hey everybody it's ken i'm here with my good buddy john how you doing john rosenberg with levrose now levrose is a commercial real estate company here in arizona they just won a big award yes we did a top local commercial broker firm uh by ranking arizona so one in arizona so it's really really great to have you here thank you so john's got an incredible background 27 years in office and retail right here in arizona and uh he's got an incredible company uh john thanks for being on thank you thank you thank you for the kind words everybody a little bit about you know your firm sure so i started levros was i said 27 a little over 27 years ago now uh went to university of arizona came up here afterwards i already had my real estate license actually and i worked for a local firm it was during the rtc resolution trust days and during that time we were managing we were leasing we were selling properties that went back to the lender in many cases these were insurance companies the company i worked for focused mostly on insurance companies who are lenders as well and uh so we were doing everything so and and you know it was literally i remember walking in and my uh to us my boss at the time says there's a building uh manage it there's a there's a space lease it and in some cases here's a building sell it so i you know trial by fire yeah yeah well so so now fast forward today you got 20 how many brokers so we've got a little over 20 i think 22 23 brokers now on the on levros side and then property management which is mode commercial is uh there's probably 20 23 24 people over there as well managing uh between 80 and 90 properties right now i believe pretty cool so and then in addition that you're an owner right and i'm an owner yeah yeah so yeah great model by the way to have a leasing company a brokerage company a management company and be a landlord yeah you know dumb luck sometimes i i remember i was talking to somebody one time and they said boy you were really smart to do property management to level the peaks and valleys of brokerage and i said i wasn't smart i was lucky that i happened to get that wasn't really by design but it's worked out to be a benefit it's yeah the perfect segway yeah because what we're going to talk today about so this is the greatest question we get a lot of these questions from you guys you know and everybody asks this question you know on the multi-family side is do i manage my own or do i you know hire somebody out and and then if i do what do i look for in that company you know and so i get that question a lot john i'm sure you do yeah yeah so really the title of this one is you know do you self-manage your own investment and i'll just tell you from a from a property management standpoint property manager's standpoint because we both have very similar companies our mine's mostly multifamily as you guys know we have about 10 000 units and john has what 90 commercial properties and so we have a lot of experience in this arena we have management companies that do both of those across all lines and so we see it all right right yeah how we do we see owners that buy buildings and want to manage their own uh we see owners that buy buildings and want to use third party um and and we see owners that buy buildings and and and they focus on the fee and they hire third party managers and then they get very poor get what you pay for yeah property management so we're going to kind of cover all of those things um you know so you know what what's what's some of your experiences here um because you i'm sure see it all especially when you sell a building right yeah we sell a building and a lot of times uh we'll get a buyer uh of that building that'll say you know we're gonna take care of it ourselves um and and one of the first things you know we always recommend is they look at is is it a building that's being currently managed um or is it a building that is being self-managed uh if it's a building that's currently managed why do you think that you should take over uh the management in-house yourself and usually the question is oh i can you know i can send my maintenance guy out and i can collect the rents and yeah that's actually uh that's the interesting right because that's what they think it is yeah yeah i'm gonna collect the ransom and hey you know if something breaks i can fix it right right and then you know you just you just bought a job right so you just bought a building but now you have a job of being the property manager of that building so um so you first you look at and think of the why and then you really look at and break down what are the what are the different items that are going into managing that building if it's in an area that you need a dayporter to go and pick up trash every morning then you have to look at that landscaping how many tenants are in the building um who's collecting the rent how are you doing how are you paying the bills um you know there's there are so many uh property taxes and and you know the different the different things that you have to to look at and then uh and then the vendor pool um as to who's out there because in a lot of cases that owner that wants to save money may end up paying more money in the long run so you brought up a very good point so what is the primary reason somebody wants to manage their own building to save money of course i mean you know that's that's going to be the biggest so here's the interesting thing so because i you know we look at this too you know let's say a management fee on a property might be three four thousand a month and what are they running on yours around that they they could i mean we have some as low