Jason Waggoner president of sales at ACUTRAQ and Doug Brien CEO of Mynd property management explain how choosing the right tenant is one of the most important aspects of property management.
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Alex Osenenko: Boys and girls, welcome to another episode of The Myndful Investor Podcast Show. We have a good one for you, as every episode is a good one, but this especially is interesting because we’re going to look into the income side of the equation, because obviously part of real estate investing, a large part, is making money. And to make money you got to provide good product. Now let’s say you provide good product, you bought an investment home and it’s in tiptop shape and it’s ready to go. What you need next is a resident that will live in a property, enjoy the property, but also pay rent and pay rent on time and they can respect the property. And that’s part of the equation we’re going to cover today. My cohost is Steve Rozenberg. We are deep into single family investment, serious, and today we’re going to unpack the resident side of the equation.
Alex Osenenko: How’s it going?
Steve Rozenberg: It’s going well. It’s going well. We have an all star lineup today.
Alex Osenenko: We certainly do.
Steve Rozenberg: Doug Brien, CEO of Mynd Property Management. Thanks for being here with us today, Doug.
Doug Brien: Absolutely.
Steve Rozenberg: And we have Jason Waggoner with Accutrac. And just to give you a little background, we’ve been using Jason for the last, I’m going to say five years, Jason, would you say?
Jason Waggoner: Closer to seven now.
Steve Rozenberg: Maybe closer to seven, yeah. And so they’ve done all of our backgrounds with Empire. We had a 1% eviction rate with using Jason, and we really honed down what is a good resident and a resident that maybe is not the best fit for us. Because as you said, it’s like building the best car and not having the right gas. At the end of the day it’s not going to get around the track for that. Jason was instrumental in helping us to help our clients understand that putting the best resident in for the situation for you, not putting the wrong resident in, because you can put them in a bad situation where they’re going to fail and it’s not a good property for them.
Steve Rozenberg: We really created the relationship with Jason over the years to make sure that how do we get the right person that can afford the property? Not put the resident in a bad position, and make sure that it’s a long relationship, that they want to stay a long time. I’m not going to say it’s an art or science, but it’s definitely something that has to be done over time.
Alex Osenenko: And Doug is here to provide color to a lot of this from a personal experience. You are an investor as well, but Doug has a long record of, I believe, successful investments and maybe some fails that you can tell us a little bit more about, but let’s get started and just say, Jason, what’s the first thing that a young investor, young meaning an investment career, what would they need to look out for?
Doug Brien: Protecting that home with everything. Because the thing about it, if that young investor has just gotten enough money to be able to start this journey, that’s the biggest investment he’s ever made in his life. He or she, and protecting that home and the person you put in it will make the difference. And I can tell you a quick story. My father-in-law, I guess I would have been 18, 19, inherited a rental property. It lasted about a year and a half, and two evictions later and the property was destroyed. He washed his hands of it, sold it for what he could get and vowed to never do property management again. Not a good experience. It doesn’t have to be that way. Qualifying that tenant, keeping the control, because where a young investor, or somebody that just like that, that inherited a property will get in trouble, are listening to the stories.
Doug Brien: Everybody has something going on in their life. And when you’re a qualifying a tenant, can you pay the rent? Do you have good past rental history? And the story that comes along with it, sometimes will get that that landlord or that investor involved. They’ll cut the person a break and rarely does it end well when somebody does something like that. Starting off on the right foot, having that process and then treating everybody the same with that process is going to keep them out of a lot of hot water and hopefully get a return on their investment.
Alex Osenenko: Doug, what is your experience with this? Have you had anybody or any situations where you said, maybe I’m in the wrong business? Investing is not for me.
Doug Brien: Yeah. When you get the resident piece of the equation or part of the puzzle wrong, it can be expensive and painful. I think sometimes, new investors can be a little bit shortsighted in that regard. As you’re really thinking about leasing more generally, I think there’s three main things that you’re focused on. One is the rent that you achieve. Two is the amount of time that you take to lease the property and three is the quality of your resident. And the reality is, you kind of have to pick two to prioritize, because if you’re trying to get all three, you’re going to be stuck. You’re not going to get the highest rent in the shortest period of time with the best resident. What do you prioritize? To me, the two that you prioritize, and it does depend a little bit on the market, but the rent you achieve is very important.
