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From 0 to 22,000 doors in 10 years – Renters Warehouse Playbook

From 0 to 22,000 doors in 10 years – Renters Warehouse Playbook

Today I’m talking with Kevin Ortner, the President and CEO of Renters Warehouse, which currently manages 1400 investors across 22,000 residential homes in 42 markets in 25 states.

Kevin is a lifelong entrepreneur who got his start in business in early age, printing greeting cards at home and selling them door to door.  Got to respect the hustle.

He’s also got a background in aviation, earning his pilot’s license at 17. He started a flight school in college, and eventually got his start in real estate as a way to spend his downtime in between flying corporate jets.  

Today, we’re going to hear about Kevin’s path moving from Renters Warehouse’s first franchisee in 2010 to now acting as CEO of the company.  

So if you’re interested in better understanding the playbook that Renters Warehouse has been executing, this is the interview for you.

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Topics covered:

  • (03:19) – Background Leading up to Today.
      • (03:34) – Kevin talks about the early days of Renters Warehouse.
        • (04:17) – Running it like a high-growth business from the very start.
        • (06:03) – Thoughts on software and technology.
      • (07:36) – The role that timing played in Renters Warehouse’s success.
        • (08:18) – Discussing the sense of urgency and growth that drove their early efforts.
      • (09:47) – Kevin’s role in the company during the startup phase.
      • (12:01) – Discussing the transition when outside capital was brought into the business.
        • (13:14) – Changing roles from one of operations to strategy.
  • (15:20) – Growth and Profit
      • (16:07) – Kevin discusses the capital opportunity available in the single-family rental market.
        • (16:57) – The “story” about the market that investors bought into.
      • (23:02) – The in-house infrastructure Kevin built early on to accommodate and drive their growth model.
        • (23:13) – Developing a unique selling proposition.
        • (24:09) – Retention strategies.
  • (26:26) – Unit Economics
      • (26:26) – Discussing the results from The Property Management Industry Financial Benchmarking Study.
        • (27:39) – The tension between maximizing returns and having a standardized platform.
          • (27:56) – Why Renters Warehouse has chosen to monetize their business in the manner that they do.
  • (31:58) – Technology
    • (32:32) – Kevin shares Renters Warehouse’s perspective on the “build versus buy” dichotomy.
      • (33:07) – Building an internal data warehouse.
    • (34:07) – Details around Renters Warehouse’s upcoming software release.
    • (36:37) – Kevin shares his thoughts on the opportunity that data represents.
      • (39:41) – The potential to develop rent analysis tools.

Rapid-fire Questions:

  • (41:11) – Why does our industry insist on valuing businesses based on management fees?
  • (43:06) – How do you think about customer acquisition costs?  
  • (47:57) – How does Renters Warehouse handle maintenance as a revenue stream?
  • (50:13) – Why did Renters Warehouse pioneer flat fee?
  • (52:45) – How do you divide work between your satellite office and your main office?

Resources mentioned:

Where to learn more:

To get in touch with Kevin or learn more about Renters Warehouse, head on over to their flagship website, RentersWarehouse.com.  You can also find him on his LinkedIn page or pick up a copy of his book, Rent Estate Revolution at RentEstateRevolution.com.


(36:03) – Jordan wants to add in a clip from Gary Keller’s 2018 Vision Speech at Keller Williams.

“Property management is the holy grail of data. If you use off the shelf property management software, who owns that data? They do. You don’t. 0:36:28.5 That’s why property management software companies are trading at massive multiples. Not because of the money being made off of the property management software fee.”

Jordan: 0:00:00.0 Welcome closers, today we have another episode of The Profitable Property Management Podcast coming at you. This is Season Three on profit.

0:00:06.8 I’m your host Jordan Muela, and every week I interview world-class property management entrepreneurs and industry experts who share actionable insights to help you get to the next level.

0:00:16.3 Whether you manage 100 units or 1000, this broadcast is designed to help you see the bigger picture and to give you the tools and tactics that you need today.

0:00:26.7 Today I’m talking with Kevin Ortner, the President and CEO of Renters Warehouse, which brings professional and scalable property management to

0:00:35.2 Alright, looks like that intro is the wrong intro. Give me one second here. Alright, try that again. 0:00:40.6

0:00:41.9 Today I’m talking with Kevin Ortner, the President and CEO of Renters Warehouse, which currently manages 1400 investors across 22,000 residential homes in 42 markets in 25 states. Man, that is a mouthful.

