BiggerPockets Real Estate Podcast - 938: Scaling from 0 to 20+ Doors Using These "Self-Management" Tools & Tips w/Amelia McGee and Grace Gudenkauf

Starting point is 00:00:00 Henry, when you first became a self-managing landlord, would you say that you knew what you were doing? Yes, Dave. I absolutely did not know what I was doing. I was terrible. Okay. Because I was about to call BS here if you said you did. I was terrible. I was just so excited that somebody actually wanted to pay me rent, that I would take their money, however they would give it to me to me, no matter what that meant for me down the road. All right, well, I'm glad I'm not alone, and we're going to dig into this topic a lot on the show today. We're going to cover everything that you need to know as a self-managing landlord. Hey, investors, and welcome to the Bigger Pockets podcast. I'm your host, Dave Meyer, and with me today is Henry Washington.

Starting point is 00:00:46 Today we're going to be talking to Amelia McGee and Grace Gutenkov. They are two young investors who both scale to 20 years apiece with no systems or processes in their real estate business. And today we're going to learn from their mistakes and give all of our investors a toolkit to become excellent self-managers. I think this is going to be a really cool episode because Grace and Amelia make a compelling case. And I personally agree with this that not for everyone, but most people should consider being a self-managing landlord because you learn so much that you can apply over the rest of

Starting point is 00:01:20 your investing career. And one of the cool things about these two guests is they've actually written an entire book on the topic of being a self-managing landlord. It is called the self-managing landlord. It's published by BiggerPockets. And if you want to get it, you should check it out at biggerpockets.com slash managing book. That's where you can get the book itself plus all the bonuses that they'll be giving away. With that, let's get into it and invite Amelia and Grace onto the show. Amelia and Grace, welcome to the Bigger Pockets podcast. Thanks for joining us. Thank you so much for having us. We're super excited to be here.

Starting point is 00:01:57 Thank you. Amelia, let's start with you. You believe that starting off as a self-managing landlords makes you a better investor over the lifetime of your investing career. Why do you recommend this approach over hiring a property manager? Yeah, so we're both of the maybe controversial opinion that when you buy probably one of the biggest assets of your life, you shouldn't look to immediately hire out something that could absolutely make or break your business. So when you're a self-managing landlord, you have way more control over who you place in your property, which is huge. You save money so that you can, in turn, scale. We also think that it's a really marketable skill that you can use in future partnerships. And we think that if you eventually hire out a property

Starting point is 00:02:47 manager, you're still going to have to train the property manager or know what goes on behind the scene. So it's really good to have that boots on the ground experience right when you get started. And Grace, do you share the same opinion or do you come at this question the same way? Absolutely. Especially if you're somebody who wants to reach financial freedom quickly or scale quickly, you really need to work every dollar in your business. And when you're hiring out immediately at 10% of your rent, that could be a third, a quarter, half of your actual cash flow at the end of the day after reserves and your pity and all of that. So when I know I can do it better and put in systems and processes, I don't know why I would ever look to hire it out. And I think

Starting point is 00:03:31 that that works for a lot of people. Yeah, I mean, I think there's definitely something to be said for needing to understand how to manage a property before you hire someone to manage a property because how do you know what you're looking for, right? And the margins are slim sometimes in rental properties in general. But when you go ahead and you hire someone to take on 10% and you don't quite know what it is they're supposed to be doing, then you can really paint yourself into a corner pretty early. So I think that that's definitely a good idea so that people understand what they're doing. But you mentioned, Grace, that once you figure out you need to have the systems in place, right? So paint a picture for us. What moment did you realize, oh no, I don't have the systems in

Starting point is 00:04:17 place to scale as a self-managing landlord. Yeah, I think a lot of landlords are like, if you're paying me, I'll chase you down for it, as long as I get it. And that's not a good systemized way to handle your rental properties. For me, I scaled to 15 to 20 units in about two years, Amelia as well. So I just ran around doing everything like a chicken with my head cut off. And there was one particular instance where I realized, oh, my gosh, I'm relying on emotional decisions, not actual procedures or systems. And it was February in the middle of Iowa.