Doug Brien: I think some people underestimate what 50 bucks a month means. 50 bucks a month is 600 a year. At a five cap, that’s 12,000 dollars of value. Is it worth waiting another week to get that extra 50 bucks? I say yes. I would also wait a little bit longer to get that right resident. Because the wrong resident can cost you a lot of money in eviction costs. It can cost you money in terms of property damage and just trying to chase down rent in general. And so I think in thinking about those three aspects of leasing that you’re trying to solve for, prioritizing the rent you achieve and the quality of your resident are probably the most important, and I see a lot of people really focus on speed. How many days is it going to take to lease? I can lease it tomorrow if you want; however, it’s going to cost you rent and we’re probably not going to get the best resident.
Steve Rozenberg: And, and I think Doug, my perspective is the one thing that people don’t factor in is the mental stress that now you’re going through. Because now, not only do you have a vacant property, if you put the wrong person in, you’ve got a property with someone living in there now, and you’ve got to get them out. Now you’re trying to figure out how to untangle something that you did. Normally, you didn’t stick to your rules, if you have have rules that you’re sticking to, which you should, and then it could even get into a legal issue, that if you’re not using the same qualifications for your business and you start changing those up, and maybe you can talk about that, where all of a sudden you lax your qualifications because emotionally you’re getting nervous, and now someone says, “Wait a second, you didn’t rent to me three weeks ago because you said I wasn’t qualified. Now you rented to someone with the same qualifications,” and it goes down a whole different path.
Alex Osenenko: Yeah, fair housing is huge. As an individual investor and landlord, it’s very, very hard to navigate, but we’re going to try to unpack some of this today with Jason’s expertise and really focus on quality. And I want to actually explore a little bit later down the line of this episode, talking about how to maximize rent from Doug, because I think you brought up a good point. It’s the same thing as if those people in cars, modifying cars, whatever, it’s fast, comfortable or reliable. You can’t have all three. You can have two though. It’s very interesting how the three rule works. But Jason, what are the some of the things that you’ve seen individual landlords and folks without professional property management, what are the first couple things that you can help them fix or you can give them advice to fix to eliminate a lot of risk. What are the top two or three things?
Jason Waggoner: Number one, charging an application fee. A lot of landlords, especially new investors, they’re afraid they’re going to scare off potential tenants, applicants. And the reality of it is you may scare some really bad ones off, but that’s your first line of defense. And you as the landlord, if you’re taking 15 applications on a house, you shouldn’t be out the full-
Steve Rozenberg: It’s going to cost you money.
Jason Waggoner: Yeah, you’re going to be spending a lot of money. The ones that pay, they have no reservations in paying, are probably going to be your more qualified tenants. The other one is the application process. Are you using paper? Are you using an electronic form? There’s a lot of options out there nowadays, but you can really streamline that process to make a good… The good tenants are out there searching online. They’re not playing around on Craigslist and different things like that. Now, there’s nothing wrong with that if somebody has a good process for that, but if you have your process down to where they call you, you email them an application, you can have that filled out within 15 minutes, or you’re busy running all over. Can you meet me here? Can you meet me here? You’re using gas, money, resources, time, everything.
Alex Osenenko: But also dictates to the prospective resident, this is disorganized. I’m not going to expect to be looked at very closely.
Steve Rozenberg: That’s a good point. You’re running a business. When you own a rental property, it’s a business. And if this is the first indication of how this business is run, you may be thinking, I don’t want to rent from this person, or you may be thinking, I do want to rent from this person because I could maybe get away with some things and I can go down this path.
Jason Waggoner: And typically people that have bad history are looking for those landlords that they call. “What’s the application fee?”
Jason Waggoner: “Oh, we cover that.”
Jason Waggoner: “Do you run me through a background check?”
Jason Waggoner: “Yeah, sometimes.”
Steve Rozenberg: I go by my gut.
Jason Waggoner: They’re thinking, I’m in. All I have to do is show up and put on my Sunday school face.
Doug Brien: Taking candy from a baby.
