Managing 360 Doors with No Employees (using AI) with Matt Luke

in a couple hours a day.

“I could scale to 1,000 plus with no employees.”

When I get a phone call to my direct line,

I first have that AI receptionist take the call.

It will dive into the knowledge base again, try to answer best it can. If it can't answer that AI agent, then gets that person's email address and then drafts an email off that phone call and puts it in my

outbox ready to be sent. I was on the pontoon and a tenant called in with a water heater issue. Max took the phone call, property mail, sent the vendor, a message, the vendor called, the tenant before the tenant was upstairs out of the basement,

checking his water heater and had the work order scheduled and I didn't even know what happened. It does provide a higher level of customer service and it has not screwed up once. In fact, it's smarter than I am.

It never sleeps. It speaks multiple languages. It can take 20 calls at the same time,

“and it stays friendly all the time as well to you.”

(upbeat music) Welcome back to Peterliman's podcast. I have a special guest today. His name is Matt Luke. Welcome to the show, Matt.

Hey, thanks Peter. Appreciate you having me on. So right off the top to get people's attention, I'm gonna read a sentence that you replied to one of my newsletters and told me.

And what you said in this email was, I managed 350 units myself in a couple hours a day. I could scale to 1,000 plus with no employees. So that's certainly got my attention, and I bet it got the attention of the listeners as well.

So what I wanna do today is dive into this and unpack how you're doing this, 'cause we're all curious, including me. So just to set the scene a little bit, share where you're located, what your company is,

and maybe just a couple minutes of background, and then we're gonna dive into this. Perfect, yeah, appreciate it. So I'm born and raised in Sioux Falls, South Dakota. I started investing in real estate when I was about 22 years old,

purchased my first single family home

and what turned out to be a commercial lot one year after we bought it. Took the investment money that we earned from that and bought office building commercial property and our first rental property,

and then just expanded from there. So for the most part, I've been managing a lot of my own properties, but in the recent years, as I got really good at it, I've had people start to ask me

if I could manage for them. And so I got a property management license and started managing properties for other investors as well too. So because I have the experience and asset management, then we provide a lot of wealth,

advising, asset management, work for our clients and investors and it's really just kind of grown from there. Okay, and we're definitely, I wanna dive into that asset management angle, 'cause I think that's pretty unique.

How many of the 350 properties are owned by you or like your friends or family? Right, so roughly half are owned by me.

Okay, the other half we managed third party.

I decided years ago that I wanted to manage on our own, and so I got really interested in doing that the way it, I feel it should be done for my own properties. So then as we were doing it really well for our own properties and making sure we were taking care of our investment

the right way, then it felt really good transitioning into helping other people, 'cause I knew if I'm doing it for myself, I can do it for other people.

“Totally, so the 350 units are, are there all single family rentals?”

So right now they're a combination of single family, multi-family, and commercial. Okay, got it. And just approximately like what's the mix there? So about 75% single family,

I would say about 25% or excuse me, 70% single family by 20% multi-family and about 10% commercial. Okay, cool. Awesome, so and how long have you been doing like the third party management part of it?

So we've been doing that about three years, got it. And so you've added about 100, like what is that? 125 floors, 175 floors. Yeah, we're actually up to since I sent you the email or write about 360 now.

Okay, nice, awesome. All right, and so you make the claim that you've got known employees. But when I go on their website, there's a team members there.

So share a little bit about with the distinction. Sure, so if I do kind of beef that up a little bit to make it look a little bit like a larger team than it is,

who are on their who are more strategic advisors than anything, the rest of the people on the website include my father

“who owns a commercial construction business.”

So he helps with any larger projects that we need to work on. And then I also have two realtors that are independent contractors on the team as well too. Not employees, but they help us with showings.

And then if there's any potentials with tenants moving into purchasing a home, then they would take those opportunities as well too. Okay, got it. So that's a nice arrangement.

It's always nice to have independent contractors

versus W2 employees. I've actually explored that in a couple areas of our business. We do our showings. Like we do a lot of self-showns, but if we need to do like an accompanied showing,

we don't send our W2 employees to do that. Instead, we have three-ish, like two to four, we call them leasing contractors who are paid a flat fee per appointment to attend those and basically unlock the door. 'Cause it's kind of all they really need to do

and they're not licensed. So we don't even use realtors for that.

“And we pay it's like $30 or $40, you know,”

per showing that not per person who attends a showing but like per appointment. Right, we might be somewhat similar. So we do, one realtor does the showings in the morning,

one in the afternoon and then the first one takes Saturday

mornings as well too, mid mornings. We do show all of our properties up to 90 days before the tenant moves out. So almost every property is rented prior to the previous tenant moving out.

Okay, and is that typical in Sioux Falls? I don't know if it's typical as we talk to our conversation here. You might find some things that I kind of challenge the mold or do things a little bit differently.

But for my own investment property paying somebody hourly to do a showing and getting that property rented prior to the previous tenant moving out is worth the investment to me. Yeah, and I know that in some areas of the country

that's very common. Another area is it's not typical at all. How do you handle the current tenant living there? What if they're like, hey, I don't want people coming through my home like this is private?

Right, so we do include in the lease. It's part of the lease that they sign that they give us permission to show the property before they're out. One of the things that we'll get into as we talk as soon as I've built up, and I got this tip from you,

I started a notion knowledge base. Nice. And I feverishly relentlessly answer every question

through the knowledge base first and create the answer.

If it's not there, put it in our FAQ section on the website. Then I go back, remind the tenant that knowledge base is available on the website, and then I give them the link to access that. So I've had a few different questions about showing times.

Can I change it? My babies taking a nap, and I carefully answer all those in a nice way, remind them why we need to do the showings. And usually those answers make the tenant feel better and help resolve that issue.

Got it. So you have a public notion, which we do as well, that you make available to current tenants, correct. Like at like a knowledge base, correct. Yep, okay, very cool.

And then when you are, so what you're doing is what we call pre-leasing, I don't know if that's like a universal industry term, but that's our term for it, which we don't do it anymore, 'cause it didn't work well for us. But you're pre-leasing, and how much time do you leave

from the current tenant moving out until the new tenant moving in?