Starting point is 00:04:50 I had a turnover. If you know anything about Iowa, you know nobody wants to move in February. And I let myself forego all of my tenant screening just to get somebody in because I was emotional about it, right? I wasn't looking at my workflow or these are the exact requirements I have. I was making it up as I went along. And I got burned very quickly. She stopped paying about three to four months. That's the only tenant I ever had to evict. And you know, right then and there, I wrote out my requirements and they are on one piece of paper and they're the same for every rental moving forward. And I don't ever make an emotional decision anymore. What about you, Amelia? Do you have a similar moment when you realized, oh, crap, I need to do this in a more system-tized way? Absolutely. I would say paying rent any which way is a trap that most investors fall into. I was accepting rent via Venmo, the property management software. I was using checks, people depositing at the bank. And it was so hard to actually keep track.

Starting point is 00:05:48 And when I eventually hired it out to a bookkeeper, they also hated me for it. And then when I also hired a property manager, they were like, what the heck is going on here? I can't tell you if someone is late. I can't tell you this, that, or the other, because you're accepting rent in too many ways. So that was a huge turning point for me, just to make it easier for others in my business as well. I'm so embarrassed to admit how many times I just like lost checks when I first started being a landlord and had to like go back to my tenants with my tail between my legs and be like, can you pay me again? Because I'm a super disorganized person and can't keep my shit together. Yeah. And that's a great way to present it to the tenant too is as a benefit for them. So you can say I need to accept rent in this property management software because then I can provide a receipt.

Starting point is 00:06:39 then I'm not chasing you down even though you've already paid. So always present something like this as a benefit to the tenant. So you've made clear, and I think we all agree, that having a system for rent collection is obviously important. But, Grace, what are some of the other processes or tasks that a property manager needs to do regularly that necessitate a system? Absolutely. We're huge proponents of having a property management software, even if you have one rental,

Starting point is 00:07:09 and there's a few key reasons why. As Amelia talked about, you want to collect rent the same place, the same time every month to keep it easy. You also want the same with maintenance requests. If you don't have your tenants trained to put everything in the system that you use, for example, they call, they text, they email, then you can't keep track of everything. You can't serve your tenants quickly and you can't make sure that you're getting things done in time and being able to reference those requests moving forward. For example, if something keeps breaking, you know you need to. to replace it, not fix it for the 10th time. And I had an instance once where Amelia and I both have now internal property managers, so not a company, somebody who's on our payroll. And a great example of why you need to have a property management system is I had a maintenance request come in outside of the system. Tenant Cloud is what I use. Well, my property manager went out of town and I had to step in and handle it. But they were texting. I can't see those texts. I have no idea what's been said. It ended up being an emergency HVAC repair the day after Christmas.

Starting point is 00:08:12 That's very, very expensive. So I've got emergency repair guys knocking at her door 8 a.m. on a Saturday in the middle of a blizzard. She's at work. She's going to be at work for the next eight hours. But I didn't know that because her phone number was outdated in Tenant Cloud because she wasn't trained to use that system. So how the heck is somebody else supposed to step in and make sure that that gets done?

Starting point is 00:08:35 And then the last thing is late fees. We always say make the management software the bad guy. make the management software issued the late fees. So it's like, hey, sorry, it comes out automatically. I'm not texting you saying, hey, by the way, you actually need to pay me another $30. Nice. That seems like a good system. And yeah, I do like having sort of the automation and it just sort of smooths the whole process.

Starting point is 00:08:56 Okay, so Grace and Amelia have laid out a clear case for what can go wrong if you aren't managing your own rental portfolio well. But are there ways you can learn these lessons without getting burned first? and what systems do Grace and Amelia recommend to make your life easier? We'll get into all of that right after the break. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy,

Starting point is 00:09:27 all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought-after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you.