Jason Waggoner: And it happens. It’s happening to somebody right now as we speak. And it is the reality of it.
Steve Rozenberg: I remember when we first started doing this and we were going through that path of getting problem residents, and I remember someone said, “Steve, they’ve been renting their whole life. You’ve been a landlord for a fraction of that. Who do you think knows the rules a little better?” And I thought, you know what? That’s an interesting point. I never thought about that.
Steve Rozenberg: We said, “You think they don’t know rent is due on the first? You think you calling them is going to make them get the rent quicker to you?”
Alex Osenenko: Because you were walking around collecting the rent physically.
Steve Rozenberg: I used to go pick up the rents because I thought I’m saving time, I’m getting the money, I’m getting it in my hand. Pete said, “They’re just training you. They know that when rent is due, you’re just going to show up and walk up and it’s your time.” I learned a lesson.
Alex Osenenko: Your book is worth picking up just for those stories.
Steve Rozenberg: Just for the stories.
Alex Osenenko: Actually there’s a lot of lessons in the book and it’s a short one. You can read it, but there’s a lot packed in there. I personally really enjoyed it, and one of them is the stories of you collecting and people ducking-
Steve Rozenberg: Yeah, ducking in the windows and I’m like, “I can see you. I know you’re there.” Again, we didn’t have a screen-
Doug Brien: You had the wrong people in there.
Steve Rozenberg: We had the wrong people. And what’s funny is the average investor owns three to five properties. Normally, a lot of times they stop at one or two and if you ask them why they’ve stopped, it’s one of those stories. They didn’t put the right person in and it went south and they don’t go and do where… Because everybody knows that if you buy a rental property, it only works in multiples. You have to ask them, “Why did you stop at one or two?” Well I had a problem, I didn’t have the time. And it’s normally a horror story. When you boil it down, it’s because they either didn’t have a policy and procedure in place, or they didn’t follow it. Like Doug said, they, had rules and then they basically did not obey those rules and they deviated from them.
Doug Brien: And I would just highlight, I know there’s a flip side to this coin, because the more qualified residents, if you think about what someone’s looking in a rental property, the property, the structure itself is part of it, but what they’re looking for is a living experience. Part of it is the property, part of it is their interaction, their relationship with their manager. If you come across as highly professional, you’re responsive, you’re friendly, the right kind of residents looking for that experience. They’re going to look at the property, but they’re also going to look at the professionalism that you show and they’re going to be willing to potentially pay more and you’re going to attract them. Those are the people you want.
Steve Rozenberg: Yep. A perfect example is when you get a resident and you tell them you have multiple ways you can pay. You can do ACH transfers, you can do monthly autodraft you can do mail it, you can bring it to our office. You give them five ways to pay, you can pay credit card. All of a sudden the resident’s going, okay, I like this. These people have systems in place. If you just said, “Hey, yeah, I’ll pick it up,” like I did, they’re going, okay, that may not be a resident that may see me and say, this isn’t professional because maybe they had a bad experience with someone in the past and they’re not looking for that.
Jason Waggoner: It also sets the expectation. We have five different ways for you to pay. Late payments are not tolerated, we will evict you.
Steve Rozenberg: Exactly. You’re setting that expectation.
Jason Waggoner: The thing about it is, going back to your first question, the other thing to really look for when you’re running that background check are evictions. Something so simple that you can search for, and if somebody has been through two evictions, they know that process. They know how long it takes, they know they’re fixing to squat on you for a month or two before everything’s finalized, and a simple search, you can tell.
Alex Osenenko: Let’s actually take a step back for a second. We’re going to unpack the background check, because I think what you brought up the first two is really key. I didn’t think we’re going to surface this out. This is really good stuff. Charging an application fee and application process itself, have that narrowed down. If you’re listening, those two things I would… There’s not that difficult to do. There’s plenty of companies that provide application process and stuff like that, but background checks. I think I want to unpack a little bit more there. That’s your expertise and that’s what you do. As an individual landlord or newer investor, how would they go about it? To me it’s like, how do even start?