“So like if the lease ends on July 1, when would the new lease start?”

Yep, so the new lease, our goal is the 10th. So we try to get the next 10 to 10 days after the current tenant moves out. That's pretty aggressive, not the most aggressive I've ever heard. So you're pretty confident with your dad's construction company

and everything that you can get that whole term completed, clean, carpet cleaning, painting, landscaping, everything good to go. Yeah, so my dad's construction company actually focused on commercial construction and new builds.

So we have a crew of vendors that we used for the turnovers. And so we send them in, we'd give them the work order two or three days before the previous tenants out, and then remind them that it needs to be ready to go for the next tenant by day 10.

Okay, very cool. Okay, so let's get into some more of the nitty gritty. So you've got 360 doors, no W2 employees. What is your tech stack look like? What softwares are you using?

Yeah, so I could pull it up on my computer here to remind myself 'cause there's quite the list. But first we're using app folio as the hub or the property management. And then again through your recommendation,

And I work very diligently to update

“and keep those processes very refined answering questions,”

resolve and things ahead of time, giving people's answers before they even come to our desk. And that particular software has probably saved me. I would imagine 20 plus hours a week. Wow, oh, easily.

I mean, we have it set up where a moving process, once the tenant signs the lease,

we never actually communicate with the tenant until,

I guess at any point other than through lead simple, there's no phone calls, it's all automated texts and emails that answer the questions and help them work through the process. So that software has been amazing. Fantastic.

Yeah, other software is that after bringing it up on my computer, remind myself, but we use ring central for phone entry. We use some AI tools for answering phone calls and specifically lease in a maintenance phone calls.

The show Mojo is the tool we use for scheduling and coordinating, yep, showings. And then we also use property mail for maintenance coordination. South Dakota Company? Yes, it is.

Yep.

“And then there's a number of other softwares”

that are ancillary to it and kind of connect with such as notion and Google Drive and Microsoft 365. Yeah, you mentioned something about an AI tool in there. Say, do you remember what tool that is or what you're using it for?

Before we're using Haven. That's AI. And that tool right now is set up. They do have offer receptionist option. So if you want some an AI to answer the call as soon

as someone calls in, they can take that and send that to the right department or you can choose to just use the leasing or the maintenance side to take the phone calls.

And that's been a game changer.

OK, so you're not using the reception part of that right now. Not right now. So when someone calls in, they can choose to schedule a showing or get more information about a property three for maintenance and four if they're an investor and owner.

Got it. I haven't gotten to the point where I feel everybody's comfortable with talking to AI at this point. So the reason we left that phone tree is so that it feels a little bit more consistent to what people are used to.

And then when we get, and I also like to take the sales calls personally. So I take the sales calls for investors and new owners. But then the showing and the maintenance that feels like people are a little bit more comfortable on that grid with the AI.

OK, so they call into your main line. It's a ring central. They get the phone tree standard thing. It's probably you saying press one for maintenance, press it, whatever.

And then if they click whatever the number is for leasing at that point, it connects to haven.AI. Is that right? Yes. And same for the maintenance.

Yep. And I've named her Serena. And Serena got it. Also one of them on the website in the lead property. Oh, hey.

[LAUGHTER] OK. We've called our remote team member. So OK, I'm really interested in this part of it. And I bet a lot of listeners are too.

Because there's all this talk about AI. But very few property managers actually have a deployed in their business the way that you just described. So I just want to ask him follow up question.

So let's take with leasing for a second.

So they talked to Serena. And Serena is presumably plugged in somehow to show Mojo or Atfolio. So Serena knows you're currently listed properties, the rent amounts, your policies, all that.

Yep, she's connected to both. So she can pull information from Atfolio. They also have a knowledge-based section that we can continue to fill out. So if there's questions, she can answer.

We'll get it prompt so that we can answer that question for the next time. So nice. I'm ready to answer that for the next person calling in. And then she can schedule showing.

She can answer questions. And then they actually follow up with text and email throughout afterward. So if the potential tenant wants to continue the conversation through text or email, it will automatically--

AI will automatically do that. So the AI will continue the conversation on your behalf through text or email. Correct, wow. OK, she really gets stumped to them.

They will for the call to me. Got it. And how many calls a week would you say the leasing Serena is handling? Oh, probably 100?

Wow. That range. OK, so pretty since we've arrived at 10 a day. Yeah.

“And are you just as seem like people are receptive?”

Like do people get angry and hang up? Or like-- Yeah, so you can listen to all the phone calls.

to handle the call.

“Many of the people will not even know what's AI.”

There are some who say talk to Agent--

Yeah. --to person. --represented it. Yeah. And then it will for it over.

But still does take a lot of effort off of my plate, a lot of time. I used to use a call center to take the showing calls and that had mixed reviews. And from what I can tell, listening to the phone calls

is as a higher review rating than the call center. Unbelievable. OK. So maintenance, the same system, haven't got AI, but maintenance, still Serena?

No, no, max. Oh, excuse me. Oh, yeah. Max didn't mean to forget about max. OK.

Well, that's funny because property milled

uses max as well. I kept that name. OK, we're just giving the last name, so.

“So-- and why not use property milled's max on call?”

I think is what they call it. So you're already using property milled elsewhere in the business. So that's not off the table. I have just having explored it yet.

I have had already integrated Haven.ai, industrial mojo, or into property milled. So I had just stuck with that for now, because it's working really, really well. At some point, it might explore that.

OK, cool. So when they talk to max, they can do things like ask about a current maintenance request, submit a new maintenance request, stuff like that. It is unbelievable.

This particular AI tool, as again, probably saved us 10 or 15 hours a week. Wow. It used to push all tenants back to submitting online, which was what we were doing previously,

but with the AI agent and giving them the option to call in, it does provide a higher level of customer service, and it has not screwed up once. In fact, it's smarter than I am. It never sleeps.

It speaks multiple languages. It can take 20 calls at the same time, and it can triage all of the questions, and issues that I wouldn't have the skill sets to answer, and it stays friendly all the time, as well, to you.

