Property management is a lot like being a parent…nobody really tells you how to do it until you find yourself needed to ‘do it’! Sam Maropis at TrainingLandlords.com is teaching others how to be more effective, and more profitable property managers and landlords. The number of ‘mom and pop’ or self-managed properties in America is staggering, and many of those owners are leaving money on the table by not operating as effective as they could otherwise. Check out this FlipNerd.com VIP Flip Show with Sam Maropis to see if you can put more money in your pocket!
Mike Hambright: Welcome to the Flipnerd.com podcast. This is your host, Mike Hambright. And on this show, I will introduce you to VIPs in the real estate investing industry, as well as other interesting entrepreneurs whose stories and experiences can help you take your business to the next level. We have three new shows each week, which are available in the iTunes store or by visiting flipnerd.com. So, without further ado, let’s get started.
Hey, it’s Mike Hambright with flipnerd.com. Welcome back for another VIP Flip Show. Today I have with me Sam Maropis, who is an investor, a landlord, and teaches landlords how to operate as landlords, because like parenting, nobody tells you how to do this stuff until you find yourself in the middle of it. So, before we pick Sam’s brain and learn what maybe all of us are doing wrong or how to find out what to do right, let’s take a moment to recognize our featured sponsors.
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Hey, Sam, welcome to the show.
Sam Maropis: Thank you very much for letting me be here.
Mike Hambright: Yeah, it’s great to talk to you because you’ve really got a great site that is teaching people how to be landlords, because so many folks have chosen to be glutens for punishment and manage their own properties. I haven’t. I vow to never bring that back in-house if I can avoid it. But I know that you have a site that offers a lot of great tips and tricks and some community for people to learn from one another as to how to do things. So, tell us a little bit about you and your background and how you got to this point to seeing that, hey, people need more information like this.
Sam Maropis: Absolutely. I started as a real estate investor in 2002. I took my first class, wholesaled my first house that year, rehabbed my first house that year, and I was employed full- time so it was always chaotic. And then in ’06, a friend of mine said he had a chance to buy an apartment complex, and I had owned some rentals and did some owner financing and things like that, and so I was intrigued by having 50 other families work to pay my mortgage. I kind of liked that sound, and so I said, “Sure.”
I had no idea what I was doing. To a degree you do, but until you actually put your signature on a mortgage that has two commas, you never know what to inspect. So, I bought it in ’07, and we run it, I think, very successfully. So, yeah, it’s an interesting business.
Mike Hambright: Yeah. And then how did you decide to start the website, traininglandlords.com? The first minute of hearing about your website and what you do, I was like, “Wow, that’s fantastic, because I know there are so many people that are…” I don’t know the percentage of real estate investors that are effective mom and pop that are managing rentals on their own, but I know it’s very high. And there are very few venues that I’m aware of for people to share ideas and learn about what they’re doing wrong and right and how to improve.
Sam Maropis: You know, first off, landlording is a worldwide business. My very first client came from the U. K., which I thought was kind of fascinating. But all of us who are real estate investors go to real estate meetings, and people talk about training and coaching to buy apartments, or to buy houses, or to buy rentals. And there are a lot of people who rightfully talk about the buy and hold model. It’s a wonderful model.
The only mistake that people make in that assumption is, “Just hire a property manager.” And then they move on to the next subject and that’s the extent of the training. From the day you sign the paper to the…maybe the definition is like a boat. You know the two happiness days in the life of a boat owner is the day they buy it and the day they sell it. I don’t believe that because I sailed for years and years up in the Great Lakes.
Mike Hambright: Maybe the analogy that I gave in the beginning is it’s like parenting. I mean, everybody knows the sexy part of dating and going out and maybe even knowing how to make babies, but they don’t know what to do with them until they are out of the house again.
Sam Maropis: And that’s true. I remember the very first story. I had owned the property for about three days and we knocked on all of the doors to introduce ourselves. And we knocked on a lady’s door and the door directly opposite of hers, she said there were some young kids shooting BBs into her apartment, and she wanted us to stop it. I had no idea what to do. I mean, I had none.
And I talked to our office manager; she just rolled her eyes and didn’t deal with it. Today, I would just go over across that thing, and I would tell those people, “Either that kid cleans up, or I’m evicting you.” We are so full all of the time, because I run the property so people want to live here.