Jason Waggoner: Well there’s a thousand people that do it and if you Google, start your own background check company, I think you can do it for $29.95, they say. The liabilities and everything that comes along with that though, look for a reputable company, a company that’s been around for a few years. There’s plenty of them, but you need to be doing one. Something so simple that shouldn’t be out of your pocket, the credit report. There’s plenty of places now, even as a small investor, that you can go through that you will initiate the invite, the applicant does everything and they send you the credit report back. Or you go through a company like Empire that has the ability to run that credit report.
Alex Osenenko: Or Mynd.
Jason Waggoner: Or Mynd, yes, that has the ability to run that credit report at will and really streamline the process.
Alex Osenenko: But then you have a credit report. Sorry Steve, I’m just going down this path here. If you have a credit report, I’ve looked at credit reports. People look good or they have a lot of delinquencies, but I know that there are good people with delinquencies and there are bad people with good credit reports. What now?
Steve Rozenberg: How do you decipher? What is the data telling you from that?
Alex Osenenko: What do you do with it?
Jason Waggoner: A lot, because you want to look at the trade lines. The credit score, it may be a 601 credit score, but why is it 601? Do they have medical bills? Student loans? Can you look on there and see where it’s current now but it was late a year ago? They may be on their way to fixing it and they haven’t missed a payment in a year and a half. That credit score started at 400. They’re at six now and they’re working their way up to eight. Knowing the details, and it’s all in the trade lines, you’ll see this is a bank, this is a credit card. They’re really easy to read nowadays, so you can get a better snapshot of who this person is. Some people pay some of their bills, some people don’t pay any. If they don’t pay any, they’re not going to pay you either, is the reality of it.
Jason Waggoner: And even HUD, HUD doesn’t want a landlord or a company making a sole decision based off the credit score. Look at the bigger picture of what’s going on with that credit. Same way with the criminal history. It’s up to the landlord of what they’ll accept, but what you accept, make that consistent across the board. Like he said, if my cousin shows up three weeks after I applied and gets approved with the same guidelines, I’m going to be upset.
Alex Osenenko: Fair housing violation.
Jason Waggoner: I’m going to be upset.
Doug Brien: Yeah, I think my strong advice would be don’t just kind of think you’re being consistent. Have a written down box. This is my screening box and apply it equally to everyone, because fair housing is one of those things, it’s not a problem right up until it’s a problem. When it’s a problem and you’re caught in the crosshairs of a fair housing violation, it can be really, really expensive. Really, really painful. They can actually just shut you down.
Jason Waggoner: Let’s say that you’re that applicant calling into the landlord. You’ve seen the property listed and you call in and the landlord says, “Yeah, we do, from time to time run that, or this is the process.” As opposed to when you call that landlord and they say, “Yes, everybody’s run through the same process. Late payments are not tolerated, we will evict.” The whole conversation, They’re not going to call you back. They’re not going to call the second landlord back.
Steve Rozenberg: Now I have a question. Doug, when you were growing Waypoint, you were buying all those properties, this was a time when people’s credit probably was not the best. How did you go through that process? Because I know it wasn’t that long ago, but technology is different today as it was back then. How did you guys do it at such a large scale?
Doug Brien: Yeah, so we had to create a wider box early on. Especially, you just couldn’t draw the same FICO lines that you have today, because everybody’s FICO was in disrepair, the folks that wanted to rent. We had a wider box. We looked very carefully at all FICOs are not created equally. What kind of a trend are we seeing? But we also started to look at lots of interesting data. I think one of the most interesting things that came up for us was, we were trying to figure out what were the attributes of residents that predicted who was going to stay and perform? And prior to this analysis, we used to get people who’d sign a lease and they were going to move in within seven days. We’re like, “Awesome!” They’re going to move in, they’re going to start paying. What this analysis showed us, not awesome.
Steve Rozenberg: Those are the bad… yeah-
Doug Brien: Who moves in, who signs a lease and moves in in seven days? Someone who has some-
Steve Rozenberg: They’re screwing someone else that they’re leaving, or yeah.
Doug Brien: Who does that? And the reality is that we discovered was people that we didn’t want.
Steve Rozenberg: Those other tenants.
Doug Brien: We created a new screen, applied equally to everybody. We don’t allow move ins within seven days. If you need to move in with seven days, go somewhere else.