Kevin is a lifelong entrepreneur who got his start in business in early age, printing greeting cards at home and selling them door to door. Got to respect the hustle.

0:01:05.7 He’s also got a background in aviation, earning his pilot’s license at 17. Started a flight school in college, and eventually got his start in real estate as a way to spend his downtime in between flying corporate jets.

0:01:18.8 Today, we’re going to hear about Kevin’s path moving from Renters Warehouse’s first franchisee in 2010 to now acting as CEO of the company.

0:01:28.7 So if you’re interested in better understanding the playbook that Renters Warehouse has been executing, this is the interview for you.

0:01:33.8 Kevin, welcome to the show.

Kevin: 0:01:37.0 Wow, thanks for having me Jordan. That was quite the introduction. You make me sound pretty interesting. That was great. Man, I’m going to have my wife listen to this for sure.

Jordan: 0:01:46.5 Well, I hope I’m not wrong man.

Let’s talk about what I personally think is interesting. So, Renters Warehouse came on my radar screen in around 2011, 2012.

0:01:55.4 I was running Manage My Property, a lead gen company. A smaller version of All Property Management.

0:02:00.2 Renters Warehouse was a big advertiser. 0:02:02.0 As we were pivoting out of lead gen and into software, we were doing some customer discovery interviews.

0:02:07.8 And I remember being in Guatemala with a crappy internet connection, talking to Brenton Hayden. The first time I really got to know this guy. This was the founder of the company.

0:02:17.7 And at the time, Renters Warehouse was managing around 2000 units and doing around four million in revenue.

0:02:24.7 And I vividly remember him telling me that their goal was to double that figure in the next 12 months. Which, you know, sounds reasonably ambitious for any property management company.

0:02:32.4 Brenton was the first property management entrepreneur that I had ever met that was actually leveraging unit economics.

0:02:42.1 So a lot of interesting things that came out of that conversation. That was really the lightbulb moment for me, was to meet somebody that understood their customer acquisition cost and their lifetime value, and was making strategic bets based on that.

0:02:53.1 I believe, at the time, Brenton mentioned that the company was doing about 50k on radio with spokespeople like Glenn Beck, Dan and Joe. And that was just a really different paradigm. It was very hard to make a comparison of Renters Warehouse versus your average property management company.

0:03:11.0 At that point, I met you around the same time. I was at – I believe it was the first Renters Warehouse, kind of franchisee convention.

0:03:19.7 I want to hear some about the early days. So, I would love to just kind of start off talking about what the business was like in those early years, as a precursor to talk about the shifts once the business kind of grew up, took on outside capital and really changed.

Kevin: 0:.2 Yeah, so. So early days of Renters Warehouse, I think, you know, as we’re running around this industry and we’re talking with different people in our space and other property managers and our friends and partners out there in the world, you know.

0:03:48.6 And when I look at what we’ve done growing a big business, I think oftentimes, I’ll forget we started like most of the other property managers in the world out there. Right?

0:03:59.0 We started as a small shop, small local property management company. And, you know, we are very entrepreneurial. We started very entrepreneurial.

0:04:06.8 And, you know, I think we looked at it differently though, then a lot of people maybe have in the past. I think more people are starting to look at this as a real big business opportunity.

0:04:17.8 When I got into property management, it was very much – very small business, kind of mindset, more of a hobby. Kind of like realtors were doing it part time.

And, you know, kind of to your point, when you talked with Brenton that first time and how we looked at unit economics and our customer acquisition costs and our costs to acquire a lead and our ultimate customer lifetime value. And we did a lot of math around that.

0:04:43.7 And I think early on we really started running the business like a high-growth business and a business, not just a property management company. 0:04:50.1 And that really made all the difference in the world.

And it’s been a lot of fun to watch you guys out there with a lot of the events you’re doing, and the podcasts and things like that. Really trying to take that message and spread it out.

And say, “Here’s how you’ve got to be looking at your business in a different light. Here’s how” – there’s ways to be able to build these bigger than I think a lot of people think.

0:05:09.6 And so we were just early in doing that. Right?