Starting point is 00:10:00 Visit fundrise.com slash BP Market to explore the fund's full portfolio. check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fundrise Fund. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. For decades, real estate has been a cornerstone of the world's largest portfolios.

Starting point is 00:10:21 But it's also historically been sort of complex, time consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Funrise Flagship Fund. Now, you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave.

Starting point is 00:10:54 The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market. explore the fund's full portfolio, check out historical returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship fund before investing. This and other information can be found in the funds' prospectus at fundrise.com slash flagship. This is a paid advertisement.

Starting point is 00:11:18 Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution. That means you can not only find motivated sellers, but you can also reach out right away. SkipTrice phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new.

Starting point is 00:11:58 PropStream also gives you AI-powered insights and comps that are over 99% accurate. So you know, know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step. Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M. Don't just dream about real estate. Make it happen with PropStream. Welcome back to the Bigger Pockets Real Estate podcast. We're here with Grace and Amelia, and they are schooling us on how to manage your rental portfolio like a pro. If you're finding this conversation valuable, go ahead and push that follow button so you can never miss an episode. Let's jump back in.

Starting point is 00:12:37 I'm curious, though, because you've both mentioned these new systems and sort of being burned before adopting a new system. And it seems to me that every investor sort of follows this pattern where you're like, I'm going to do the cheap thing or I'm going to do the lazy thing. And then it just, it always happens. You get burned. You get what you pay for and you learn your lesson. and then you start to adopt the systems. But, Amelia, are there ways that people can be a little bit more proactive about it and not wait until something bad happens?

Starting point is 00:13:10 It just start picking up best practices, maybe a little bit earlier in their vesting career, than probably the four of us did. Yeah, we actually think our biggest lessons learned and our best systems and processes come right after we've gotten burned. But if there's one thing that we're big proponents of, it's to start your systems and processes with your very first property. And this can be as simple as writing down what you're doing.

Starting point is 00:13:36 So when you're onboarding a tenant, walk through the steps of how you're doing that. Where are you listing it? What is the listing description? This is important because you don't want to have to rewrite that listing description every time the unit comes up for rent, which is a mistake I've definitely made. And this has started to save me so much time. write down your requirements for rent. How are they applying? What does the walkthrough process look like? Every little step of the way, it can be as simple as just a Google Doc, but start writing down what you're doing.

Starting point is 00:14:07 Even if it seems like I'm going to remember this, I think we're all guilty of that. I have a lot of things in my head that I know that I can remember. But once you've scaled to even five different properties, it becomes a lot harder to remember what you need to get done for every property. if you have a checklist, it's so much simpler. Yeah, it almost sounds like you are from day one creating like a standard operating procedure. And I think that, A, that's a wonderful idea. I wish I had done it. But B, I think one of the things I want to clarify for people, too, is I don't think I hear you saying on day one, go out and buy the most expensive, sophisticated piece of property management software there is out there because it's going to make your life easier. You're just simply saying, document a process.

Starting point is 00:14:53 and then follow it repeatedly. And then as you grow in scale, maybe you can bring in a more sophisticated piece of software. But a process doesn't always mean an expensive tool to track it. It can literally mean a spreadsheet or a word doc, but something that you reference, repeat, and keep updated. Because I promise you, you're still going to make mistakes, right? I still make mistakes today. So that document needs to live and breathe. Is that what I'm hearing?

Starting point is 00:15:21 Absolutely. your SOP should be living, breathing documents that are always updated. I tell my team within real estate and our team in wire all the time, hey, it might say to do it this way right now, but in four days, it might change. And I'll update the document because I'm all about learning quickly and changing and adapting. But you have to have that one source of truth. And that's where a lot of investors get tripped up. They have a source of truth in their text and their emails written down on paper, whatever they've said verbally to their tenant, a standard operating procedure is the way to have one answer. This is how we do it. This is the answer. And like you said, it doesn't have to be