All right, this episode sponsored by Haven.ai. They may have actually sponsored a prior episode, or newsletter, I can't remember. But, okay, so they're hooked into Mel, so they see all of your mels, they can submit mels all that.

Correct, it is. It's getting to property Mel, so once a request comes in, it recludes the notes from the phone call, a link to the recording, and then it follows up with the tenant to ask for pictures.

So it not only does it put all that into the system, it gives our vendors a lot better. More information than when the tenant was doing that, input on their own, or if I were to take the call, I certainly wouldn't take the time to write up a paragraph

of notes or include a copy of that call. Yeah, not if you're only working a couple hours a day, man. Yeah, you can all have time for that. Come on now. Hey, I just wanted to give everybody an update on Creme.

So Creme is the paid private community that I co-founded with Wolfgang Kroski a couple of years ago, and if you're listening to this and you're a member of Creme, especially if you're a new member, just want to say thank you and welcome to the community.

Wolf and I are thrilled to have all of you wonderful folks joining us inside the community and participating in our masterminds and showing up for our Creme dinners and Creme events that we host all around the country. If you're curious to learn more about Creme,

or if you missed the application window, I wanted to start providing some information about kind of what you can do in the meantime, while you wait for the new application window to open.

First thing I really want to encourage you to do

is join the wait list if you haven't done that already. You can go to joincreme.co, and if you just click join the wait list, you just put in your name and your email and like one or two other pieces of information.

And that way you're going to be notified as soon as we open up for new members. And something we're going to do differently in the spring is we're actually going to give the wait list members early access to jump, the line, and apply first.

And Wolf and I will be reviewing those applications before we even open up for the general public. We did recently finalize the application dates just if you wanted to mark your calendar. We're going to be opening up the application window

officially on April 3rd, and it will run for about 10 to 12 days there before we close up for another six months. And so if you join the wait list, you can expect to get an email from us. Probably that last week of March or so.

Really encourage you to learn more about crane. If you don't know much about it, it's been growing really quickly. We've been overwhelmed, frankly, with all of the interest and positive response from all around the community.

We have industry leaders joining crane every time we open for new members, and it's just been an outstanding experience. And I'm really honored and grateful to be a part of it. So what do join crane.co?

“If you want to learn more, and I look forward to seeing you”

inside the community.

continue this dialogue over text and email,

the way the leasing side of it does as well? No, because once the work order is submitted, I've set up workflows for each category. And probably out so they have plumbing, electrical evaluations, all kinds of different categories.

And I've set up workflows to auto assign each one of those categories to a vendor. So once the maintenance AI submits the work order, then the vendor takes over from there. All right, this episode's over.

I'm going to implement all this right now. I'll catch you guys later. So did you evaluate other, and the reason I'm really drilling on this is because truly like this is what you're talking about is the stuff that's been promised.

But I very rarely have met a property manager who's actually implemented it and being this successful with it. So I'm trying to uncover some of the details.

“Did you evaluate any other AI solutions before Haven?”

Yes, just briefly, Haven was just had specific agents

to property management and they were the first one that I

noticed that did that. There could be other ones out there. I'm not aware of that. I just, there are, I didn't see any at the time that was specific to property management.

So our first conversation and our first demo went great. So I took a shot and yeah, the one was at working. We've used that for roughly a year now. Wow. OK, and what's the cost?

So for the leasing side, it's $1 per unit and the maintenance is $1 per unit. OK, there is one other tool that they provide that is very neat. And they have a great dashboard as well, too, to see all of the details behind the phone calls.

They do also escalate emergency maintenance. So if someone calls it three o'clock in the morning with an issue, it will call and text me to let me know.

“And then on my text, I can simply say, yes, this is an emergency.”

No, it's not or decline. If I say, yes, it's an emergency, then it's going to expect me to handle it. If it declines, then it will just put it back into property meld to handle the next day or at the next time I'm available.

Or if I decline it, it will then start reaching out to a phone tree of other vendors. So it's going to start calling all of those vendors until someone accepts the work order. And then it will go into property meld in the sign

that work order to the person who accepts it. If it gets the end of the tree in the AI has hit in a haven, then we'll just start back at the top and then alert me that none of the vendors took the work order. OK, so between leasing and maintenance phone calls,

I mean, that's got to be at least half of the incoming calls at a property management company. And these are off your plate. And I'm already getting a sense of how you're able to do this with no employees.

Of course, lead simple being a big part of that as well. And we were early to that also. And it does save a ton of time. Let's explore some of the other areas of the business. How about when a current owner calls in with a question

or emails a question? So I do feel those questions. I do have a knowledge base for the owners as well too, so that they can access those questions and answers most of them.

I also like to respond to those emails to the best possible, so I will actually access that knowledge base and then copy and paste the email to the owner. So again, before I answer any question in email,

I have zero one-off emails basically.

I go to the knowledge base, create the answer first, put it in the knowledge base, and then use that as my template to send back to the web time emailing me. And surely there's an AI right now. Maybe fixer.a is when I've heard of that could draft

these emails for you using your knowledge base, and then you would basically just be able to give it a review and click send. Yes, so I also have that set up by use marbleism. OK.

So it's an AI agent for each individual staff member, so myself. So if I get an email, then it will go into the knowledge base, pull the answer, and then throw that email into a draft email. Beautiful.

Beautiful. So good. So good. Oh, man, I'm really excited to get this episode out for people to hear because this is cool.

And what I love, like, you're at a perfect size and age of business to be doing this stuff. So your company's just a few years old. You've got no employees. You've got 360 doors.

So you are able to get in and tinker and set stuff up and try things and break things and fix things. And you can just move so quickly.

“And I remember being about that way now, it's so much harder”

once you're bigger and you have a big team

And there's all this just legacy stuff and procedures. So I haven't yet cracked a code on how to remain agile, the way you're able to be once the company gets bigger. But I love what you're doing. And if I was three years old with 300 doors,

I'd be doing the exact same thing.

“I think it's totally the right way to go.”

