 units, you know, so so you have to make that decision. Usually, if you’re bringing somebody in from the outside, you’re gonna be paying more though. So there’s a trade off on on how fast you want to move and and get it done.

J Darrin Gross  31:46  

Right now and just is kind of a reference point for scale. And like you said, if it’s just kind of a gradual thing, and you’re doing it internally makes complete sense. But if you want to do kind of go fast, it might take some external.

Anna Myers  31:58  

Yeah, I guess there wasn’t Another thing that actually came up recently with ordering materials for the turns, we have one partner who’s been very successful at ordering materials, you know, outside of the United States to order these, you know, beautiful courts and cabinets and has been able to control their costs and they order containers of them and get them on site. And it’s been a magnificent thing. So we were working on that on another project on the other side of the United States and we said hey, let’s let’s get our granite and and our cabinet doors front, you know, from an outside source outside the United States. This was about nine months ago before the whole trade wars was going on. So you know, there it was better pricing them. So that was all kind of you know, the pricing got a little wonky, right. But what happened is they delivered the granite and the cabinet doors, and the granite wasn’t measured right not by us. We’re not the ones that did the measuring that their company did the measuring the granite Wasn’t measured, right and it all of its off by an inch. All of this one particular style is off financially. So now they have to come in and modify, like, you know, 70 granite counters that we’ve ordered that are in this container. So, you know, to the best of your intention sometimes you’ve tried to get something that’s like cost effective and efficient and get containers that you can have on site so that you can scale and things happen but you know what it where they say, you know, you always have to measure you know, measure twice, measure three times once. Yeah, yeah, cut once. Now, that’s not our that one was not our fault. So they have to eat that one. But it adds to our timeframe because every time we do one, they have to come out and modify it. So it does have an impact on us. Be careful when you’re buying materials off, you know, offshore, it’s it can be not a good thing.

J Darrin Gross  33:55  

Well, and just it kind of highlights just how You know, whether it be the political or even though the local rules or whatever I mean that, you know, operating a property, you are susceptible to a lot of things beyond just the, the physical property and the rent, the tenant, the property management, there are other influences that can come into play that may not be so obvious up front. Yeah, so, definitely, I’m hearing more of that just, I mean, you know, based up here in Portland, Oregon, we’ve, we’ve certainly got our fair share of new rules that are coming on board with rent control, and all that, but it’s, you know, it’s, I think, as much as the the fear of it is I think more of it’s just a an adoption of and, you know, continuing unless you’re planning to get out of the market and go to a different market, you know, kind of thing but if you’re, if you’re committed to the market, you have to pay attention and, and, you know, get your wits about you and have an answer. Action Plan rather than find out in court how you’ve, you’ve lost because you weren’t, you know, taking care of things properly.

Anna Myers  35:07 

Yeah. And well, and speaking to that, we really try to pick our markets carefully. Because it does affect your asset managing related to landlord laws. So you can be in a state that’s landlord friendly, but in a county that’s extremely slow with delinquency with evictions. And the net result is it takes you 90 days to get a tenant out even though you’re in a landlord friendly state. So I do always tell people that don’t just look at the landlord friendly state part of it. Look at the county level and find out what is the timeframe it takes to evict because we were in Georgia and multiple multiple apartment buildings in Georgia, in Atlanta in this particular DeKalb County. It’s at least 60 days to get a tenant out that isn’t paying your rent and in The same state, not very far away 45 minutes away in Dalton, Georgia, it takes two weeks. Hmm. So that’s a huge difference. And that can make a big difference in your bottom line, because you get a bunch of people in there that are basically professional tenants that are, you know, hey, I can be here for First of all, they’re going to be late for months. So it’s basically like a 90 days, 90 days, they can just be sitting on you know, sitting there and not do it. But when you’re in a place that there’s no advantage to you, because you’re going to be on the street in two weeks. You don’t play that game. Run. And Arizona, I will say that we really like Arizona, they’ve got very friendly, landlord friendly laws, and they’re very quick. On the leases, you can change over time. So if you come in to stabilize a property, and you want to add rubs or you want to add pet fees, it’s a very quick process. You don’t have to wait until the lease cycles out. It’s more of a notification process. So I really like Arizona the way we’re able to turn our property much quicker and implement our stabilization plan. So I would say that, as an asset manager, make sure you choose your state and your county very carefully because you will have to live by those rules and it will impact your business plan, especially delinquency. You always want to look at delinquency and understand your market. And what is the expected delinquency for that market? Don’t just look at a property and say, that property’s got so much delinquency, I’m going to do so much better at it. They’re just bad at it. No, don’t look at it like that.