Starting point is 00:16:00 complicated. It could be some bullet points in a Google sheet. I really like that because at least in my experience managing people at Bigger Pockets, not in my real estate business. I think it's very difficult to try and standardize how people are organized. Like some people want to use Trello, like really complicated software. Some people just write it down in a book. I personally use Evernote for everything in my life. And it's difficult to say, like, there's just this one way that you can be organized. But it sounds like, Grace, what you're saying is, like, figure out what works for you and certainly try and use best practices and adopt them. But there doesn't need to be this super complex system. And everyone can sort of figure out what

Starting point is 00:16:45 resonates best with them. Absolutely. There's a million ways to do every single process we're talking about, whether it's renting maintenance requests, whatever. The idea we're trying to tell you is that think about it like a business, make sure there's a source of truth, and know that you can execute that however you want, but do what makes sense for you so you actually use it and stick to it. Otherwise, it's all going to crumble and you might write out this huge long operating procedure and never follow it. That's useless. So let's take kind of what you've talked about and put it into practice. right? So let's say an investor, they just closed on their first rental property. They've been

Starting point is 00:17:24 hounding bigger pockets for months now and they've been doing all the research and they finally did it. They pulled the trigger. They closed on their first rental property. What should be their first or some of their first steps to get themselves organized? One of the first things you should do as a first time landlord, and this is something Amelia and I did very, very wrong, is start quick guides. These are little keys to the different important information in your business. So it might be utility numbers. It might be banking account numbers. It might just be addresses. But as I was talking about the different sources of truth earlier, that's how we started. So whenever it was time to go find a utility number, I'd be scrolling through my email or looking through my text messages trying to find whatever it is I was

Starting point is 00:18:11 looking for. Whereas if you just make a quick guide, and this could be even for tenant communication or onboarding communication, you know that is the source of truth and everything gets organized. And it's crazy how a little bit of organization is really the foundation for an efficient business that gets things done the right way the first time. I would add to that even before you buy a property, while you're going through the like escrow process, you should be documenting everything that you're doing. Reaching out to insurance agents, Grace and I are both guilty of the day before closing. so bad about that. Yeah, we love to forget it. Oh my gosh. I still do it to this day. I'm like,

Starting point is 00:18:53 oh, man, it's even on my list. I forget to get an insurance quote. And I'm like, what the heck am I doing? So put that on your list. Put all of your contacts that you're going to use for that specific property in your quick guide. Don't forget to change out utilities into your name. Also super guilty of that. So just before you've even closed on the property, be documenting what you're doing. You've both in their in our conversation so far, referred to your properties as a business. And I'm curious if you think one of the barriers here to setting things up is that people, particularly when they start out, don't see a single rental property or a couple of properties as a business and are just sort of treating it sort of as the side hustle or thing that they do on the side. And that sort of

Starting point is 00:19:42 prevents the professionalization that you both are recommending here. Yeah, we're both extremely guilty of this as well. We've done a lot of things wrong, which is why we're so happy to be sharing because these are... This is turning into a confessional. This is a telloff. There are such common traps that lots of investors fall into. So we, neither one of us started calling our rental portfolio a business until we were probably over 20 doors apiece. But starting with your first property, it is a business. Even if it's a side hustle, you can have a a part-time job and that's still a business. So that also helps you manage your tenants. If you have a business email, they're going to take you more seriously. If you say, this is how my business does

Starting point is 00:20:29 things. These are our procedures. They don't know. They have no idea that you own one property. So even with one property, this should be a business to you. I think that's something that a lot of landlords get wrong is they think that self-managing is a job. And it can't be if you make it a job. When you call it a business, it forces you to think about it of, oh, I own this business. I'm the CEO. Do I need to be cleaning my properties? Do I need to be doing the sit and think where I reinvent the wheel every time I go to list that rental property? Or can I consider myself a business owner and then put myself in the shoes of how do I work on my business, not in it, and not reinvent the wheel and work on finding deals and things that are money making rather than the things that just take a lot of time and don't