And you're having to be at a really fun moment in the industry where AI is just coming in just-- it's like a bowl and a China shop to all the old ways of doing things. I've been exploring more with AI just even in the last month.

So another example of how we use it is with Marvelism. When I get a phone call to my direct line,

I first have that AI receptionist take the call

and says, "Math's not available right now, but I'm here to help. What can I do for you?" And it will dive into the knowledge base again, try to answer best it can. If it can't answer, then it says, "Hey, let me get this information

and we'll follow up with an email as soon as possible." So that AI agent then gets that person's email address and then drafts an email off that phone call and puts it in my outbox ready to be sent. Very cool.

I haven't heard of that marbolism. And again, I'm sure there's lots of different tools to use, but that just happens to be one. - Okay. - I started using.

- Got it.

“All right, moving around the rest of the business”

talked to me about accounting, trust accounting

and your corporate accounting.

So another one of the tools that we use and not every tool is a piece of software. Some of it is outsourced vendors. - Sure. - We use APM help.

- Yep. - For accounting and specifically I use them for their daily bank racks. - Yeah, we do too. - I don't use the full accounting suite,

but I do get the daily email. If there's any one-off deposits or anything that needs some attention so I can quickly get that changed in APM that has been huge. It's a stress relief.

So I use them for the daily bank rack and then I also set up a meeting with them one time a month just to go through the reconciling side of things.

Make sure everything's looking great

and then we go through the financial diagnostics as well too just to make sure those are all on point and there's no major issues. So that's how I use APM help. The rest of the steps I've really

boiled down to clicking buttons for the book keeping side. So we do some things that, again, may break them all a little bit, but we don't take any payments other than online. That's the only option.

We do use the pay slip option to appfolio for tenants that want to pay with a money order cash that can take it to Walgreens Walmart. - Yep. - And then, so again, I broke down pretty much

all the book keeping steps into just clicking buttons and checking off the steps as the progress goes through at folio. And so I'm able to not have a book keeper on the team because I'm able to click those steps.

One other thing that I haven't brought up is that my daughter is a virtual assistant for me. And she spends about an hour a day when she's available, when she needs extra spending money at college.

So some of the steps that I spend an hour to a day on actually end up to her, if she needs some extra money got at college. So I let her handle those steps or I'll do a miss she's not available.

That's great.

“And is APM help doing your corporate accounting as well?”

Not the corporate accounting side. So for the corporate accounting, we do use QuickBooks and I do have a keeping company that handles that. Okay, very good.

All right, let me make sense. How about processing rental applications? So when an application is completed, they do that through our website. So after showing all of the showings get a email

with the link to the application that comes in and then I use an outsource service to run the application. So we've set up criteria with that service and we get a score on the application based on our criteria.

We then get a task in lead simple to answer the questions about the scoring and that then provides the answer of either approved or denied to that person that's applying. Okay, got it.

And what's the name of the company that does your screening? N-t-n. N-t-n national tenant network. Yeah, I think I've heard of them, yeah. Okay, so they're taking the rental application.

They are doing the credit criminal eviction history checks, potentially landlord verification, yep. And then it comes back with a score and then that kicks off a lead simple process for you to approve or decline the tenant.

into lead simple, and do they have a verifiable income? Do they have positive landlord references? And then that uses some, not worth it that much or what the word is, conditional logic? Yeah, in lead simple, to then move them to the approved stage

or the denied stage. Got it.

“Did you set up all these lead simple workflows yourself?”

Did you use them or like a consultant?

Yeah, so I used them for the first two,

which was included in our onboarding package. And then I got pretty savvy on it myself. So then I just started building it out from there. One of the things that I'm pretty aware of is I try not to create too many processes.

I think we only have nine in time. Love that. You listen to yourself, gang? I did look at his list. And I think there's like 100 there, so yeah.

But yeah, I've tried to keep it very simple. I haven't been ordered on the toolbar. Yep, numerically ordered them based on kind of the workflow. And I try not to add more processes. The more I add, the more complex it gets.

So for me, I like to figure out how could we make the process as simple as possible first and then I go on create. Dude, we're fully aligned on that, fully aligned. And when I meet people who have like 30 processes and lead simple, like Wolfgang, I'm just my mind is just like,

how do you keep all these up to date? How do you even remember which ones you have? Like I would, I would end up making another process for a process I already had. One of the things that I wrote down here is I'm not sure

who this quote's from, but it is, the quote goes to possibly the most common areas to optimize something that shouldn't exist at all. That's an Elon Musk quote, actually. Isn't, okay.

“So when I think through something that comes across my desk”

that isn't automated isn't off my plate,

that's the first thing I think about,

do I actually need to do this at all? And if I, if I do, why? And I just take some time to think through that first. Even if the industry has done it one way, can I do it some way different

that's gonna save me time or just take it off my plate entirely. Totally agree. If I can't get around that step, then I go to, what is the most optimized way to do that?

Is there a different way to do it, is there a better way to do it? Is there a shorter, faster way to do it? So I think through that, and once I have that need optimized, then I move to automate. Can I fully automate that task?

Yep. If I can't automate it, then I go to outsource it. Can I send it to someone other than me that can tackle it for me? And then if I do need to outsource it,

then I have to create the standard operating procedure to make it as simple as possible for someone else to tackle. Yeah. Are you using any automation type tools

besides lead simple? Like, are you using some of the more advanced things that I don't even know about like robotic process automation, or some kind of AI thing that drives a computer for you, or like scripts or anything?

Yeah. I know where my skill sets end, right? And for that. Yes, same. Okay.

So when you say automation, I mean, this is just, this is basic, nothing exotic is being applied. Yeah. Lead simple, appfolio. Yep.

You know, some AI receptionist got it. An agents, and that's pretty much it.

“'Cause again, I think I've dove into a little bit of software”

that might handle some of things like you're talking about. And I'm just going, you know what? If I have to get that intense, something's wrong with the process.

First, let's make the process simple first

and then figure out how to automate it. Can you think of any AI tools or software that you tried and didn't work as promised? And so you just stopped using it. I hate to say this one, but probably the realm X in that folio.