I understand the dynamics of A-properties, the very best of the best. B-properties are a little older, lots of nice features. But a lot of investors are like me that buy Cs and Ds.. And my property is probably a B-. But we are always full, because we have people lining up to want to live in our properties. And I realize that there is something to it. So, that’s why I started this site.
Mike Hambright: Yeah. And talk a little bit about how it’s been received, because I know for a fact that if people know about it, why wouldn’t you want to be involved to basically help improve. I mean, REA clubs, they tend to be focused more on the sexy side of it, which is maybe the initial acquisition or how to find deals, but there is very little talk on how to operate and ultimately your ability to be successful in real estate investor hinges almost 100% on how well you execute that property that you have, right?
Sam Maropis: Exactly.
Mike Hambright: So, talk a little bit about how well it’s been received and how your community helped. I assume there is a lot of word of mouth growth as well.
Sam Maropis: Yes there is. The focus has always been how to help the owner run their property better. And the two types of scenarios you get is the owner that owns two, three, four, five, six rentals and really does have a property manager, and they hire out professional plumbers, electricians and all of that. Years ago, I had a floor problem. So I had a contractor come in to one of my rentals, to one of my houses, and I paid him to pull up the toilet, put down new floor, put down the toilet, and he did that, and a year-and- a-half I’m back in the property, and the bathroom floor feels wet.
A different guy, the guy I now use all of the time, he pulls it up. There was no wax ring. A wax ring is a $3, $4 item that is catastrophic if you don’t have one. And I thought this contractor was a good guy, my first guy, because he had all of the right tools. He looked the part of a good contractor. He didn’t put a wax ring. It cost me $1,000 to do all of the repairs, lost a wrench and everything, because of the $6.00 or $5.00 ring.
So, the site is really to give a lot of free information, because there is so much out there. YouTube has thousands of videos. The trouble is which ones are the right ones to watch.
We have a whole section in Spanish. I have a whole series in Spanish, because there are so many workers that only speak Spanish. And what’s interesting is just as separate. We have these two courses dedicated to fair housing. Now fair housing is interesting because everybody preaches the law, and I’m not saying don’t break the law. Don’t get me wrong.
What I am saying is that there is the law, and there is the business of fair housing. When tenants say to me…let’s kind of step back and kind of look at numbers for a second, I used to work for AT&T years ago, and the research showed that the average homeowner, the person who buys the house, lives in the house four to five years. The average apartment, be it a house or an apartment, was 11 to 13 months.
High turnover, and turnover is our biggest single cost. I don’t care if you own two single-family homes or a thousand doors, that’s your single biggest cost is make-ready. And if I can get a resident to stay one, two, three more times, I’m in money. There is just no way around it. The goal is to keep people more than one term. And so everything that I have to do is how do I take care of the place, how do I get the tenants, how do it run it to keep people one, two, three more years? And that’s my focus.
Mike Hambright: So, give us some tips. What do you do?
Sam Maropis: Well, the first thing I do that most people don’t do is I like people who need me. I admit it. It’s kind of a weakness on my part, so I rent to felons. I’m very selective about my felons. I’m very selective about my felons. There are categories that I won’t rent to. But the most perfect example was a woman who was in jail or prison because of a social security fraud. So, what she did wrong was momma died or grandmother died, and she cashed one check with a fake signature. I’m not saying that it’s morally right or wrong. She ended up serving three months in jail. She has a felony. She committed a crime against the U. S. government. That’s a big deal.
But I, as a landlord, what do I care? Grandma’s already dead. I’m not giving this lady checks. So, I rent to her. I rent to people who need me, and so I don’t blanketly say I don’t rent to felons. That’s just my first bar. Lots of people won’t do it, because they’re afraid. They’re afraid that the only kind of person they’re going to get is some rapist or murderer. And I actually rented to a murderer, but that’s another subject.
Mike Hambright: All right. Well, we’re going to have to have another show that’s like a comedy show, maybe. Isn’t the interesting, as a real estate investor, what I tell folks that join my team, people that I mentor and coaches is that you’re going to be the life of the party at cocktail parties for the rest of your life. You’re never going to have a shortage of interesting stories that blow people minds, so that’s interesting.