Steve Rozenberg: That’s a red flag.
Doug Brien: That is a red flag.
Alex Osenenko: Interesting. They’re not moving in?
Doug Brien: Yes. Apply it equally to everybody. Nobody, I don’t care who you are, moves in within seven days. If you can’t wait until the eighth day-
Steve Rozenberg: If the stuff is in your car when you show up and you want to move in at that point, that’s a red flag, which it wasn’t for me when we were doing this and that’s why we ran into problems.
Doug Brien: You’re filling your vacancies.
Steve Rozenberg: Exactly. High five. Let’s roll on.
Doug Brien: You think you’re celebrating. Not so fast.
Steve Rozenberg: Now, how did you do this on a… you guys were national, on a national scale with that? Was it the same across the board or was it local in nature as far as the rules?
Doug Brien: Yeah, that’s a great question. Every market had its own individual screening criteria. Every property had its own individual screening criteria. The system we used, TransUnion, there were A neighborhoods, B neighborhoods, C neighborhoods, D neighborhoods. We had a D box… We actually didn’t do D. C, C was our lowest. C box for C neighborhoods in Atlanta. What that meant was if we were trying to find A neighborhood residents that made a lot of money with really good FICO scores, they didn’t want to live in this C neighborhood. We would have a lot of vacancies. Figuring out which houses go in which box is really, really important, because if you have a mismatch of screening criteria and the actual location and the property, that can be a way to put the puzzle together in a very-
Steve Rozenberg: Because you’ve got the city and then you’ve got the breakdown inside of the city, of the particular property.
Doug Brien: Whole different criteria, but all documented. These addresses are in C quality neighborhoods and this is a C box for that.
Alex Osenenko: How would an individual investor listening to the show now be able to replicate or think through some of this? They may have two or three properties or maybe just getting their first one. How would they, because with Waypoint, you guys had made significant investment in that, because this is a core part of the business. How would an individual investor be able to replicate something like that?
Doug Brien: Jason, you might know better than than I, but I would think most screening companies, you have to apply a neighborhood quality attribute to your-
Jason Waggoner: Definitely. That even goes back to helping the consumer. You’re changing those metrics because you understand the position that they may be in, in that demographic. And to try to place people and house people is huge. A lot of times, the screening companies will even help with that. Go over those metrics. What’s a standard in the industry? What should we be looking for? The only thing that we can’t really do is say, “Yes I would rent to this person,” or “No, don’t rent to this person.”
Steve Rozenberg: You’re just saying based on the qualifications, they match-
Jason Waggoner: We have to be outside of that decision, but we can say, here’s what we’re seeing in the industry for that demographic, and really work through that.
Steve Rozenberg: Now, I have a question. I don’t know how much you dealt with this, but emotional support animals, it’s kind of changing gears a little bit. Did you have to deal with that much when you were… Was that a big thing?
Doug Brien: Yeah, because there’s some scanning along those lines.
Steve Rozenberg: Yeah, absolutely.
Doug Brien: If they have documentation, you have to let them in no matter what.
Steve Rozenberg: That was big back when you guys were doing it?
Doug Brien: Yeah, absolutely.
Steve Rozenberg: Okay. And so what is going on? Because I know that that is a big problem or a challenge now with investors, is to find out… obviously there’s things you can and cannot ask them obviously, but how do you address that?
Jason Waggoner: Well, just for statistics point of view, about 30% of the ones that tell you they have a service animal or an assistance animal are bogus.
Steve Rozenberg: They’re not?
Jason Waggoner: Right.
Alex Osenenko: 30% are bogus, but 70% are legit?
Jason Waggoner: Right. Think about that if you’re a landlord and you know the damage pets are going to do and you need that 300 dollars or pet deposit or the pet rent, and you don’t get it because this person gave you a bogus-
Steve Rozenberg: For people that may not know and may not… Can you explain what an emotional support animal is and just kind of the criteria?
Jason Waggoner: Yes. And the big thing with those, an emotional support animal will be a dog or a miniature horse, basically. I’m sorry, a service animal will be a dog or a miniature horse.
Alex Osenenko: That’s it? It couldn’t be an alligator?