Okay. Still haven't really figured that one out yet. Yeah. Some of the prompts that I put in there aren't really providing the solutions I need.

And then come back more with an answer than a tool to make the workflow better. Okay, that's fine. Help out. I don't know how to use it exactly, but yeah.

And I know they've been working on it quite a bit. I've heard even just from crane members in the last month or two, people are saying like, oh yeah, it's working way better now. So how about, I'm just going through my mental list of the most painful and manual parts of property management.

How about Bill Entry? Like all the vendor bills utility bills, all that. Yep. So the vendor bills, all the vendors are required to upload them into property mail.

Yeah. Once they get into property mail, then they sync with app folio.

So there is one pain point in app folio.

“I do have to improve all the bills and create the bills”

after they come in. But it does give me a moment to just get an eye on them to make sure they look accurate or if we need to charge the tenant for a service, then that's that point to do that. I don't know if that process would ever come off.

Somebody's plate, they'd be pretty tough to automate. Not getting an eye on every bill quickly. Yeah. But yeah, the vendor bills are all synced through property mail.

We don't have a mailbox, we don't have a office. There's no place to mail anything or stop and drop things off. So, and utility bills are sent to a service that scans them in and puts them in to smart bill pay and app folio. OK, what's that service?

So we just have a local virtual mailbox service. Oh, God, I got it. So the utility companies mail it to them. They scan it to my app folio email, and then it goes in to smart bill pay.

OK, so you have some email with app folio where if you forward a bill attached as a PDF, it automatically, like AI scans it and gets it into app folio for you. Correct.

Yes, that's amazing. I love that. And it tries to read the bill as best as possible and enter in the information. It's not 100% accurate, but it does save a lot of time

because it'll get about 90%. If not more, so you can just look at the bill quick, click approve, and then it puts it into your bill pay flow.

So taking a pause and zooming out for a second,

most property managers who started a business would not have followed the path that you followed. You're reminding me a lot of the stuff I was doing when I started back in 2013, except we didn't have any AI back then.

Like, did you come into this with a background with processes or what led you down the path of like, I'm going to kind of ignore what other people are doing

“and just figure out what I think is the most efficient way?”

Yeah, if you talk to my wife, she's going to maybe have a different opinion, but I am a nerd for organization and creating systems and being optimized. I don't know for whatever reason. It's some sort of passion really hobby for me.

So as I was building the property management side, I thought, you know what? I can take that weird hobby and give it an outlet

for the over to a business.

And yeah, then I get to spend my time doing that. Instead of reorganizing the spice drawer at home. Yes. Having my wife getting annoyed with my OCD habits. Yeah, it's giving me a good outlet, like you said,

to be able to flex those brain muscles and try to-- It's fun. I find it to be a really fun. Yeah. And most people don't get it, they don't understand it.

But like, what are you doing? And like, this, that's boring move on the next topic. Yeah.

“I think you would find some friends inside Creen.”

There's a cohort of us who are quite nerdy in that way. So-- Oh, that's great. On the financial side for a moment, if you're comfortable sharing, like, I have to imagine

your margins are pretty good. Are you able to share, like, your-- let's pretend-- I don't know what you pay yourself. Let's pretend you pay yourself $100,000 a year. Once you back that out, what would be, like, your net margins,

percentage wise? Sure. So do you have a separate property management LLC for the property management outside of the properties to owner cells, and that is how we also work with our investors

and owners as well, too. So we are paying ourselves a property management feed, even for properties that we own, got it. And that goes into that bank account. And from there, I forgot to mention,

but I also owned a marketing and advertising agency that I started in 2002. Wow, I did that for income. That was my income for many years as I was building up the real estate business.

And I still have that business. But from an income standpoint, I don't pay myself anything out of the property management side. So I am able to use a lot of legal tax write-offs with the property management side to keep my income low.

And we just keep that money in investments and bank accounts and reuse it to invest into more property. So I'm not actually pulling any wages from the business, but the margins are very good.

We could talk about that. We do have a resident benefits package. And what I have done is I've created a spreadsheet to keep track of the cost of good sold on per unit. So I know what we're spending on either outsource vendors

or software per unit that actually comes out to less than what we charge for the resident benefit package. Wow, okay, so that would be like all your hard costs, like your software and your benefit package

and all that stuff, your haven rate AI, all that, yeah.

So all of the charges we have for managing a property including the software, the vendors, the leasing, the photo shoots, end up per unit less than the cost of the resident benefit package. Wow, that's amazing.

So the rest is gravy, correct. Yeah, the actual management fees, got it. Okay, how about not like posting notices

“and going to court for evictions and stuff like that?”

Yeah, so what we do is with our delinquency process and lead simple, we actually work with the local attorney at day five, they receive an email that says we didn't just start a three day quit or vacate with the tenant. So then they take that entire process from offer plate

after day five, if the tenant does make a payment,

then I have lead simple trigger and email back

to the attorney to say, hey, they've made the payment, you can take this one off of your plate. Okay, and so they'll actually post the notices for you? Yep, they hire the process server for us, correct. Yep, I love that, okay.

If we get all the way to the eviction stage, then they have the phone number for our vendor that does the lockout and meets the sheriff. So if they get that to that point, fortunately it doesn't happen very often,

but if they get to that point, they'll contact our vendor directly to coordinate that lockout. This would be like a small town thing or something because no eviction attorney in Columbus would do any of that for us, actually the sheriff calls the vendor to be honest.

So wow, that's great. I think they know each other by now, but okay, do you personally have like any type of an assistant or like anything like that? No, okay, just other than my AI agents on marbolism,

that's it. Yeah, I just keep an it simple. Okay, I'm interested in understanding your turn process a little more, a high value activity that we do as property managers is walking the unit

and preparing the turn scope and estimate, getting that to the owner and communicating with them about exactly what's going to be done during the turn is how much it will cost. Here is how you're handling all of that.

Yep, so on our turn process, about two days before the tenant is out, we have a task come up and lead simple to create a project in property meld. And in that project,

you're able to assign multiple vendors to one specific unit. So that's going to include carpet cleaning, maintenance work that might need to be done, cleaning, paint touch ups, whatever.