So, what would you say for folks that don’t rent to felons? I know that there are definitely some strategies out there for how to keep people around and kind of improve your vacancy rates and your turnover rates, things like that. Can you maybe share some tips for the average person that doesn’t necessarily rent to felons would maybe…just some tips that they can do?
Sam Maropis: Absolutely. I think that the first thing that comes to mind is I’ve always given, depending on your state laws, I’ve always given my existing tenants to get a discount if they refer someone. I’ve had four family members that lived in a property at one time, different units, different leases, all had jobs. Momma was retired. So, I build a community. I like people who want to live in my neighborhood, because we’re inner city, eastside San Antonio, and so we’re very quick.
The other thing I do is I make tenants prove themselves, in that if I’m doubtful, I’ll give someone a three-month lease. And I know that’s sacrilegious to this industry.
But I have a friend of mine who owns a staggering numbers of doors. I won’t even mention the number, he owns so many, and he only does 30-day leases. And his theory is he only wants people who want to live there. He doesn’t want people who don’t want to live there. The other advantage of a very short lease is, and every state is different, but if a tenant becomes a problem, all I have to do is send him a notice saying we’re terminating the lease. We love you, yeah, right. Wink, wink, nod, nod, but we’re not going to renew the lease. And that eliminates so many problems.
I’ve rented to people who passed all of the screenings and day one, they ended up going out and getting wasted, and a fool. So, I threaten them. I say, “You know what, you can’t do that around here.” So, it’s all about making people want to live in your property and treating yourself as a brand. We as landlords, even if you own one, two, or three doors, you think of yourself as a little island, but the truth is it’s a brand.
You want people to want to live in your house. And I’m not necessarily talking about discounting on rent either, because we’re currently now renting at probably within $3.00 of the top of our area. So, yeah, we’re discounting by $3.00 a month. It’s not a lot. It’s everything else that goes into the relationship.
Mike Hambright: Yeah, there is probably some psychological thing to be said for when folks know that they have a year’s lease, you always know that date. There is a line in the sand, and you’re always thinking for the next year or for the next 10 months, “Am I going to stay or will I go somewhere else?”
I remember back to my early days when I lived in an apartments, that date is always in your mind as to, “I have a decision to make.” And I bet that doesn’t exist if it’s month-to-month, because you’re not really thinking about it. You know I can go whenever I want, but you have a tendency to maybe not want to because of the pain of the moving process.
Sam Maropis: That’s right. And so it really goes counter to the thought process, because these are our customers. So, my average customer brings me $6,500 roughly per year, and that’s a lot of money. So, I’ve got to do everything that I can to keep them and the more that I can do to let them make their decisions and happily… I would say at least 50% of my residences are month-to-month. And I have no desire to force people to long-term leases. I still do price increases on a regular basis, but I don’t necessarily force the lease.
Mike Hambright: And based on what you’re saying, I suspect you don’t raise the rents if they go month-to-month. I know in the past we’ve done that. If you’re not in a lease, and you want to go month-to-month, that’s fine, but the lease is going to be higher to give you that opportunity. So, I presume maybe you don’t do that based off of what you’re saying.
Sam Maropis: I do do that, but not by much, $5.00, $10.00. Because I want it to be priced right all of the time, and I don’t want discounts unnecessarily, because if you overcharge your value, then you will lose people. What’s the right about that you can collect? So, I try to be near the top but not at the top.
One of the things that I find in lots of places, here is an example. I’m a real estate agent, and we get paid a commission. If you have a house, you put it on the market, and you’ll pay me a couple of hundred bucks to…or in an apartment, you can pay me up to 150% of your first month’s rent just to get people, which is just mind boggling to me. But I remember I had a client, and I was driving around, and there was a house that had a for rent sign, and I called the lady, and I said, I have a client here that’s interested in seeing your house.
The first thing she said is, “I won’t pay a commission,” the very first thing. I said, “Fine.” I let my client into the house, show him the house. We drive away. I can find five things wrong with that house in a heartbeat. Had she said to me, “I’ll pay you $300.00. If you bring them in, I’ll pay you $300.00,” I might have been able to have a client who made an enormous amount of money, move in right away. So, you’ve got to really think out of the box to keep and get residents, that’s really the most important.