Starting point is 00:21:14 make you any money. So it seems silly, and I always felt silly saying my business for a long time, but it really is a mindset shift that helps pave the way for a lot of different things that you need to do within your business to make it easier so you can have more profit, more time, with less input. You know, that's a great distinction. And I don't know that I've ever thought about it like that before. But you hear it all the time. People are like, oh, you're a landlord. You're just giving yourself another job. No, absolutely not. I own a business. right? And there are jobs to do within my business. And I can choose to do those jobs. I can hire someone to do those jobs or I can bring it a piece of software that helps me do those jobs, right? But

Starting point is 00:21:55 when you picture it as a business and not a job, it forces you to think more like an owner and not an employee, which is what we all need to do with our businesses. But with that, like I said, you can bring in technology to do some of these jobs. And for me, like, Like I said early on, I realized I needed to bring in some piece of technology to help me. But it was overwhelming. And I have a technical background. Like I did software development like as my career. So if it's intimidating to me, it's got to be intimidating to somebody who doesn't have that background.

Starting point is 00:22:31 So what types of technology do people need to be looking for and implementing early on in their business? Well, the first one is your property management software. If you haven't already picked up on that, Grace and I are huge proponents of a strong property management software. We both use tenant cloud, but there's lots of software is out there. And you need to do your own research and decide what's best for you. But you should have a software that at least does online lease signing, collects rent, has a really robust maintenance system and a strong tenant messaging system. So those are our minimum requirements for property management software. The second that I would recommend for new investors starting out that want to have some sort of a tech stack is a bookkeeping software.

Starting point is 00:23:18 This is huge. Grace and I didn't have one to get started. I think we were both using Excel spreadsheets or maybe Stessa. Or nothing. Or nothing. Grace was using nothing. She can tell that story. But this is huge.

Starting point is 00:23:31 You have to be able to show how much you spent every year, document what you're even spending money on so that you can know if you're even running a profitable business. And then the third is a project management software, which we can talk more about. But just to give you the top three, those are what I would say. Given that you've both scaled to the point where you were self-managing, you did all the things yourself, then you've started to bring some things in house. Like what is the difference between what you're doing and someone who's not self-managing at all? Like where do you see the distinction of what self-management is?

Starting point is 00:24:07 Yeah. the people who who continue to treat management as a job are going to crash and burn, not be able to be proactive. Earlier, we talked about how do you increase your profitability with the same rental portfolio rather than always focusing on acquiring, acquiring, acquiring. And if you have the systems and processes to do that, to review your finances, to be proactive with your turnovers and who you're leasing to, you're going to have such a more streamlined and hands-off business than if you are stuck in the job of self-management.

Starting point is 00:24:38 The last straw for me before hiring a bookkeeper was I set up my own property management software and I accidentally put one unit into the wrong bank account into the other bank account. And like at the end of the year, I was like, this property is killing it. I am doing amazing. And then this other, I was like, wow, this deal really sucks. It took me like way longer than I care to admit to realize that I was just to pop. two sets of red checks into the wrong property. It definitely took a lot of time and a lot of money to fix that up.

Starting point is 00:25:11 And now I have a professional bookkeeper who does all this stuff for me. All right. At this point, you all know maybe a little too much about Dave's and my early mistakes, but you also know what to do to avoid them. After this break, we'll get into some of the best ways that you can both find and manage tenants. And we'll talk about how these strategies pay off in terms of your time. and you'll also learn at what point do you need to think about starting to delegate some of this work as you scale. So stay with us.

Starting point is 00:25:40 For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind.

Starting point is 00:26:19 It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio. check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund. Fundrise Fund this and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive.

Starting point is 00:26:58 That's the power of the Funrise Flagship Fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10.10. The portfolio features 4,700, a single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market. to explore the fund's full portfolio, check out historical returns, and start investing in just minutes.

Starting point is 00:27:33 Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. Thinking about wholesaling or flipping your first property, but not sure where to start? The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in.

Starting point is 00:27:53 With PropStream, you get instant access to over 160 million properties nationwide. wide. Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution. That means you can not only find motivated sellers, but you can also reach out right away. Skip trace phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new. PropStream also gives you AI-powered insights and comps that are over 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step.