0:05:13.7 But we did start out with zero doors under management in zero markets and have grown into what we are today through, obviously a lot of hard work, a little bit of luck mixed in between, and obviously bringing on a financial capital partner to help us fund some of that growth recently. 0:05:31.4 But back to the root of your question, what was it like in the early days, it was …

Jordan: 0:05:36.8 Come on man, tell me. It had to be a little crazy.

Kevin: 0:05:39.6 It was super crazy. We were wearing tons of hats. Just like so many property management companies out there today are still doing. We were no different. Running around.

We were making it up as we went, right? 0:05:52.4 Figuring out this business. Figuring out how to manage a couple properties. Then hundreds of properties. And building processes and trying to leverage technology and tools.

0:06:03.1 And the frustrating thing in the early days, was there wasn’t a lot of technology and tools out there.

0:06:09.4 Real estate’s, frankly, somewhat archaic still when it comes to technology. All around the technology around the world.

0:06:14.5 And then you add the property management aspect of that. Single-family property management aspect of the real estate world.

0:06:23.3 So we developed some internal technology. We tried to change and leverage other technologies out there.

But we just really thought we had to find a way to make this more efficient, less human touch. But still, obviously, high customer service.

0:06:35.8 So we were running around with our hair on fire trying to grow this. And a lot of things happened accidentally. 0:06:39.8 And frankly, we made a lot of mistakes.

We’ve tried things, tested things. 0:06:45.2 Whether that be advertising and marketing. Whether it be an operational process.

You know, how we’re interacting with our tenants, owners, and clients. Whatever it might be.

0:06:53.6 And I think one of the key takeaways from me looking back at that time was how many times we failed. Right? 0:07:01.9 But we just reiterated on it. And we iterated on it and changed it and made it work.

0:07:05.8 That I think as you’re growing a business, whether it’s a property management business or any business, you can’t be afraid to try new stuff. You’ve got to get out there and be innovative. You don’t have to create a new product or service line, but you’ve got to be innovative about how you’re trying to grow your business and deliver that service.

0:07:23.8 And that’s what I think we did well, was just continue to push that cart up the hill. It was a lot of work and a lot of effort, but we’re seeing some great results from it now.

Jordan: 0:07:36.3 “We did well.” That may be a bit of an understatement, Kevin. But fair enough.

0:07:38.4 Let’s talk about the role of timing in business.

What I got from Brenton in that conversation was a sense of urgency. I got a sense of, “The opportunity is now, the timing is now.”

0:07:52.8 And the messaging and the positioning of the company around that time was, “Hey, if you can’t sell your home, don’t foreclose, don’t short sell, don’t be stuck with it. Call Renters Warehouse, and we will teach you how to rent it until the market comes back around.”

0:08:05.7 Obviously, you were playing to the market, but was it your sense at that time that there really was kind of a golden moment happening? And did that drive a certain sense of urgency around growth?

Kevin: 0:08:18.6 Yeah, there was a definite sense of urgency around growth. That was always our mission, was to grow.

And I don’t think at the time either of us knew how big we could grow the company. Frankly.

0:08:31.6 We didn’t even realize how big of an industry this was going to turn into when we first got into it.

0:08:35.1 And I remember sitting around with Brenton early on in the days, thinking, “Man if we got to like 2000 doors under management, that’d be the cat’s meow.” Right? “That would be amazing. We’ll have arrived.”

0:08:45.6 But obviously we kept on growing right past that, but there was a definite sense of urgency. We wanted to capitalize on the current market conditions that were out there. We thought there was huge opportunity to do it.

0:08:56.7 And we were pioneers in how we went about trying to get those clients. Through the radio advertising, and through some of the other things we were doing. 0:09:04.3 So yeah. Certainly. There was a lot of urgency.

0:09:06.9 You know, I think that urgency still exists today for us. It’s just in a different way and it’s a different market. And we’re kind of talking to clients differently. Frankly. Right?

0:09:16.6 Because people can sell their home today. But we certainly wanted to capitalize on the market conditions that were out there.

0:09:23.8 And I don’t think our mindset around being aggressive with growth and being aggressive at growing a great business and being able to hire and employ a lot of great people has changed.

Just maybe our philosophy or how we’re going about targeting those people and who they are certainly has changed a little bit. 0:09:43.6 But that’s just kind of in our DNA. It’s part of the DNA of Renters Warehouse.