Mike Hambright: Yeah. And I find the biggest, besides not wanting to deal with the day-to-day headaches, the biggest reason that I don’t want to manage rental properties is I know that I can’t turn them over as fast as my property manager can when you have a vacancy. And every day is money, right? So, I have known a lot of landlords that are managing themselves, and they think that they are saving money, but they are not looking at the opportunity costs of lost rents and things like that. They’re not really factoring those things in.
Sam Maropis: Yeah, that’s true. And one of the things is that even if you are not managing it, if you own enough of them, you can hire someone. And granted, at 48, I can afford to have staff, but if you have three or four, you can’t. The whole issue around make-ready is so fascinating, because one of the things that I believe very strongly is let’s say it’s the first of the month, someone comes in and says, “I’m going to move out at the end of the month.” The strategy that usually happens is they let the person move out and then they go in a couple of days later, and go, “Oh, my God, look at all of the stuff that needs to be done. I need to order this part, and I need to do this.” And you’ve already lost a week because of inefficiencies.
The better thing to do is that if someone gives you notice on the first, well then on the 15th, you’re doing a walk- thru. You’re doing a detailed walk-thru. What does it need? Does the furnace need to be cleaned? Do I need to call an HVAC guy? Can I call an HVAC guy now? Because you have in everywhere I know the right to maintain your equipment while the tenant lives there. Granted, you’re not going to clean the carpet. You’re not going to paint, but you can do some of the big things that you need to do ahead of time.
So, you’ve got to manage it well. And I know my guys get annoyed at me when I’ve got three vacancies coming on the same weekend, and I’ve already rented them. So, I have to turn them, three units within three days, and get people moved in three days later. Anyway, it causes some enjoyment.
Mike Hambright: Well, in terms of teaching other landlords, can you talk a little bit about how you’re able to do that? I’ve noticed some universal things, but there are a lot of things, especially regarding evictions, and leases, and things like that that differs pretty substantially state-by-state.
Sam Maropis: It does, and truthfully, if you look at it state-by-state, all the evictions and the contracts are all unique state-by- state. So, I don’t even want to touch that. I do have a link with a company that does leases. If you don’t have your local leases and you need a lease, then there is a company. But where things are the same everywhere in the world is broken windows, toilets, carpet cleaning, and painting, all of the running of the business, that’s the same everywhere on the planet.
Mike Hambright: Yeah, and what advice do you give, Sam, to folks that are, I guess a couple of questions here I’ll kind of throw out. One is that are managing a property themselves and maybe shouldn’t be, how do you advise them on making the decision to do something else?
Sam Maropis: Well, to step back, I think it’s important and this comes back to maybe your coaching is don’t buy property because you like it. I mean, you never fall in love with real estate, right? That’s the first rule. You fall in love with the money. You don’t fall in love with the property. There are a lot of houses people look at and buy to turn into rentals that are lousy investments. I have friends of mine and they won’t touch a property if they can’t make $300 net, net per unit, per month. And that’s huge. Whereas other people go, “I’ll make it up in my tax savings.” I don’t think so. So, the first rule is that you’ve always got to buy right. And buying a multi-family is different than buying 30 single family houses. It’s just vastly different.
We get to walk around all of our units every day and kind of keep our eyes on stuff, which you can’t do when you’ve got 30 across the whole city.
Landlording is a people business. If you’re not a people person, then you need to hire a people person. Because if your residents don’t like you, I’m not trying to say fall in love with you, I’ve listened to other people say you don’t want to have a relationship of any kind with people. You want to keep your distance. You know, that’s okay in a one-call close, where it’s, “Come on in,” and the a year later, we have very high turnover.
I’m not talking about any close relationship. I’m not talking about going out and drinking beer, but what I am talking about is just the respect of always treating your people properly. And then they treat you with respect. And as soon as somebody crosses the line, you just go ballistic. You don’t tolerate it. If you shouldn’t be renting a rental, then get out of this business or hire someone else. Get your daughter to do it or something else.