Starting point is 00:28:32 Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M dot com slash BP. Don't just dream about real estate. Make it happen with PropStream. Managing properties can feel like a full-on circus. You're juggling vendors, tracking payments, chasing approvals across multiple properties, and maybe a few HOAs, all while trying to keep tenants happy and owners confident. One delay can throw everything off and suddenly your day is all clean up, no progress. That's why hundreds of property managers rely on bill to streamline their finances. Bill for property management lets you add all your properties,

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Starting point is 00:30:59 Let's pick up where we left off. I want to move to something that I think really what a lot of people want to hear about from you guys, and that is tenant selection, right? So when it comes to finding tenants and managing tenants, what is it that you guys do or recommend or has worked for your business? Because that is where everybody feels like they get kicked in the teeth sometimes. Yes, this is absolutely the biggest part of your business. in our opinion is finding the right tenant because they will make or break your property.

Starting point is 00:31:30 They will make or break you as a landlord emotionally. No, I'm just kidding. But we are huge proponents of choosing the right tenant waiting until you have a good applicant to move forward with them. So I'll take you through our tenant onboarding process. So obviously the first thing is listing it. We pretty much solely list on Facebook Marketplace. And the markets that we're in, that is where.

Starting point is 00:31:55 most of the tenants are hanging out. But we all know that there's tons of is the still available messages that come through. I know. It's like the bane of my existence as a landlord. So right off the bat, we have saved in our notes app or Google Drive an automated message that gets sent back to these possible applicants. It says, hi, the property is still available until it's no longer listed. if you're interested in the property, here's our free free pre-application, and it sends them to a Google document. So this is huge because we want to make sure we're pre-screening tenants before we're even moving forward or wasting any more time with them. Are they even qualified? So that's going to collect their name, their income, and obviously check the fair housing laws in your state to make sure you can collect this information.

Starting point is 00:32:49 but just basic information, previous landlord's name with their contact information and the reason why they're moving. So just a couple basic things. From there, from the pre-screening application, we go through. If you're qualified, we set up usually an open house or one or two dates that they can go on to our calendar, lease schedule, and book a time to view the property. After they viewed the property, we have them submit a formal application that checks their background, credit, score, and eviction history. And while that process is going on, we're also doing their

Starting point is 00:33:24 employment verification and pay stub verification and previous landlord checks. Now, this is huge. And pro tip, just because someone writes down their landlord's name is John Smith, that doesn't always mean their landlord's name is John Smith. So do a little extra research. If you can look up the owner of the address that they say they're in, verify that it matches up with that person. When you call the landlord, we like to use a little trick that says, do you have any rental properties available? Instead of immediately going into, hey, I'm calling about Sam Jones. Is Sam Jones your current tenant? Well, if it's that person's friend, they're going to know that they need to lie for Sam Jones.

Starting point is 00:34:03 So if you just say, hey, do you have any rentals available? If they're actually a landlord, they're not going to be super confused by that question. So landlord reference checks are huge because you want to make sure that they treated their last landlord kindly. make sure they have employment history, and credit check comes back. So those are the basics of screening. And we don't skip on these processes anymore because we have been burned too many times by placing the wrong tenant. And I just want to add in that if you're busy running around barely keeping your head above water, you're going to realize your tenant or your proper needs to be rented a few days before it needs to be rented because that's what I used to do. If you can get

Starting point is 00:34:43 proactive, and that's what working on your businesses is getting proactive, you have a checklist that says, okay, the day my tenant gets notice, I start my pre-leasing. I start the listing. So now I know tenants are going to be looking when they're one or two months out, not three days. And you can be more proactive, get better quality tenants, a bigger tenant pool, and place somebody who's going to be higher quality in your house, stay longer and pay more rent with less turnover, which are all good things for you in your business. Now, I want to move on and sort of talk about sort of how you both manage your time here, because you're both trying to scale. You're both managing your own portfolios, but how do you decide what parts of property management are worth it to you? Because there's so many