Jordan: 0:09:47.9 So the company is moving in a really hard-charging fashion, growing aggressively. Obviously a little bit of a kind of a cowboy atmosphere, which is just the nature of any startup. Particularly a bootstrapped startup. A mom and pop startup. Not even a valley startup.

0:10:04.0 I mean, it’s a really unusual story to see a company grow that aggressively without a ton of outside capital.

0:10:08.9 But at some point, there was an inflection point where there is a decision to bring in outside capital. 0:10:15.0 Up until that point, what was your role? Were you kind of like Brenton’s right hand man? What was the relationship up until that point?

Kevin: 0:10:23.5 Yeah. A couple pieces really. Kind of a complicated question. So, I was certainly – I think a great way to refer to that is, I was Brenton’s right hand man.

0:10:32.1 He’s very much a visionary. And looking for innovative ways to change the space and innovative ways to grow the business. And he was very aggressive at doing that.

0:10:43.4 And I was more behind the scenes building up the operations platform. 0:10:47.8 To be able to fulfill what we were trying to build. And working with our team internally on how we were going to keep the machine running as we continued to scale.

0:10:55.9 I was also our largest franchise owner. Right? 0:11:00.5 And so, as a couple broke entrepreneurs looking for a way to grow the business, franchising was kind of the obvious answer. 0:11:05.6 Capital efficient way to expand the business across the country.

And so, as we sold franchises across the country, there were certain markets I was interested in and I ended up building quite a nice franchise 0:11:17.0 <Inaudible> Renters Warehouse.

0:11:17.8 I had four different markets. So I was out running and growing my franchises in certain cities like Phoenix and Denver and also helping to kind of grow the corporate franchisor. Our corporate office as well, with Brenton. 0:11:31.4 Up until he sold.

And then in 2015, Brenton sold a majority stake of the business to our private equity partners.

0:11:40.3 And at that time they wanted me to stick around and to continue to lead and run the company, but also really align our interests.

0:11:47.2 So I sold my offices back to corporate at the same time that we did that transaction. And became – I was no longer a franchisee, but then just the CEO of the business.

Jordan: 0:12:01.2 So tell me more man. Talk me through that. You’ve been, kind of the right hand man. You’ve also had these markets, you’re selling.

I mean, this is a lot of flux, this is a lot of transition. New people entering the relationship. 0:12:12.7 What was it like to walk through that transition? And how did the culture, the energy of the company change during that timeframe?

Kevin: 0:12:21.6 Man, good question. Ultimately, you know, it was an amazing experience. Right? Certainly something I had never done before, never been through before.

0:12:34.2 I was a small business entrepreneur. Had grown a couple different businesses to decent size, and had grown several Renters Warehouse franchise offices across the country to do several million to ten million dollars in revenue a year. 0:12:52.0 And, so I was a small business guy.

And it was definitely moving into a new world. And you kind of referenced that aggressive growth, or that urgency to grow the business that we had back in the beginning.

0:13:06.7 Like I said, that’s still around, and it really took on a new meaning, also – as you bring on outside capital with new investors. 0:13:13.9 So it was a very interesting experience.

0:13:14.9 It took me a long time to really – to get my feet underneath me in a new role. 0:13:22.1 Which really needed to be a little bit more strategic. And less in the weeds and operational, and very much leading strategy in how we were going to grow and how we were going to continue to perform at a high level for our clients.

0:13:38.5 But also now, you know, we had a lot of investors to answer to with their desire to grow a big business and make more return on their capital. 0:13:48.9 So it was a very different role for me.

Took me, I’d say, a year before I really got that settled into it. 0:13:55.7 But it’s been really good for the business. I think we’re able to continue to do some really innovative and exciting things in the marketplace.

0:14:01.1 I think we’re able to – we’re constantly focused on how we can continue to increase our value proposition for our homeowners and our tenants alike to create a great experience out there for people in the 0:14:11.6 <Inaudible>. 0:14:14.1 And we’re able to do that because we have good capital backing.

0:14:17.8 But, it also requires us to be disciplined about how we’re growing the business and be disciplined about how we’re spending and allocating our resources.

0:14:25.9 And the final piece of that, you mentioned the culture of the business. I think that was – that’s been something that has been a conscious effort to maintain a great culture and great place to work. But it’s certainly been one of the bigger challenges too.