as you know a thousand okay you know let's just let's just use a thousand sure okay so you're managing a property in a thousand dollars a month there's no way you're making money on that right like i don't think people realize this there's no way like the accounting alone costs you a thousand in-house overhead you know your your office space uh everything that you're doing on labor and time is not it's not under a thousand dollars if you want to do it right absolutely right yeah i mean you can't and that's where a management company will make more sense because economies of scale that one thousand dollars you couldn't do it yourself for a thousand but if that pro if that property management company has you know dozens of those properties well then they can do it because they have the the bookkeeper the property manager the assistant the maintenance the building engineers which is what you have you have a whole accounting team so you can take and throw a building in there right and you're much more efficient because one accountant might be handling six seven eight nine ten buildings yeah yeah and then and it goes back to all of that um you know you have accounting support you have management support um you know as a property manager assistant property manager who takes a call when someone is uh you know go and then and then what happens then we have building engineers you know that run out and they're doing uh uh taking care of things whether it's uh you know a pipe uh quick pipe break or uh or not quick but you know when you have a leak or or uh uh you know lights out um whatever it is lockout you know the locks are not working the toilet's running i i got my haircut this morning by the way before how do i look looks good okay good sure so anyway i'm in there and uh there's an hvac guy in there like in the barbershop right and i go do you own this he goes like nope that's the landlord's experience you know what i mean i started laughing i go and the guy comes in he says oh you need a compressor i go you might want to check and make sure you know because at some point you know what i mean you're gonna hit the summer here in arizona and you're gonna need that and we had this funny little exchange but he's like it's nice and those are the things that happen he said he goes my air's been out for three weeks i've been trying to get this guy here okay okay so he's a little bit unhappy because he's bringing people in and this just this morning so this is a real deal right i mean you see it i see it we have we have a i bet i have 75 maintenance guys you know at our properties and they are b z i bet and they're constantly constantly handling things and so what happens is a lot of times these landlords take these on right yeah they do and and you know i give you a a a great example of what you're talking about um you know when in the summertime in arizona ac goes out and you walk in you know someone walks in their office and turns on the ac it's not working that's not a good day they could you know they could possibly have to you know shut down for the day send their employees home customers whatever so um if you're self-managing your own building what are you going to do when that happens well you're going to call the air conditioning hvac company and say hey can you do me a favor i need you guys to get out there as soon as possible well it's 115 degrees out today we've got 50 calls lined up our guys are slammed all day by that you know they'll get there first available and who are you first available guy will get there by you know hopefully this afternoon well here we are now three o'clock in the afternoon they get there the tenants are not happy um they just had a completely unproductive day and they get there and they don't have keys to get into the maintenance closet or they may that may not know if the the ac is on the roof where it is so they spend the first hour just diagnosing what's going on or figuring out where to go and then they start and then the billing starts going up and then they come back to you okay we'll have parts tomorrow next day whatever um and if you're a self-managing landlord that has a job right yeah just this is a great day for you yeah now now just go to the other side you have a third party manager they call the third-party management company rac's out uh that company sends out you know in our case we send out a building engineer we have some of them are actually hvac certified they have keys on their truck they show up there they're there you know 30 45 minutes they already know where to go they go in they already know where the maintenance room is they they pop up maybe it's something simple um you know re recharge or or start you know a reboot or whatever it is and they could be back up and running within an hour well think of your tenant now one hour tenant yeah versus all day tenant you know or the next day and then think of the cost correct one hour versus several yeah yeah if they have clients coming it could be a doctor's office a dentist's office it doesn't really matter but these are real things that happen real time i mean we have water leaks we have fires we just had a we just had a fire in in in texas took 20 units out happened to be arson by the way uh a tenant was um uh lit his own unit um so it's crazy like things happen guys and and so you know obviously we had a massive call around that you know but those are real things right yeah they're really all the time and what my my experience has been that you know uh people you know for and people ask me you know when they buy these single family houses too like you know should i manage it so should i not manage i