“Yeah, I think those are the main categories.”

And so then that triggers that project in property meld and all of the vendors get a work order at one time. It also includes a work order to our vendor who does the inspections. So the vendor does the inspections in the work order,

I remind him to try to get there and about a day or two from the time that he received the work order. And then he goes and then he'll take pictures of the property to document the condition when the tenant moved out.

A round day nine that vendor also has a separate work order that asks him to go back and take pictures after the vendors are done, so that we have pictures of the postwork and then pictures archive for the new tenant moving in.

Okay, so is that vendor also like calling the owners to talk to them about the scope? You know, we don't actually do that. You just, we just take care of it. We have very few that would go beyond the limit

where the deposit doesn't cover the turnover. So we don't have to reach out to the owner because the tenant is covering the cost of that turnover. So the deposit, so you say and you have very few turns that exceed the amount withheld from the deposit.

Correct. Wow, that's really surprising. Not all of them. I mean, there are times. Yeah, but most of them fit within that deposit range.

What about when like the deposit is returned basically

in full or nearly in full to the tenant? Yeah, because you still got a paint carpet cleaning. Like there's a lot of stuff that you can't charge for the tenant for. Yeah, trying to think of a scenario like that.

“I think we've also built up trust with their owners”

to get deterrent units flipped. So we really don't have to reach out to the owners to have a conversation. If it goes beyond the deposit, so far, the owners have trusted us to just make the right decision

Okay.

“Now we have had a couple retention issues on owners”

who feel like we're investing too much into their property. And we've let those physical out. What I try to articulate to owners is that when we take care of your property the way I take care of mine, you're going to increase appreciation.

You're going to have less deferred maintenance. You're going to have better tenants. Your property is going to be worth more when you're ready to sell as opposed to the situation. You may be in now where there's a lot of work

that needs to be done and you're losing value in your property and attracting poor tenants. So if an owner doesn't want to keep up with their property, we'll do our best to explain it to him. But if they fizzle out, that's OK.

Okay. But the theme I'm really getting from this conversation, I mean, obviously, like the automation and AI stuff is really exciting. But the other theme I'm pulling out is

heavy partnership relationships where a lot of things that a lot of property managers are doing in-house, you are relying

on third-party vendors, trusted partner vendors,

like your eviction group, like this turn contractor, the tenant screening, like you're like, great. You're good at this. I'm going to deliver the whole thing. In fact, can you also do this?

Can you do this? Can you do this, please? And you're happy to pay for it and just get it out of the theoretical four walls that don't actually exist of your business and onto somebody else's area

of responsibility. Yeah, you're exactly right. Even like the application screening process, the level of detail that the company I used to follow up with applications is much more detailed

than I would do it on my own. So to pay someone to do it, I either pay in myself and utilize in my time, which I find to be worth more per hour than what I'm paying them. Yeah.

“Yeah, I think that mindset you just articulated,”

which is like, you place a high value on your own time. You place, like, I'm not going to ask you to give a number, but my guess is you have an hourly rate in your mind of what your time is worth 200. Okay, I would argue it's actually much higher than that.

Like, out of zero. And anything that you can accomplish for a lower hourly rate than that, you do it. So like, for example, tenant screening, you probably estimated would take you an hour to screen a tenant

fully in a detailed way, including time to do landlord verification and all that stuff. And you're like, well, hey, if this company can do it for $75, that's way cheaper than my time, if I were to do it. So I'm going to do it.

Exactly right, in the first stage of that,

when I was growing was the maintenance side. When I was first building real estate, my wife and I did a lot of the cleaning and painting ourselves, and it's a big step to say, you know what? We're ready to let somebody else do that.

Yeah, and that was probably the first time where we made a real change in the business that we have to spend our time building the business and that working in it. Yeah.

That mindset shift of my time is worth more than $20 now. My time is worth more than $40 an hour. My time is worth more than $100 an hour. Is, in my experience, not easy and not a natural thing that just happens automatically.

“It's something you have to either work at it”

or have a mentor or have somebody who's kind of pushing you. Like for me, that was my business partner. My business partner for whatever reason was born with a high intrinsic understanding of his hourly rate. And he's like, you and I Peter, we have engineering degrees.

We're smart, we need to not be doing this. We need to not be doing this. We need to charge this for that.

And I was always like, whoa, like this.

I don't know, I mean, I was more conservative than him. But I really got from him this mindset of my time's worth a lot. And if something's a lower hourly rate than my time, then I'm going to have this other person do it or this other company or whatever.

So I think it's great that you brought that and it's clear. I mean, this is what happens when you fully internalize that mindset. You end up figuring out a way to build a big relatively large company, not relatively large, but more than just 100 doors with no employees,

with automations and all these other things. And you end up with a super high profit margin, right? So I gave you an example of that. Some people, like you said, don't understand that. I also move that into my personal time.

So things that I have to do at home, I also outsource a lot at home, again, which people don't always understand. But because I do that, I'm able to spend every weekend in the summer at our late cabin and enjoy time with friends and family and what's that worth for our,

you can't really put a price tag on. Totally. And I'll give you one example.

with a water heater issue.

Max took the phone call, property mal, sent the vendor, a message, the vendor called, the tenant before the tenant was upstairs out of the basement, checking his water heater and had to have the work order scheduled and I didn't even know what happened.

Wow, I love that. All these vendors that are getting a shout out on this episode are just sharing right now. There's like, this is exactly what we want for our customers. It's great.

“Okay, how about when the tenant is gonna go move in?”

So he's security deposit, how do you get them access to the property, all of that stuff? Sure. So as soon as the tenant signs the lease, then it triggers a process in lead sample.

And this process, I've been tweaking,

I still tweak because I want to provide the tenants

with the least amount of information 'cause it's overwhelming when someone needs to move in. There's a lot going on. But try my best to answer as many questions as possible. So I've continually tweaked this.

If there's a new question that pops up, I'll try to sneak it into a texture email in the process between the time the send the lease and before they move in. And we use tools to help them set up their utilities.