Mike Hambright: Your daughter. Oh, man, you’re pawning stuff off on your daughter.
Sam Maropis: My 17-year-old has been helping me on my property since she was 13. Now at 13, she didn’t do very much, I admit. She sat there at the desk and took money when I was walking around the office, but today she’s been much more involved, which is kind of cool.
Mike Hambright: Yeah. That’s great. That’s great. And then I guess what advice would you give to folks that are thinking of buying properties for rentals and then intend, whether they intend to manage it themselves or not, I think people are interested in buying rental properties to build wealth or to generate cash flow and things like that. They get enamored by the purchase, sometimes maybe overpay, because they want it so bad.
Again, nobody ever talks about the actual management part, so what advice would you give to folks in terms of what to consider, from a property management standpoint, before they get into the business, or if they are looking to kind of grow?
Sam Maropis: Two very important questions, because to grow you’ve got to like this business. That’s really it. You’ve got to like this business. It’s nice having other people pay your mortgage, I must admit. So, my first answer is you need to…I don’t know how to answer it, it’s such a big question, and I apologize.
I think that if you’re looking to get into this business, go to the other apartment association meetings. And I know that when you go to other club meetings that are apartment related, it’s intimidating, because you can be sitting next to a guy… A guy I know, not very well but well enough, he has 2,600 doors. And I know lots of people who own 1,000 doors, and that’s staggering. But they run it as a business.
And then I know a lot of people like myself who own 50, and so it’s doable and the money gets there, but you’ve just go to prove your worth. Lots of people would like to own 200 doors, but they have not experience at it, and you’ve kind of got to start somewhere in this business, either find a partner who understands it. Because the truth is, you’ve got to run your business. How are you handling maintenance? And I’m just going to talk about one maintenance item just as a real micro, if you will let me.
Mike Hambright: Absolutely, yeah.
Sam Maropis: Unfortunately for us, we had a fire on our property. We had a horrible fire. It was very ugly, and I could go on forever discussing it, but I don’t want to. But the lesson that that fire taught me is you’ve got to always have a well-run operation. Just as a perfect example is your maintenance tickets. This is such a boring subject but how do you keep track that you are doing a good job. If a tenant calls you up and says, “My stove is not working,” “Well, just let me get over there. Let me send Sal over there, and we’ll just fix it right away.” Or you don’t fix it right away or whatever. How do you document for a third party that you are doing a good job as a landlord? Because that’s really important, is to be able to run your business as a business.
But at the other hand, the lesson is people have choice on leaving. I don’t care what quality of unit you have. Your turnover is what is going to separate your money at the end of the month verses not. If you to spend $2,000, $3,000 on a make-ready, you did something wrong, or they’ve lived there for 10 years.
Now I have had tenants that have lived in the property for 10 years and moved out. Sure, that was a big make-ready, because there was everything that needed help. Man, just everything. But I had 10 years of never having to do a make ready. So, we go on in a regular basis. Tenants come to me all of time and say, can we get our carpets cleaned? Sure, absolutely. I’ll do it for free. Why? Because when they move out, it won’t be as bad.
So, there is a strong strategy that says you are always giving the best stuff to your existing, long-term resident, not the new guy moving in.
Mike Hambright: Yeah. Good stuff, Sam. Well, tell us again how folks can learn more about your website and some of the trainings that you offer to help people to become better, and more efficient, and more productive landlords.
Sam Maropis: I appreciate it. The website name is traininglandlords.com, and it’s just like it’s spelled, traininglandlords.com. And we have a whole section in Spanish, for Spanish speaking folks. And then, of course, we obviously have a lot of stuff for English speaking folks.
Mike Hambright: Yeah, awesome. Well, Sam, thanks so much for sharing your information today and telling us about your website. It sounds like a great place to learn for those that probably need some education in most instances.
Sam Maropis: Thank you very much. I sure appreciate it.
Mike Hambright: Sure. Thanks for being on the show today.
Sam Maropis: Thanks a lot. Take care.
Mike Hambright: Have a great day.
Thanks for joining us on today’s flipnerd.com podcast. To listen to more of our shows and hear from incredible guests, please access all of our podcasts in the iTunes store. You can also watch the video versions of our shows by visiting us at flipnerd.com.