Jason Waggoner: Well, an emotional support animal-
Steve Rozenberg: I saw a peacock on the news one time.
Jason Waggoner: Emotional support, service animals, they’re starting to lump those into the same category now, and there are legit reasons for both. The thing about being an investor is you’re a liability if you start asking those questions. Like you said, you just kind of have to take the paperwork and run with it. One company in particular now that is taking the load off of that, they know what to ask, all the right questions, but it is an added expense. As an investor you have to say, do I want to take that liability? Do I want to add this expense? But for the most part, disabilities, emotional support animals, service animals-
Alex Osenenko: You’re talking about John Bradford’s company, Pet Screening, right?
Jason Waggoner: Yeah, petscreening.com. Wonderful, what they have put together. We partnered with them. It was a no brainer. Seeing what they put together, there’s no reason for us to reinvent the wheel when they’ve got a perfect product.
Steve Rozenberg: It’s part of the process when you’re getting a tenant, that this is a verification that you have to do. You can’t be intrusive, but you need to… Again, when you’re running a business, you’ve got to at least know that you’re covering yourself, because if the person puts an animal that’s maybe… And this is my question, if they’re on the dangerous breed list, but they’re an emotional support animal, dangerous breed list, I don’t know if you know this, some insurances will cancel you.
Doug Brien: Correct. I have a German Shepherd.
Steve Rozenberg: What happens there? You can’t turn them down.
Jason Waggoner: You’ve got to take it. But the thing is though, what we found, we’ve had people try to pass off ferrets as service animals. I’m sure out there somebody has tried to pass off an alligator or an iguana or something, which may very well be an emotional support animal, but it’s not going to be a service animal.
Steve Rozenberg: What’s the difference there? What’s the bifurcation?
Jason Waggoner: Service animal is typically going to cost 20 to 30,000 dollars to train that animal. It’s going to have a specific task. It’s going to help somebody that has a disability.
Alex Osenenko: Physically? Physical help, or mental is included in that?
Jason Waggoner: Mental would be more… could be mental. Now there’s definitely service animals that help with PTSD and things like that. The emotional support animal, it’s in a different category, but you still could be sued for not taking it. Those details are really-
Alex Osenenko: Differentiate. What’s the difference. If you have to take him either way-
Jason Waggoner: Well that’s the difference. One came from a doctor. As far as the paperwork, you may have a legitimate emotional support animal that came, that was documented, prescribed by a doctor. It’s legit. And then you’ve got so many platforms, you go online now and just print off for $29.95, “Yep. I’ve got an emotional support animal. I go to PetSmart and I put my orange vest on them and my landlord is none the wiser.”
Steve Rozenberg: If I’m an investor, again, and I may come across this every two years, and someone comes to me and says, “I’ve got an emotional support animal.” What are some things that they should know? They say, okay, you need to ask them this. You cannot ask them this. Where can you direct them so that they can learn this?
Jason Waggoner: I would just tell them I need the paperwork submitted with your application. If I’m an investor outside of any of this, I wouldn’t even touch it.
Steve Rozenberg: Don’t dig deep?
Jason Waggoner: Right, because they have rights for a reason. There are people with disabilities that are preyed upon that are victims of things. And so all the laws that are in place are there to protect them. We always know there’s going to be people come along and abuse that, and people that aren’t really disabled or whatever the case may be.
Doug Brien: I just want to take a brief tangent here because I think one of the biggest missed opportunities in the rental property investment business is pets. Because I think a lot of landlords think, I don’t want to have pets in my property. They’re going to destroy my property. No pets allowed. The reality is the majority of all renters have pets. You’re automatically cutting the universe of applicants that you’re going to take, in half.
Steve Rozenberg: It’s 80% actually, statistically.
Doug Brien: 80%. 80%, you’re shrinking, you’re massively shrinking the universe, and the reality is you can actually be better positioned for these emotional support animals or any pet by having a program where it’s basically like you have pet rent. You can charge 50 bucks a month per pet. And then you can have big deposits. You could have as big a deposit… It probably depends on the state, but you can have meaningful deposits. If that dog does do damage, you have 500 bucks plus 50 bucks a month. Again, remember what 50 bucks a month is worth if you’re going to try to sell your property? That’s 12,000 dollars in value. I would strongly encourage you to open your property up to pets, have strong deposits, charge pet rent, and then when you have a situation like we’re talking about now, okay, you have to take them, but you still can charge your pet rent and you can still charge that big deposit to protect your property.