J Darrin Gross  37:37  

Yeah,

Anna Myers  37:37  

There is potentially a demographic issue going on and you might not do any better than the previous person in managing that demographic and dealing with delinquency, but delinquency is a huge, huge issue. When we’re asset managing buildings in certain areas, and it just eats away at your bottom line.You know?

J Darrin Gross  37:57  

Yeah, no, the goal is The rents due on the first and that’s the end of the conversation. If you’re spending a lot of time chasing people, it’s it’s his money lost.

Anna Myers  38:06  

That’s right. So try to invest in places where you don’t even have to have that discussion. That’s the best cure. Right? invest carefully. Invest in the hyperlocal. Look at your hyperlocal area and understand the unemployment, the poverty level, the delinquency trends in that area, so that you know, what you’re buying into, and what are what you can expect from the tenant base, and they’re just who they are. Right? So you, you It’s your choice of where you buy,

J Darrin Gross  38:35  

Right, you’re not going to change the neighborhood by buying one property.

Anna Myers  38:39  

That’s right. So to me, we’ve got to buy used data to buy the right way.

J Darrin Gross  38:44  

Right, right. Hey, you’d hinted at and I would hate to not touch on this because I know you guys have the secret weapon for driving traffic.

Anna Myers  38:56  

We do.

J Darrin Gross  38:57  

Can you speak a little bit to that and how How you as an asset manager, you know, are involved with that and how your property management responds to that.

Anna Myers  39:09  

Sure, so, so at grow capitis We have a team that we call the efficiency center, and that is a group of offshore team members that are under my, my side of the house. And what their job is, is to create campaigns to create advertisements for our apartment buildings on across various sites and sources online, to drive traffic to the property to create demand and to create appointments is what we’re trying to get to we want to show the property as much as possible.

So we have, you know, Neal is known as the mad scientist of multifamily for very many reasons. One of them is because early on when he was trying to figure out how to dry property, he hired people to figure out how to get legally get around systems. How do you get the best out of each of you know, Craigslist and Google and Zillow and Thumper? How do you keep up at the top? So that’s the strategies, we’re looking for their strategies, not hacks, but their strategies. So with this knowledge, we then implement our campaigns across various platforms. And we have this army of people doing it. So we’re driving traffic to our apartment buildings. I’ll give you an example. In these softwares, you know, yardie, AppFolio, etc. there’s typically a button that the property manager can push that pushes up advertisements and they push that button and they say, I’m done. I’ve advertised my apartment building. Let them all come now. So we are looking at traffic every week. And so on this particular project, we had an average I think was like 18 leads 18 incoming leads per week.

Once we turned on our growth capital efficiency center, it went from eight 18 to 190

J Darrin Gross  41:02  

Oh my god.

Anna Myers  41:03  

Yes. So 190 leads Well, that is so many leads that the property managers like I can’t handle this, this is too many leads coming in. So that is our, our efficiency center team also handles the leads. So they are now taking the leads and following up with them, whether it’s over email over Facebook marketplace over text, they’re interacting and engaging with these leads at the platform level, and that with the intention of booking appointments, so our team members are trained in the software that the property managers using the portfolio yardie va, and they actually have accounts that they are able to go in and book the appointment for this lead to come on-site to see the appointment to see the the unit that’s available.

So they’re always aware of the units that are available to book or to rent and then they’re booking appointments to fill that need, okay. So by using this and then and then it’s up to the property manager, right to show and to bring home beliefs, right? By using this strategy, we feel we’re able to probably increase the occupancy by anywhere from three to 5% across our projects, because we’re driving traffic to them. That’s huge. So yeah, it’s really nice. The other thing that our efficiency Center does is they can help our property manager to do things that they never have time to do, like delinquency calls. These You know, this is something that takes time there’s a lot of communication that goes out in certain markets related to delinquency. Well, our team members can play a role in that. We also play a role in improving the tenant satisfaction and resident satisfaction and increasing the surveys online increasing the feedback and the you know, the scores online by reinforcing Good, good, you know, people getting good Scores give me a

J Darrin Gross  43:00  

Good review.