always say do you have the time i always start with that not necessarily the experience because usually they do not but you know managing a home has a lot less moving parts and you could probably do it but managing a house you know what is it a hundred bucks a month right maybe two i go really like you know to be like really kind of pay all the bills and collect all the rent and manage the the the landscaper and the maintenance people and the tenant calls and all that stuff is it really gonna be less than a hundred dollars you know is it really worth your time right you know when you're uh you're at your kid's birthday and you know i mean these are real things and not only that you're keeping the tenant happy which increases look the tenant retention's so important so you don't want that tenant to be upset and move out as soon as their lease is up or find a reason to move out sooner you want them to stay and renew because just that one month downtime of finding a new tenant paying commission fixing up the space blows away that hundred dollars or whatever it is that they right that's the other thing and so so what we were laughing about before we decided to pick this topic was we actually love self-managed properties right right when we're buying yeah that's what i'm saying when we're buying yeah because i've done this a lot you know we had a group i remember there was a group from um denver and the guy had raised a bunch of money you know because raising money is actually not that hard and bought this building and uh it was a disaster right it was highly vacant it was um and it had a lot of the people uh that were actually living there probably shouldn't have been in there so now number one they had a lot of vacants two they had a lot of deferred maintenance uh because when you have vacancy you have no cash so you can't pay for any of that um but also three the people that lived there shouldn't been there so they weren't really paying and then so you had all those people that are going to move out and so they basically call a third party management company because they screwed it up right so we step in and it gets worse right because you have to evict people that aren't paying rent and so now your vacancy's gone down right and the owner's like what's going on here i go dude it's your issue like you put all these knuckleheads in here right uh don't you want people that are gonna pay rent so finally what happened was after three or four months uh they fired us i was like what and you're the one that ripped off the band-aid right i ripped the bandit off but he didn't want to tell his investors right you know what i mean because he's trying to save that little bit of management fee you know he's trying to put in his pocket that's what he was doing he was flying there and you know hey i i raise all this capital and i got this nice investment but really he was and the manager also was stealing so we had to fire when we when we started uh there was all these things and so the point is is that we love those buildings right because these guys don't know what they have right right yeah so you've probably found this it's mismanaged a lot of times and look there's the occasional owner that that you know actually is on site and that is a focus and they enjoy it and they get to know the tenants and they work with the tents and you have that but but that's a rarity you know the majority of these are are not necessarily on site and if they are on site they may have their own business so do they focus on the i mean look my building that i'm in um we don't manage it ourselves we have our we have a property manager our management company obviously but but we we don't want to deal with it if there's an issue you know it goes through the management company including paying rent and paying all the bills so you find these owners that think um you know oh you know i live not too far away i can come down i can mow the lawn myself or whatever it is that gets old it affects the the tenant too that's the that's the biggest issue yeah you you guys they're not thinking long term they're they're not thinking retention right renewal right right yeah and these people they're getting pissed if they're having business interruption issues which really do happen sure and you're not dealing with them they're like screw this place i'm going to the next one absolutely and they're getting look they're getting uh approached all the time to move to the more professional building uh professionally managed buildings professionally leased buildings they're getting uh they're always getting approached so you know your job if you own a building is making sure that you're doing everything to make sure that the building's not only running smoothly but you're keeping the tenants happy and uh that you know those go hand in hand so i wrote down a little list here of just things that uh for i've just scribbled this down this morning on things that a professional management company like arnold's does like we do we source tenants screen tenants we all are legal you know our all those leases are all tight all our accounting we manage the expenses we manage the income we advertise we we we manipulate the rates up or down um we manage the leases we screen all the tenants we collect from the tenant or we collect if they don't pay we do preventative maintenance we do repairs we have we have all these issues around rent repairs tenants evictions we enforce the lease we fill vacants we communicate to the owner we do the accounting we pay the bills report weekly all that stuff for a thousand dollars a month yeah yeah i mean think about that like there's a lot