0:14:40.2 Because culture can’t be a top down effort, it’s got to be a bottom up thing. I believe. Culture’s very grassroots.

We set the tone at the top for that, but ultimately, as the organization grows from two people to 20 people to 200 people to 400 people, over time, that culture naturally does change.

0:15:01.6 Because it can’t be the same as it was when there was ten people in the office. It’s very different, right?

0:15:06.4 So, that’s an interesting question. I think that, you know, business scientists can study that forever trying to figure out, you know, all the culture questions.

0:15:15.7 And I don’t think we’ll ever solve it, but it’s certainly something we’ve spent a lot of time working on.

Jordan: 0:15:20.1 Love it. Ok, so I want to transition now to getting into the model. So many folks look at Renters Warehouse and they scratch their heads and they think,

“What are these guys doing? The things that they’re doing, in terms of their aggressive positioning in the market, or they’re running radio ads. Hey, who does that? This seems like a really different model. Wouldn’t make sense for me, how can it make sense for them?”

0:15:43.7 The company clearly has an underlying thesis about how these investors have chosen to deploy the capital. And there’s a lot of outside capital coming into the industry right now.

0:15:53.3 So my question to you is, what is the story that outside capital is buying into that merits this investment spree that we see happening right now? How would you describe the capital opportunity within the SFR industry?

Kevin: 0:16:07.6 Yeah, I think outside capital is starting to see that the SFR world, the SFR industry, is a legit industry. Right?

Ten years ago, when I got into this business, it wasn’t really. Frankly, I was the red-headed stepchild, as were all of us in the property management world. Red-headed step child of the real estate industry. Right?

0:16:26.9 It was a, “Why the heck are you doing that?”

0:16:29.8 Shortly thereafter, when the bottom fell out of the market, those same agents that were kind of patting us on the head of a cute little property manager, were knocking at the door looking for a job. Right? 0:16:41.9 And so that was nice.

But through that, with the institutional money that came in through Invitation Homes and Blackstones, and bought all these homes. From the other 0:16:49.5 <Inaudible> that formed, you know.

And I think early on, we all know, it was really looking to be a trend. Buy low, sell high.

0:16:57.5 And in that timeframe they realized that this could be a good long-term business. And I think that was a big changing point in the industry. 0:17:06.2 And that certainly helped our story.

Because we went and searched for outside capital. We thought, “There’s really something transformative happening in the space. There is a real industry here and there is a real fragmented, young, unsophisticated, low-tech industry.” Right?

Probably one of those last disrupted places, and we thought we were in a good position to be a leader in that.

0:17:31.5 And that’s the story that our investors bought into, and that’s what we’ve been executing on since we came into play.

0:17:37.2 And frankly, for us, we believe that there’s still urgency around growth, because we believe that there is a lot transforming in the marketplace today.

0:17:46.3 There’s a lot of consolidation happening of property owners. As larger funds continue to grow and buy out some of the folks that own a few homes. 0:17:55.9 And there’s people getting into the space.

0:17:56.8 But there’s also consolidation happening among property management companies. Right? 0:18:03.1 And we’re trying to lead the charge at that.

But it’s becoming more and more popular, and I think that’s a good thing. 0:18:08.3 It continues to add legitimacy and credibility to what’s happening in the space.

0:18:12.4 But we want to be winners. Right? And so we’re aggressive about it. 0:18:17.4 I think sometimes we get a bad rap for it.

But ultimately, you know, I think – the point is that’s what they bought into right. That there’s a lot of opportunity here, and they like the fact that we figured out how to get a retail client for a decent customer acquisition cost through untraditional means in this space. Right?

0:18:38.1 Meaning, some of our radio advertising and television advertising and some of the different things we did.

0:18:43.2 That was very attractive to them. It was meant to show them we have the data to show our customer acquisition costs, our customer lifetime value, what the difference is and what that means for growth and business.

0:18:53.0 So that’s what they bought into, that’s what we’ve been executing on. We continue to double down on that.

0:18:56.2 The only strategy that really changed once we brought in outside capital, was we veered away from franchising. For awhile. We still have several franchises out there. 16 to be exact. 0:19:06.7 We love our franchisees, they do a great job.

Jordan: Shout out to Rich Drake.

Kevin: 0:19:10.2 Rich Drake. Shout out to Rich Drake. Right.