Anna Myers  43:01  

Nice. Yeah, so it’s all about good review that takes time, it takes people that are dedicated to move that needle on your online reviews. And our efficiency center helps with that, as well. Finally, what we’re also dedicated to is improving the community experience. So property managers don’t always have time to be planning events and doing that type of thing. So our off offshore people are very skilled at, you know, finding catering and coming up with ideas for how to plan plan events, that to make it easy for our property managers to create, you know, just little small events and do things that improve the community, make the community a better place to live, make people appreciate the efforts that are going. So I would say that at first, our property managers are maybe not so much in into the growth of the efficiency center, but once they get the full effect of how we’re plugging in and really helping them do their job. They really love it. So that you know, we’re there to do the things that they never have time to do and to provide leads like handheld like, here it is on a plate here’s here’s tenants potential tenants showing up at your door potential residents showing up to see to see units.

J Darrin Gross  44:20  

Do you guys tie any kind of incentive compensation for percentage full or is there anything that

Anna Myers  44:31  

Well there’s I mean, there usually is for the property managers, there’s there’s leasing commissions and that type of thing that’s always built in.

J Darrin Gross  44:39  

Okay, let’s just say yeah, but you know, I love the model in as much as that, you know, and I know there’s some science behind it about you know, a task if you’re in, if you’re doing one thing in you have to leave that task to do something else. And then when you come back to at the time last type thing, whereas in this model, they’ve they’ve got people Showing up, they’ve just got to keep showing up, you know, showing appointments as opposed to then having to do the do all these other things, they can stay on that one task and just it makes a lot of sense.

Anna Myers  45:11  

And the lead side of it is also true, the property manager doesn’t have that much time in their day to be constantly doing the emails and constantly following up with the leads. Well, what happens when, when you are I are interested in finding an apartment and we place you know, we’re submitting our inquiry. If we get called right away or emailed right away, and we book an appointment, we’re like, oh, good, I did that for the day, I’m going to go off and do something else. So we’re trying to stop the prospective tenant in their tracks. And by having ready staff that’s that’s there, day in and day out, booking,we’re hoping to turn that tide we can also drive traffic between our properties if we’re in the same Metro. So that’s also another advantage is being able to take advantage of that.

J Darrin Gross  45:57  

No, that’s awesome. I You know, just that staying on task like that and like said, The lead is hot. If somebody is clicking around on your website and they click it and they book right then all the other opportunities have kind of like, you know, fallen by the wayside, you’re in the lead there. So that’s

Anna Myers  46:18  

Right and usually they’re on Zillow or Craigslist or Facebook. So they’ve got lots of choices. They’re not necessarily on your website yet. Right?

J Darrin Gross  46:26  

Right.

Anna Myers  46:26 

So it’s so easy for them to just go to the next advertisement, the next listing, so that’s where we really want to stop them in their tracks.

J Darrin Gross  46:36  

No, that’s great. You know, and, and I appreciate you kind of going through all of the different aspects of, you know, what you guys do in asset management? Is there anything that we haven’t talked about that you feel like asset management is, uh,

Anna Myers  46:52  

Well, I will say that on a monthly basis, we do a really deep dive into the financials, which obviously are very important. So we’re looking, we have our week. meetings and then once the financials are closed, we have a finance meeting every month and we bring in our we call our financial controller Loretta. And so she’s a big part of that. So she receives the financials to go through with a fine-tooth comb, you know, a few days before the meeting. And then she comes into the meeting, as a, as an expert in the apartment industry is she’s also an expert in new construction contracts and everything related to that. And so she’s able to, to look at the trends and look at the financials in a way that I don’t even know how she does it. I mean, she’s just a phenom.

She, then well, the accounting team has to be on that call, also, not just the property manager, because she’s asking very detailed questions and diving into things and saying I want to see the supporting reports under this section of the balance sheet or under this section. I need more detail under here to understand these transactions. And her job is well she’s got a few jobs. Want us to make sure that when it comes tax time that our books are clean and ready for the CPA, because if things are in the wrong place within the books, it’s very expensive for the CPAs team to fix it. So that’s a bad cost that the investors have to bear. Basically, it impacts the bottom line, I should say, if we end up having to spend a lot of money with a CPA to clean up our books, because things were put in the wrong place. So she’s making sure that’s done.