Starting point is 00:35:30 different things. You can do everything yourself. You can get software. You can get hire out people internally. Amelia, how do you think on the return on time and what is the, like, how do you decide what's worth it to you? Yeah, that's a great question. So there's so many components that go into owning rental properties. And the way that Grace and I look at it is in terms of money making activities versus activities that we can hire out that aren't worth our time. So money making activities for us is acquisition, reviewing financials every month,

Starting point is 00:36:07 making projections and determining which properties are performing well and which aren't, determining which properties maybe need some deferred maintenance to make them hold more value or appreciate. And non-money-making activities for us at this point are those maintenance requests that come in at midnight that need to be taken care of. Those can easily be outsourced. We have processes written down for our property managers at this point where they can do those tasks, little things like scheduling with handymen or anything like that that doesn't directly

Starting point is 00:36:43 bring in more money for the business or help us with projections in the future has been hired out at this point. So then, Amelia, that's interesting. You say that because would you consider that approach still being a self-managing landlord? I personally do consider myself still a self-managing landlord, even though I have an internal property manager. She's only working for me. I have a I have 41 doors at this point. She just self-manages for my portfolio. But I am still heavily involved in the operations of my rental portfolio. So I'm not doing the day-to-day communication with tenants, looking to make sure everyone's

Starting point is 00:37:21 paid their rent, serving notices if that needs to happen. I'm looking at big picture. I'm the CEO of my business. I'm making sure that the rental portfolio is operating as it should. Yeah, that makes sense. You know, I actually like to divide my management of any particular deal into two different categories. One I would say is operational management, which is sort of like the day-to-day stuff. So, you know, if you're renting a property out, yeah, it's all the stuff we're talking about.

Starting point is 00:37:52 If it's short-term rental, it's managing guests. But there's this whole other side of managing a rental property, which I would personally call asset management, which is like, what are you doing with the physical asset to maximize its value. And that is stuff like, you know, are you going to do a bur? Are you going to do a rehab? What's the scope of that rehab? Are you going to, you know, reposition the property? You're going to subdivide it, whatever, comes up in a particular property. And to me, that part, I've never figured out a way to outsource. Like, you can outsource sort of like the day-to-day stuff, but asset management and sort of like being the last line of defense and the person who's really ultimately responsible for the success of any individual deal.

Starting point is 00:38:38 Personally, I don't know if you can outsource that. Henry, are you sort of the same way? Yeah, absolutely. I mean, I think that that falls into exactly what Amelia and Grace defined as money-making activities. Because I think this is a, and I think this is a part of management that people don't do enough. Even experienced operators don't do that enough. And I've been guilty of this because we get so focused on

Starting point is 00:39:03 acquisition in order to scale that we forget that we've got scale in our current portfolio if we monetize the properties to their fullest potential. And I think that that's something only, it's really only something you or some sort of like COO that you hire would be able to do, somebody who specialized in understanding your portfolio, the intricacies of your portfolio and then specialized in the industry. But this is the like far less talked about part of growing and scaling a real estate business that I think needs to be more on the forefront. And if you don't refer to it as a business, you are only looking at that little sliver of property management. It doesn't even occur to you that there's an overarching manager, the asset management, what we're all talking about.

Starting point is 00:39:54 And so you never think about it, you never do it. And one of those proactive things that came to my mind when you were talking, Henry, is my internal PM handles all the leasing and turnovers. But as the asset manager, a question I might bring to him is, hey, how do we eliminate winter turnovers? And I focus on the bigger picture. Okay, we only offer six-month leases. If they start the lease after October, it has to be six months. So things like that that are the bigger picture preventing turnovers. over, which makes me money that I'm talking about as the asset manager, but I'm not going

Starting point is 00:40:30 doing the nitty-gritty. I don't at this point even know my tenant's name. I might look them over, but I don't talk to them on a day-to-day. He does that. Got it. So it sounds like both of you sort of started as, you know, doing 100% of the management, everything from, you know, picking up the phones, you know, signing the leases yourself. Amelia, at what point did you decide that you needed to hire someone internally? That's such a great question. So I was at 36 doors before I hired someone internally. And I have a mixture of long term, midterm, and short term.