0:19:12.5 And, you know, they’re great. We continue to support them. We love them. We bought some back. You know, we’re not selling any currently.

As we saw an opportunity to really kind of change our model a bit and go after a corporate growth model to service investors in a different way. 0:19:29.2 So that’s a bit of a change.

0:19:29.6 And then we, of course, had some capital to do some acquisitions. Everything else is really – we’re doing it the same way we’ve always done it.

0:19:36.4 And trying to grow these markets and create a brand that people know what it is. And continue to grow.

0:19:45.6 And I think, sometimes people can get confused by that as you mentioned, or get just perplexed by, “How the heck does that work?”

Or frankly, there’s some – I was talking to someone a couple weeks ago and they said, “Yeah, how can you guys just go into all these markets and just spend, spend, spend and lose so much money and be constantly investing and not making any money and growing? Like what’s your plan? How do you sell a company like that? Or does it matter? Are you going to implode?”

0:20:08.9 I’m like, “What are you talking about?”

Like we’re a profitable business. Right? 0:20:13.2 We weren’t for about a year and a half as we went through rapid expansion, but that was intentional.

0:20:17.8 But at the end of the day, when you have sophisticated financial investors behind your company, you need to be smart about what you’re doing, and you need to be proving that you can make money.

0:20:27.6 They – we’re not a Silicon Valley tech startup that can have some crazy, you know, long-term revenue plan and lose money forever. Right?

0:20:38.7 We’re not a VC backed company. We’re a private equity backed company, which means they need to see growth. They need to see revenue growth, they need to see profit growth. They need to see margins improve. 0:20:49.6 All those types of things.

0:20:50.8 And so, that’s what we’re dealing with today. And so I think that’s important for people to know as they look at our business.

0:20:58.3 We’re not necessarily cowboys out there just, you know, throwing it around finding out what we can possibly do.

There’s a method to our madness and we can go into markets and we have the scale to go out and spend a lot of money to grow this business, but at the same time, be profitable and give a return back to our investors.

Jordan: 0:21:18.1 So that’s a really helpful distinction. I would say, when asking the question: Where does Renters Warehouse sit in terms of model? I think that some people do kind of mentally lump you in with Mind or Castle or OneRent.

0:21:30.9 And there’s a distinction between a service company that is powered by technology versus a technology company that is employing labor where necessary.

0:21:42.1 Obviously, in terms of your roots, you guys, again, it’s a mom and pop traditional company. Started by a guy with a dream. Right?

0:21:50.2 So in that sense, the roots are very clear. Maybe, in terms of some of the kind of parsing up the distinction or what’s different about the company, obviously that capital component is different. 0:22:02.5 The advertising, the sales and marketing component is very different.

And Kevin, I’d love to get your feedback on this, but this is really my belief: My belief is that for a company that does have an aggressive growth goal, what so many folks miss is that sales and marketing has nothing to do with property management. It is its own distinct skill set.

And for the companies that are really committed to growth, the evidence of that commitment looks like operationalizing sales and marketing as opposed to assuming that operations is property management. 0:22:35.6 And sales and marketing is something that you do on the side.

0:22:36.8 I think that is part of what drives the footprint that a lot a people scratch their head around, wondering how you can afford to have that much of a sales and marketing engine.

0:22:48.9 But, it’s not purely about the capital expenditure, just in terms of throwing dollars out there, buying APM leads, or just renting radio.

There’s actually some in-house infrastructure that I’ve had the pleasure of meeting some of the people behind that.

0:23:02.4 But I’d love to hear more about that from you. So, the company has grown a lot. Tell me about the growth infrastructure that you guys built early on and how you think that’s different than how other companies have approached growth.

Kevin: 0:23:13.6 Yeah, man. You said it really well. We used to joke, a lot, that as we were growing and really honed in on how to acquire the customer. And we used to joke a lot that, you know, we were really a sales and marketing company with an emphasis on property management. Right?

0:23:33.8 Because you’re right, sales and marketing are a very different function of property management operations.

0:23:40.8 I think you need to break down this business into a couple of ways. Which is, “How are you going to uniquely target the world of single-family rental property owners out there?” Which there’s a ton of. Right?

0:23:51.9 We all know that this marketplace is vast. And frankly, our largest competition as property managers, is not ourselves and other property managers, it’s people who do it themselves.