there's a lot and you know one of the other things that i mean that's that's an unbelievable list and there's there's a lot of there's a lot of other things you look at you know one of the things uh like vendor um review um if you have i have a good example of a property that uh we were we took over the management and it was adjacent to another property we were currently managing and the uh the property manager went in and and said what you're paying i'm gonna say you know two thousand dollars a month for your landscaper um well our landscaper that does multiple buildings who always gives a preferred rate um to us because we have so many again economies of scale um and we handled the building right next door so they're gonna be out there one time what if we can get them down to twelve hundred dollars a month by the way your management fees you know a thousand dollars we just saved you eight hundred of us so now it's cost two hundred dollars and that's just before you even open the door there's so many other little things that are being done that that that you don't even realize as an owner that you may be missing oh my gosh you know it's so funny we sit around here in our conference room and we're we're meeting with our insurance brokers and we're dialing in our coverages our deductibles and making sure you know that all our assets are covered you know from from uh and there's all kinds of loopholes in that uh we we just cut a big deal on our property tax appeals you know so we're managing insurance we're managing the property taxes we are dialing down on all our utilities our water conservation you know our sewer electric gas trash all that stuff we're i mean the same as you guys right there's these guys have no idea like what we did is we went and re-measured all of our floors on all of our flooring and we cut out a million two in our flooring expenses in one year a million two now by the way we self-manage our own stuff now but our our costs were about four million a year that we were doing in flooring and we got it down to 2.8 the next year by just measuring it and dialing in and going with one major company et cetera et cetera so there's all this stuff that's going on um that's happening on the property with a good property management company right yeah we it's funny that you're talking about measuring the flooring and saving money not only on on the cost of the flooring but i remember a building where we had a client bought a property and it was self-managed and uh the the new owner came in and said you know we need to get these vacancies filled and and we were man we were not only managing but we're doing leasing but um so we went in and and the the old management company um didn't really know the right way to measure a space so you've got you know bulma standard way of measuring a space so they were missing square footage so now we went through and we start measuring the space the building grew by at least 10 percent just by so i remember that owner called me said find any other building that these people own i want to buy them yeah so you know that was instant just by thinking about having i mean it's crazy so so we went in and and re-measured all the suites and as the tenants turned over you know we were able to increase the the rental income um and he was thrilled and it was he wasn't you know ripping them off in any way it was exactly what they should have been paid for your management fee yeah exactly the time way way more than our management fees so so yeah so so those are you know those are little things that that an owner may not know and it's not that the prior owner um was was you know didn't know what well they didn't know what to do but it wasn't that they were um not measuring the space they just didn't necessarily know the right way to measure the space um to make sure that they're accounting for common areas to make you know certain common areas especially if it's a loaded building with um restrooms things like that they may not know to do that so so uh which is a problem it's a it's a problem it's an experience issue it's an experience exactly you know what i mean yeah and this is all i'm talking about like there's nothing wrong with buying an investment or bringing if you guys are raising capital and buying things you better have a good management company yeah right if you don't understand it right right because it's not worth saving a little bit of money that story that i told you was a true story those guys out at colorado you know they they lost the building basically you know what i mean because they they they brought another management company in and then by that time was too late they had like 200 some thousand dollars in open ap they couldn't make their mortgage they had to you know they were missing the to the attacks et cetera et cetera and this is all before uh you know when everything started crashing back in the early 2000s or mid-2000s but regardless um you know it's such a small number and if you're really in the investment business like really and you're out trying to find deals that are cash flowing that's all you should be spending your time on right yeah you should and then as an investor you're going to eventually sell that property potentially but if you are and you don't have it professionally managed the the buyer is going to come in and look at it and say okay these numbers are they correct or are they not correct um what are they missing what what else do we need to build in so the money you're nest you may be thinking you're saving you're just gonna lose it in the end anyway because now someone comes in and thinks well i better build in this amount i