But a very important job is she’s making sure that there’s no financial mischief when our property managers know that we’ve got Loretta on the call every month. They stand up and take notice. I mean, Loretta asked very detailed questions. She asked her very detailed reports and she doesn’t just take simple answers, like you got to really come correct with Loretta because she knows her stuff. So I’m really proud to have her on our team. I learned so much from her and she’s there You know, to help people understand the higher the fine levels of finance that we all need to be, but she’s there to protect our investors equity. That’s what she always says is, that is her number one role is making sure the investors equity is is is in is protected. And she takes that role very seriously. And she’s a great team member.

J Darrin Gross  49:18  

Well, it’s great. I love the team concept and the team of experts. Mm hmm. That’s, that’s pretty powerful. Anna if we could, I’d like to shift gears here just a second. As I mentioned you before by day, I’m an insurance broker. And as such we do some risk management with our clients. And we typically look at one of three different strategies. Well, we usually end up on one of least one if not more, but there’s three different strategies we look at. The first is we asked the question, can we avoid the risk and Second, we look at if we can avoid it, is there a way we can minimize the risk? And then the third option is can we transfer the risk and that’s what an insurance policy is, is a risk Transfer Tool. And so, I’ve been asking my guests, if they could take a look at their current view of the investment situation and their situation, and see if they can identify what they consider to be the biggest risk. And just for clarity, I want to make sure you understand I’m not looking necessarily for an insurance-related risk. You know, people don’t want you to feel like that’s, that’s the goal of this. It’s more of just like, you know, looking out what do you see is the biggest risk. And if you’re willing, I’d like to ask you, Anna Myers, what is the biggest risk?

Anna Myers  50:54  

What is the biggest risk of well I’m going to tie it back to a To Asset Management because there are, there are risks with investing in real estate. And I think it’s a risk if people aren’t watching the bottom line and keeping track of their investments. So I think that, that you need to have your handles hand on data and keep on keep on, you know, keep on task to make sure that to mitigate the risk of things going wrong. So the risks are, you know, occupancy could could go way down because you’re not watching the issues, you could have a lot of delinquency coming in. Of course, you could have a lot of natural disaster come or something like that. But there’s a lot of things you’ve got to keep your eye on, on an asset. And those are the risks that I believe the asset manager like you know, the asset managers responsible for under Standing those risks and mitigating them and seeing them before they happen so that we can pivot. And we do that using data and always being on task I, in 2019, I spent over 450 hours in Asset Management meetings, just Asset Management meetings, I’m not talking about meetings, Asset Management meetings 450 hours, it is something you have to be very dedicated to. And it’s you know, it’s a team of people so I do believe that the job of the asset manager is to mitigate risk for the investors.

J Darrin Gross  52:37  

I love it. And again, kind of reiterating the value of paying attention to the numbers so that they all add up and are what you expect them to be.

Anna Myers  52:50  

Eyes on the Prize and eyes on the trends. Okay. Always have your eyes on the trends. We create glorious dashboards. I love creating dashboards and Tying everything together because, you know, you see those trend lines and you’re like, Oh yeah, that’s where we are.

J Darrin Gross  53:07  

Yeah. No, and like so the pictures are just so easy to interpret you don’t have to deep dive into the, into this the story you can see it on the picture there. That’s just That’s awesome. And where can listeners go if they’d like to learn more or connect with you?

Anna Myers  53:25  

Well, I’m going to tell you about two places because we actually have two businesses we have the syndication side of the house which is grocapitus.com. And so that’s where you can find out about the projects we’re working on. You can connect with me at Anna@grocapitus.com that’s the two ends if you want to hear more about 1030 ones, or upcoming projects. But you also mentioned Darren about the multifamily or multifamilyu.com platform and that’s our education platform. And we’ve got lots of free webinars that we do. You’ll hear my voice a lot. I’m the host of this different webinar. Ours that we put on, and we’ve got some fantastic ones coming up. They’re all free. So it’s we love putting out education for people. And we are all about quality, quality information. So that’s where you can find me. On weeknights. I’m often doing webinars on multifamily calm. And on weekdays I am asset managing our portfolio and buying more of the same syndicating away.

J Darrin Gross  54:28  

Awesome. And for anybody that hasn’t, I highly encourage you to check out both the Grocapitus and the MultifamilyU you’ll you’ll definitely find it very, very worthwhile. And I can’t say thanks enough for taking the time. I’ve enjoyed it and learned a lot. And I look forward to doing it again soon.