Steve Rozenberg: And you can actually make that a point of difference, where you can make that a marketing, where you can outwardly let people know that you accept pets and that you’re pet friendly, because people that have pets, they’re going to go right to that and they’re going to be like, I’m going to go to this landlord because they like pets. I’m going to be a patron of them.
Alex Osenenko: This was my personal experience. It was just unbelievable to me, because me and my wife we rented out our house. We wanted to move to start a business. I didn’t want to have liability, so we rented our house, we moved into a rental one, wanted to move into a rental closer to the office. We have 790 credit score, income, everything’s good, but I have a German Shepherd. We had a hell of a time. We ended up with a individual landlord who was actually pretty good, but no processes, no systems. He looked at us, he looked at our car and says, “You’re in, guys.” And that was it.
Alex Osenenko: And I’m like, “I have a German Shepherd.”
Alex Osenenko: He’s like, “I don’t care. You’re in. You drive a nice car.”
Doug Brien: What’s this guy setting himself up for?
Alex Osenenko: Right, but we paid rent, fine. We paid rent fine and it was good.
Doug Brien: He does not have a problem.
Alex Osenenko: No, he did not have a problem. He got lucky. He got lucky in the situation, but this is the challenge with this. And Doug, I admire what you just said. People love their pets so much. I pay for that German Shepherd. I pay 100 bucks a month. That’s what I would do, and most people would. And so this is such a good opportunity, and by the way, we got to we got to look at this opportunity company-wide, what we can do to help our investors make more money and get tenants happier.
Doug Brien: Yeah, as a third party property manager, all you can do is advocate for it. Especially in a neighborhood like this. There’s a dog park down the street. You are going to be able to get more rent. You’re going to lease your property faster, you’re going to have an adequate security deposit. Why not accept pets?
Steve Rozenberg: And again, sometimes their perception is that an animal is going to just tear apart this house because they think this Great Dane is going to be running through the walls. When I would talk to owners, I said, “The reality is, is these pets are taken care of more better than children.” Sometimes they’re not… A goldfish, legally, is a pet. When you say no pets, again, that’s the 80 percentile, and you can even call it a pet fee, not a pet deposit, because the deposit you get back. A pet fee, you do not. That’s a transaction to do business. But there’s things that you can do. But again, you can make this where it’s win-win. You can make it as a point of revenue, but also you can increase the time that the property is going to be vacant. And again, people that love their animals will do anything for them. If you promote that and go after them, to me it’s just a smart business choice.
Alex Osenenko: Jason, what do you see as a missed opportunity that a lot of individual investors who are a little bit newer to the business make? What’s one thing that we can help? Somebody is listening right now, what’s one thing you can help them fix?
Jason Waggoner: I would go back to taking the story of the applicant out of their decision. That’s the biggest thing that we find. When somebody comes to us and I hear them every week, “We need a service like this. Here’s what I’ve dealt with.” I just think, oh my goodness, I wish you would’ve called me sooner, because all it amounted to was they were getting emotionally involved with the applicants and the stories. I’ve seen it happen to people in my own family where I’m like, “Why didn’t you call me? They told you what? That’s a red flag.” But even going back to the animals, if you’re qualifying that tenant and they have animals and that tenant’s qualified, they’re probably going to be a more responsible pet owner than the average person.
Jason Waggoner: If you have that set of criteria in place, they paid the application fees without even thinking about it, that’s a red flag. If you’re charging the application fee and they call and say, “60 dollars a piece? How can we afford that? We’re trying to move and do everything.” Probably going to be check to check. You’re probably going to be chasing them down for rent. Just things to think about. When those applicants start calling, listening to them and what they’re saying, your situation, that landlord got really lucky. We’ve seen stuff where somebody pulls up in a nice car, briefcase, “Hey, I want to pay six months up front.” They go check on the property six months down the road and they can’t get in. It’s barricaded up, and then they do get in and it’s completely gutted inside and it was a commercial grow operation. They’re long gone and the harvest-
Steve Rozenberg: Now you have a much harder problem.