build it better building a management fee better building you know the the the their the cost of of uh uh you know certain areas of the building that maybe the vendors are too high we need to spend the time now to do that and quite frankly they're gonna build it in they're gonna beat you up on the price you're going to sell it for less than you could sell it for and they're going to be the winner you might not even know so so here's we we bought portfolio properties we bought eight properties all at once and um for a lot of our investors this was it was called the the uh to the tucson eight opportunity fund and we bought um i think it was just under 2 000 units and um but uh when i when i looked at the broker package and i hadn't gotten into due diligence it was managed by a uh small mom-and-pop company and they owned all eight and i saw all these things you know because you know i'm like oh my gosh they're not charging for the water sewer trash and uh they're not uh pricing the units by location and there's a lot of value out here and the expenses were high in these areas and it all calculated up to 500 grand in anti-growth wow so before i even looked at the buildings just by looking at the math from a self-managed portfolio of eight i saw five hundred thousand dollars in ny now could i have been wrong of course and when we got into due diligence it was pretty close but i knew that we had a massive value-add right so i knew that we i mean we're talking about uh close to 20 million dollars in value-add and how much did they pay for management fees during that time they thought they were saving right so they were they had their own little management company in their own little office and their own little property manager running around doing all this stuff nothing wrong with that guys but i'm telling you that was a massive win for my investors because we bought all eight and eventually what we ended up doing was improved four of the eight next we improved all eight we sold four off and we got all our cash back so now we own four free and clear you know infinite yeah we're infinite and this is the this is how it works right you do the same thing with office right right when we're looking at self-managed stuff we're looking at all like all the stuff that the management company sees and the efficiencies that we bring you see it in the financials right and the way they're running the buildings yeah it's first thing you have to do is you have to look at that you look at that the financials you look at the package and then you determine uh you know right or wrong and like you said is there it is there money left on the table um and for a buyer uh if they find that that's that's that's secret you know that sounds good yeah that's the gravy that actually is the reason we buy so if we don't find that on a deal we're not buying stuff just hoping the market goes up we're buying stuff we're trying to force equity we're trying to see a mistake on the rent we're trying to see and by the way that happens all the time right we're trying to see a mistake on the expenses we're trying to see a mistake on the other income we're trying to see a mistake on the debt and and guess what with all of those things at your disposal there's almost always something right they've always they miss it they may miss a rent increase as simple as a rent increase may be in there we've seen owners you know that self-manage or you know they come in or they have it mismanaged and very simple rent increases miss maybe recapturing some of the common area or the cost that they're supposed to on a base year lease which um where they're where they basically get to recapture from the tenants or the tenants have to pay any increase in certain expenses they may miss that um or not do it properly or not calculate or maybe not even build altogether so there's all kinds of money that that uh you know an owner could be leaving on the table without even realizing it and that's interesting tenants aren't going to say oh by the way i owe more money there's nothing right yeah yeah that's actually the interesting thing they're they're looking at the two or three grand a month that they make on a management fee and we're looking at the millions of dollars of value right right that's really the reality of it right yeah i mean just professional versus not you know and it's so guys there's nothing wrong with self-managing your property at all but you have to have the time you have to have the experience and if you don't have the experience make sure you find people that have experience on lots of different things your accounting has to be tight you have to know how to manage your vendors you know because every hvac guy is going to get on a roof and tell you you need a new unit every single time it starts there right and then it works all the way down to a hundred dollar repair right at the hairbat right i mean this is very common in our world right yeah or a painting contract or a landscape contract or a plumbing or an electrical or whatever it is they always start out here and the property management's job is to bring it down to here right we just went through this yesterday we i'm looking at renovating a building or a clubhouse in one of our properties and we got a bit our uh we said we want to spend like 50 to 75 grand we got a bid for 250. wow i'm like okay right and i'm like there's no way number two yeah yeah yeah so so this is what we do right you don't get offended you just go next right you know what i mean okay you know let's let's see if we can do this in-house we still need the you know the guy literally had about a hundred and fifty thousand dollars