We use obligo as an deposit waiver program through appfolio, so that's an option. And they're emailed all of this information

“or send a text through the moving process.”

We also then remind them we've taken photos prior for them to them coming in and we send them a link to sign the photo inspection before they move in.

And then every property has a lock box.

So we give a permanent lock box, a permanent lock box mounted on the house. And then we give them a code to that lock box so they can access the property on their move in day. Got it.

So this is a touchless moving process. Correct. And how about security deposit? 'Cause what I find, we also try to push everyone to do online only, but for security deposit, there's issues with that

because they can reverse it and now suddenly they're in moved in with no deposit and things like that. So I haven't had an issue with that. To this point, obligo is used about 30% of our tenants use obligo and then the other security deposit

that we would collect manually would be done through appfolio. So they're either paying with credit card, debit card, or each act payment for their deposit. And that's all just through appfolio.

“Correct, that's what we're obligo, yep, yep.”

Okay. There's one other tool that I have thought of that we haven't touched on is the inspector. Okay. So I use the inspector vendor to do maintenance checks

and move in and move out maintenance checks. And we do that, the ongoing maintenance checks every six months and that vendor gets a work order, recurring work order for that unit or property in property meld.

And then they go and do the inspection with Z inspector and I've set up each property at the way you walk through each one is exactly as it is in Z inspector to make it as simple as possible for that inspector.

And then when they flag an item in Z inspector it then creates a work order in property meld in the signs of the vendor. So in Z inspector that work order is flagged as damage goes into property meld and includes information

about that work order and then links to the photos from Z inspector and property meld to give the vendor a little bit more context as to what you're getting into. So instead of having to take flagged items in an inspection and manually enter them,

I pushed hard on Z inspector and property meld to work together to get that integrated and then also sign the tenant so that the tenants notified as well too about any issues that we're going to come back to take care of.

And is the tenant like given the option to fix it themselves or you just do it and you charge them? - Yeah, so if it is tenant damage, we call that process a homocyst. It's a nice way of telling them it's tenant repair.

So we call it a homocyst. The vendor who does the inspection will type in homocyst in the work order and then I have a tag in property meld that triggers a message back to the tenant. That says, hey, this is a homocyst.

We're going to line up a vendor. You have 14 days to do it on your own and upload pictures. So we know that it was done. Otherwise the vendor will be coming and there's going to be past that bill along to you.

Love it. That's really cool. - I wanted to ask about the wealth advisor title that you use and is all over your website.

and kind of how that impacts your conversations with owners.

- Yeah, I mean, I feel for myself,

“I've been working towards building wealth”

through real estate and I have a good understanding of how to do that. But when we're managing property for somebody, a lot of what we do is really helping them build their investment and grow their investment and make sure

that it's the best for them. So more than just taking phone calls and handling maintenance and getting tenants in, when we do the preventative maintenance, when we make sure the property is in great shape,

we're making sure their investment is getting a good return. So yes, there's a property management component to what we do but there's also in a wealth building component that is tied to property management. And that helps our owners feel like we've got their back.

We're taking care of them and it's more than just making sure

that the tenant is paying rent on time. - Love that. And it's very clear if you go on your website and you look at your team more than half of the team members, you would expect like property manager or director means

whatever but they say wealth advisor.

“And I imagine that helps you in your conversations”

with owners, helps the owners zoom out from the day to day toilet clog repair cost and understand that you're helping them build long-term wealth let's look at this on a 20 year time rise and not just this month's statement.

So I really into that approach. I think it takes it a step further. Like we all talk about asset management but it's really taking it a step further and you've found a way to sort of remind owners

in a subtle way that there's more going on here

than just collecting the rent. - Right, we also have the app polio investor manager tool. And so that's software. If the owner chooses to have us handle the asset management, we migrate them from that polio property manager

to the investor tool so that they can hire level view of their investment and not getting those day-to-day notices or owner packets because they're trusting us to handle that part and they're looking at, we're moving them from property owner to property investor.

- Okay, I'm super into that and tell me a little more about that. What do you handle for them for those owners that you don't for your normal clients and then how do you charge them differently or...

- Yeah, so there is an add-on percentage for handling the asset management side and then that would include things like paying the mortgage, the taxes, the insurance, helping them get their tax, the information pulled together for taxes,

making sure that they have the proper LLCs set up if it's time to refinance and pull the money out,

“what are we going to do that to leverage more properties?”

I hope what kind of return on equity are you getting? So we're diving into a more investor focus side of the process and because anybody who owns a property is going to have to go home and do bookkeeping, they're going to have to pay the taxes,

they're going to have to find insurance and so we provide the resource to take those steps off their plate. And a lot of owners when they come in don't even understand that. Like, wow, there's a lot to do even as an owner outside of the property management side

that they may just take for granted and feel like they can either do it on their own or have been doing it correctly and I try to show them that there is another way to outsource those components as well

and let somebody who's been doing it for a long time help you make better decisions. - Wow. So did you say that these owners who migrate to the asset management, you said they're not getting the monthly packet?

- Correct. - Yep, they go just to the portfolio investor software. - So let me get this straight. You're making more money for doing less work. Basically, sort of.

- Yeah, because, yeah, those owners, you're not calling them for every little maintenance thing, they're not getting the monthly packet. You're taking care of the stuff they mess up anyway, like the insurance and the taxes and the mortgage stuff,

you're handling all of the accounting so you can deliver to them like a complete accounting package, you're probably handling like all of the capex, depreciation, schedules and all of that.

- Yep. - This is great. I love this. Because this is all the stuff you're getting questions about anyway, so you might as well just handle it for them.

You know it's done right, they're happier and you get paid more. - Give you one example. So we had a client come in that had a four-plex and they were probably purchased it at the wrong price,

but struggling to get the units maintained had a previous property management company that was not good. And when they switched to us, they were in the whole several thousand dollars, took a home equity line of credit on their house,

and they still had two units that weren't flipped and ready for the next tenant. So as an example, what we did for this particular client is we offered to provide that asset management and find an investor to pay off their debt,

get the units rented, and we took equity in the property. The investor took equity in the property, and the owner was able to wipe off the debt, get the two units rented, and then create a cash flowing property.