Jason Waggoner: … has been gathered. The qualifying process is going to be their lifesaver.
Steve Rozenberg: This is good. As we kind of wrap up here Jason, one of the things I’m curious about is right now the economy’s doing well. Do you think that when the economy changes, that maybe the laws start changing as well, or do they keep those pretty steady? You’ve been doing this for long enough.
Jason Waggoner: No, that’s going to be steady. What’s going to happen in the next couple of years are background checks are really… we’re under the eye right now. It’s going to become even more so in the forefront of the news and the things of that nature. What we’re seeing right now, you guys know, when somebody is denied they get the adverse action letter. That’s something that individual landlords don’t think about. When somebody is denied, telling that person why they were denied, who ran the report, when they don’t do that, they’re basically violating that person’s rights and they could get sued.
Alex Osenenko: We expect to have more renter friendly laws and regulations to come out?
Jason Waggoner: Yes.
Alex Osenenko: And companies like mine, we exist to help investors have healthy investments, but also provide happy homes for folks who are going to live in those homes, because we know the fair housing rules. We know we have the team of people. This goes back, let me just wrap this up and say, the theme that I’ve caught across all of our single family investing serious episodes is, have a team. Have a team in place. If you have a lot of free time, absolutely go it yourself, but you have to build a team and this is what I recommend: Going out there, listening to podcasts like this, educating yourself, taking notes, but also go out to events. Meet your local other landlords, talk to them and see. A lot of times they’re not doing the right things, but at least they potentially have relationships that you can capitalize. You have a company called Accutrac?
Jason Waggoner: Yes.
Alex Osenenko: Accutrac’s to check them out.
Jason Waggoner: You know what? The team aspect of it, like you’re saying, the investors, what do they do? They try to do it all on their own. I can fix that air conditioner. I can fix the flooring. Get a team of people.
Steve Rozenberg: Yeah, and just to kind of close up, my opinion, do you think Doug, all the books that I’ve ever read about being successful and owning real estate for wealth, I never once saw anywhere that it said, do it all yourself. You need to be the sole-
Doug Brien: But that’s how people think. That’s how I would think if I didn’t know any of it.
Steve Rozenberg: We think maybe it goes against our IQ level or our ability, or because there’s money involved, people don’t like to talk about making the mistakes, but I have never met anyone that’s said, “If you want to be successful, get away from everyone else and do it all on your own.” Never.
Doug Brien: Here’s what I see the successful investors do. They start with what’s their opportunity costs?
Steve Rozenberg: Absolutely.
Doug Brien: What is my time worth? And you can kind of pretty easily back into, is my time worth more doing something else or managing my property? I think that’s question number one. Question number two is, with everything that needs to be done with investing in a property, what do I enjoy doing and what am I good at doing?
Steve Rozenberg: Absolutely.
Doug Brien: Pick a couple of things that you’re really good at doing. I like to find the property. I like to scope the renovation. I don’t want to do the renovation but I want to scope it out, because I know what the rent is going to be if I get these amenities, hire a good general contractor, hire a good property manager to execute the plan. Leverage, maybe a broker or a lender to get my loan, but what I want to spend my time on is picking the right properties, doing the renovation the way that I know is going to maximize the value of the asset and then get the team of people around me that I’ve screened and gotten reference checks on and they’re the best and they’re my team and we go do multiple deals together, and you get better as you go. That’s what the best investors do.
Steve Rozenberg: Absolutely. I agree.
Alex Osenenko: That’s fantastic. I want to say thank you to Jason and Doug for joining us. Thank you for listening. You can find more of this in and lots of discussions on subjects at Mastermind Real Estate Investment Club on Facebook. Maybe we’ll get Doug into it. Maybe he can field some questions.
Doug Brien: Can I get in that club?
Alex Osenenko: We’ll see. We’ll see. But yeah, check us out on Facebook. We’re at Mynd.co as well, M-Y-N-D.co, if you need property management services, would love to talk to you. Thank you very much for listening.
Steve Rozenberg: Thanks everyone. See you later.
Jason Waggoner: Thanks guys.