of padding in the bid this was yesterday so this happens every day in my world we get beds we're looking at all our properties we're getting guys on the roofs we're getting paint jobs we're getting parking lots we're getting the suites redone the tenant improvement costs i'm sure you see them all over the place well these are these are people that in theory should be giving you preferential pricing so if they're doing that to you imagine what they're doing to somebody that doesn't have any other properties if you're a single property single you know your landlord an owner of a single of just one property they're not going to give you any any deal they look at at an mc companies they say well gosh i can if i get in with with them i could maybe get 10 other jobs so i want to be fair and reasonable and and maybe go in and actually give a better better pricing model so that's exactly right and that's why i brought up the flooring thing because you know when we went through all our flooring john just like you do i know exactly what it's going to cost before i even pick up your phone sure right yeah oh yeah we already know guys i you know and so we're not getting three bids we're calling a vendor that we've already vetted that that has 20 different projects with us and we're basically monitoring their bill when it comes right right yeah it's not three bids at that point you've already vetted trust you know and that's important trust yeah and it's the same thing all the way up the line with all these different vendors and there's hundreds of vendors that we're managing hundreds i think our vendor list is over 2000 people right now you know what i mean well we're all over the you know western us so we have you know texas oklahoma nevada oregon you know arizona and so we have different vendors in different areas but um you know well let me tell you one thing carpet cleaning uh you know a water heater uh you know a new carpet a new appliance a paint job is all very very different you know from one building to the next to the next to the next the next and that's what the property manager job is for it's to manage all of that and i'm telling you guys so if you're going to do this you got to really understand how to do it and you got to understand the right questions to ask and you can't do it and if you don't have the time right no you can't i mean if you're like you said if you have a full-time job doing something else it's going to affect you not you may save you think you're saving some money but it's going to affect you if you are a manager managing your own though the biggest thing is you know you might not know what you're leaving on the table right right you know you don't you don't know what you don't know and then down the road you've sold your building and and you saw that sell again a few years later and you want to see go look at a building that you sold and then go look and see if it sold like two or three years right right yeah because that'll be some pain yeah right yeah is that true yeah oh yeah you can you almost can't look you know you don't want it look right yeah billions because you know every single deal is what you don't see right i mean i mean we look at that it's like what do you see from the 27 years of experience that you have that somebody that's new in the game doesn't see and it's a lot there's a lot yeah that's my point guys so i'm not saying don't self-manage but i'm saying that just uh just be conscious of the consequences uh if you're trying to save a little bit of money by doing it but if you if you're on site have the time and really want to understand it and have and you know and understand how to manage some of these things then you'll probably do okay you could and i and i would say even with that there's a time to bring in professionals to help it may be professional leasing leasing for sure because that may you know you can't do that you can throw a sign there's a lot of people who throw their own sign up and think i'm gonna lease it myself and that's fine if someone's driving down the street but when you hire uh you know professionals like if you hire levrose for example you know we may have 50 buildings in in a few mile radius of there so there's a good opportunity that and a good chance that we're going to find a tenant that that's not going to be calling on your side you're coming from something else that you have you're coming for something else or the broker that's representing that tenant is less likely to call an owner directly because they're not even sure if they're going to get paid when they know they call another brokerage firm they know at least their commission's percentage very good point yeah yeah so you're not even really going to be in the deal flow right right right exactly yeah because a broker like you're not going to call a self-managed building because you're you're just going to move on right you move on right just take it off yeah because now you're going to negotiate your their your lease commission right they don't want to pay one exactly because that's why they're self-managing exactly you already know going in that they're going to try to save money so why right you know why do that and you're not doing the best for your tenant because if they go in and they don't have a professionally managed building you may be setting them up for a bad experience when they move into that building oh for sure dude i mean and the best part is is uh they're not going to call you so they're going to take whatever they can get and they're they're therein lies the whole value-added opportunity for the next buyer right right exactly john you're the best thanks