So of them, we moved them from the, just the property management side to the assets side, so we're handling everything. - Yeah. - So not only did they get out of debt,

they also took some of that burden off of making those higher level decisions that probably wasn't their best skill set. - Yeah. - This is so cool.

And I love that I've never heard anyone articulate

this motion of moving property management clients from @folio to the @folio asset management side of things as a way to clearly delineate like these are asset management customers, and these are just our property management customers.

I need to introduce it a Mark Brower if you don't already know him, because he's thinking along various similar lines and I think he would be fascinated, I'll make sure he listens to this episode

about some of the concrete steps that you've done, 'cause he's very big on, and he and I have had some fun kind of public debates and discussions about, what is our responsibility to these property owners

to help them think more like investors? How do we get them to be more long term than they're thinking?

“How do we build the stamina to help them weather the year?”

'Cause there is gonna be an occasional bad year, right? How do we get them through that, because the real returns only come in your '79, '10 plus, and so we have to try to help them get to that? - When we meet with somebody,

I have a side-by-side slide in our presentation

that says, here's what asset management is,

here's what property management is, 'cause most people don't know the difference. - Yeah. - And here's what asset management includes, and can take off your plate,

and here's what property management includes, and can take off your plate. So that give them the option to choose property management or asset management. On top of it, if they choose the property management side,

only then I'm reminding them what we don't do. - Yep. - And part of that is spending the time it takes to build their investment outside of just general maintenance and making sure there's not deferred maintenance

and keeping the property in great shape. - Yeah. - On the asset side, if you want my help, I can help you track return on investment, track return on equity, figure out best tax strategies,

when is it time to refinance? And so I give them those options in the first time I meet with them. - That's really cool. How do you charge for the asset management?

Is just a straight-up additional monthly fee

“or is it like a percent or how does it's structured?”

- So to keep it simple, so the billing is easy, we just add an additional percentage to the property management, okay, type of it, got it. - And what percent of your third party customers have taken you up on this asset management?

- Unfortunately not that many right now. It's only about 10% at this point, but I think that takes a lot of time of building trust. And so as these owners work with us longer, I think I feel like we'll be able to migrate more.

The other side of that is that it takes a real a lot of education, most people do not understand going from one or two rentals to, wow, I could have 10, 20, 40, 50. And that is a bit of a leap for some people.

So the education process is intense and I haven't figured out that key component yet on that side of it. - I'll give you a couple of thoughts. I just came up for me and you can take or leave these.

Would you say after one year that would be enough time to really build that education and trust? - Yes. - Okay. So what you could do is like for that one year, put together an email or a video series or both

and have it just dripped out through lead simple to get them ready. And then on their one-year anniversary, what I would do is send them an email that says, "Congratulations on your one-year anniversary.

"We're so thrilled to have you as a customer "and as a property owner. "You now have unlocked a special offer, "which is valid for seven days, "to upgrade to our asset management package."

“And our asset management package, you may remember”

from when we first met, blah, blah, blah.

Here's what it is just as a refresher

and this special offer, which is only valid for the next seven days because it's your anniversary, you're gonna get six months free or you're gonna get 25% off or whatever.

But the key is it has to be time limited

“and it has to be tied to something like their anniversary”

or you could if you wanted, you could run this once a year on April 16th as like a, "Hey, tax time is over. "By the way, all of our asset management clients, "we know their taxes are done "because we took care of it for them."

Special offer right now, if you wanna upgrade, hit 'em when they're at their peak point of pain. - I have an afternoon project. - Yep, there you go, all right. So, but okay, well, we're at time, Matt,

I really enjoyed this conversation with you

and hope that you got some value too and...

- Oh, it was great. - Yeah, this has been awesome. For anyone who wants to kind of keep up with you and what you're doing over there in Sioux Falls where would be the best place for them to do that?

- Yeah, you can find us on social media, just look properties on Facebook, Instagram, and then also on our website, we have a blog as well too that you can subscribe to the blog too.

- What about you though, are you active anywhere, do you have a newsletter, do you have a Twitter account,

“do you have anything like that, or are you posting anywhere?”

- Personally, or... - Yeah, like personally.

- Yeah, put over first business stuff, yeah.

- For business, it's pretty much posted through our business accounts, I do post every once in a while, but the more I post the less time I have at the lake, so. (laughs) - Well, I guarantee you people wanna hear more from you

after this, so get ready to people are gonna find your contact info about that. - Yeah, and we just scratched the surface. There's a lot that we can get into and how the software integrates.

And for me, it's the biggest part, I just had this kind of come through my head here when we were talking or gearing up for the podcast, and the word was friction, any moment during the day that I have some moment where it isn't as easy as it could be,

and there's a little bit of friction,

“I think what can I do to reduce that friction?”

- Yep. - And that has kind of been my key focus for the last month, and it even happens personally, how do I get my coffee cup out of the cupboard, and why do I have to move it around 10 of my wife's other mugs? So I move mine to shelf above hers, I have two of them.

- Yeah. - So I can easily grab them. Have you worried about knocking over my wife's coffee mugs? - There's a great line from the lean manufacturing world that goes fix what bugs you, and that's kind of reminded me. There's a great book, it's reminded me a lot of what some

of the stuff you've been talking about that John Matzer turned me on to some of this lean manufacturing stuff, yeah. - Yeah, so that's fun, and again, it's a weird hobby, I enjoy it, but I'm able to use this business as an outlet for that.

- Yeah. - It's fun. - Awesome. - Well, thanks again, Matt, and we'll catch up soon. - Thanks, Peter, appreciate you having me on.

(upbeat music) - I hope you have enjoyed this episode. If you like the show and want to get connected to the community, you can follow me on Twitter @PSLoman and subscribe to my email newsletter

on my website, heaterLoman.com. I try to share as much valuable property management content as I can on a regular basis. Thanks again for listening and have a great week. (upbeat music)

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