Starting point is 00:41:09 So there's a lot of moving parts. And one thing that held me back from ever hiring someone out was the fact that I wasn't even organized enough myself yet at that point that I felt I could train someone else on it. But to go back to your question, how did it? I, what was the turning point? It was when I really started to dig into my books and realize that I was losing money because I wasn't able to focus on the asset management. And I, the $500 a month that I pay my property manager, I save just by being a better business owner. So I'm very money motivated and that was the turning point in my business. I think when people ask this question,

Starting point is 00:41:50 they want to know like, you know, when's that point? Is it 10 doors? Is it 20 doors? is it 30 doors? When can I truly afford to hire somebody? But more importantly, like, how did you feel? And this can go for both of you. How did you feel when you hired somebody? Did you feel like, oh, my gosh, yes, this, I needed to do that. Because that's what I felt when I hired somebody. And that let me know that I should have done it a lot sooner. Yes, 1,000 percent. It was such a huge relief for me. And I said, I have to sign out of this. I will no longer be looking at this software. Sarah, my property manager, manager, it's on you now. If you need me, I'm here, but I can't be in here anymore. It's too emotional for me. I just want to add, for me, I'm very logical and numbers driven. And while, yes, emotionally, I knew I needed to hire somebody and it was an immense relief when I did. I looked at it as if I bring somebody on, what can I now do in flips to pay for that person? And I was doing maybe a couple of,

Starting point is 00:42:53 rehabs a year and now he's been with me six months now and we're doing six flips right now, which I never, ever, ever would have thought possible. So you don't have to look at it as how can I make this much money and then drop my income because I hire it out. You can also look at it in a safe way. How can I leverage this person to make more money? Yeah, it's definitely, I don't know if double-edged sword is the right way to say it, but there's definitely two things to be thinking about because yes, for me, I was very similar to you guys where I didn't want to hire somebody. I didn't want to hire somebody. And then someone pointed out to me that I was losing more money by not staying on top of my turnovers, by not getting to, by not getting to three-day

Starting point is 00:43:42 notices on time, and by not collecting on time, then I would of just paying the salary for someone to stay on top of those things for me. And on top of all that, I get that time back to grow my business more. So I think that's a fantastic perspective and approach. And I'm glad that you're right. It's all about the data. And it's all about understanding what's going on in your business so you can make those decisions. All right.

Starting point is 00:44:07 Well, thank you both so much for sharing your stories and knowledge with us. This was a very cathartic exercise. I feel like for all of us just to admit a lot of the mistakes that we have all all made as real estate investors. So it was a lot of fun. Grace and Amelia, thank you so much for joining us today. Thank you so much. If you want to learn more from Grace and Amelia, definitely make sure to check out their book, the self-managing landlord. You can do that at www.biggerpockets.com slash managing book. It's biggerpockets.com slash managing book. And of course, as always, if you want to connect with them individually,

Starting point is 00:44:44 we will put their contact information in the show notes below. Henry, thank you so much for joining me, man. I know you enjoyed this a lot. It seemed like you enjoyed getting some stuff off your chest over the course of this conversation. It was like looking in a mirror. So thank you for making me realize the flaws in my business. Hopefully, that's behind both of us at this point in our careers. Amen.

Starting point is 00:45:07 All right. Well, thank you all so much for listening. We'll see you soon for another episode of the Bigger Pockets podcast. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on. on YouTube, Apple, Spotify, or any other podcast platform, our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer.

Starting point is 00:45:46 The show is produced by Ian K, copywriting is by Calicoke content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.w.w.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with quality.

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BiggerPockets Real Estate Podcast - 938: Scaling from 0 to 20+ Doors Using These "Self-Management" Tools & Tips w/Amelia McGee and Grace Gudenkauf

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