0:24:03.2 So, how are we going to uniquely target them? How are we going to build a value proposition that makes sense? And what’s that sales and marketing plan and strategy look like? 0:24:09.7 That’s one piece.

0:24:09.9 Then there’s how you’re going to retain that person on your books for as long as possible and make their real estate investment so easy that they don’t want to sell it.

0:24:20.7 Or that they’re not frustrated and go somewhere else or go back to doing it themselves. Etc. Right? So that’s an operations piece. 0:24:24.7 So I think there is a very distinct role there.

And we, I think – I don’t know if we consciously recognized that right away, that’s just I think how we thought and how we grew the business.

0:24:36.8 And then we started to make conscious decisions around it once we realized it was working.

And, it kind of goes back to our early story on what maybe made us different, or allowed us to go from small mom and pop property manager, local manager, with no funding, to the business we are today. Was we looked at it like a business right out of the gate.

0:24:58.2 And what I mean by that is – kind of to your point. We built out sales and marketing as a department. 0:25:04.4 Right?

And we didn’t find people from the real estate world or the property management world that knew sales and marketing and brought them in here.

0:25:10.3 We went out and found the best sales and marketing people we could from whatever industry they were in, and brought them into the fold and built that up. Right?

0:25:17.8 The same thing we do with our corporate finance team and our corporate accounting team and our HR department. 0:25:24.4 We built a real, true business.

0:25:26.0 And certainly spent a lot of time focusing on our sales team, our sales organization, our sales structure.

0:25:31.2 We taught our real estate agents, that are out there leasing homes, that are really the front line for bringing on new clients for us, how to be sales people, how to sell. Right?

0:25:40.7 And we spent a lot of money building a marketing team. All the way from a Chief Marketing Officer down to in-house digital, in-house creative. All that kind of stuff.

0:25:50.8 And so, yeah, I think you hit the nail on the head. You really need to look at this – every business out there needs sales and marketing and frankly, it’s very similar disciplines.

0:26:01.0 And so, just because you’re property management or you’re a smaller property management firm, or real estate company, doesn’t mean you shouldn’t apply those same principles to your business.

Jordan: 0:26:08.5 Got it. Love it. We’re definitely on the same page. And we’ve seen the fruit that has come from that.

It does seem like that part of the implicit undertone of what’s being asked there when that gets brought up – it goes back to what you just said. “How do you guys make money? How are you not losing money?” Etc.

0:26:26.0 So let’s talk about unit economics. We did the benchmarking study. The Property Management Industry Financial Benchmarking Study earlier this year. Released that.

0:26:36.5 Some really interesting results that came out of that. But one of the things that came out of that was looking at the annual contract value for your average property management company. 0:26:48.5 It was around $1700 dollars.

0:26:50.4 And ultimately, that’s going to be broken out part in the base management fee, part in the ancillary fees. We did not include maintenance revenue in that stat, so keep that in mind.

0:27:03.0 When you guys think about the balance between having a tight standardized service offering, which is the nature of that promise to the outside capital.

0:27:12.8 Is that we can truly be focused and standardize this at scale. When we contrast that versus trying to max out the revenue opportunity on a per unit basis.

0:27:25.8 Talk to me about the tension between those two things and how you guys have intentionally approached leaning in one direction or the other. Because there does seem to be some implicit tension there, agree?

Kevin: 0:27:39.5 Yeah, there really is. There’s built in tension between maximizing that return and also having a standard platform.

And especially as we grow to be a nationwide firm and across the country. 0:27:52.9 Having a standard offering that’s easy to sell, easy to understand, is very important.

0:27:56.0 And there’s different ways we could probably monetize this business differently, or at a higher level, but choose not to. 0:28:04.8 For one of two reasons.

One: to keep our offerings simple, and be competitive in that manner, but also to – the more you start changing fees or making a complex fee structure, the more operationally intensive that becomes to make sure you’re delivering on a good brand value.

0:28:22.5 So, we’ve been pretty thoughtful on how we’ve built our fee structures and our revenue models and things like that.

0:28:30.4 And frankly, where we look for future expansion of that contract value on annual bases, really through value add services that we’re going to be able to connect either our homeowners or investors with.

0:28:47.1 To increase the value proposition for them, but to also increase the revenue stream for us.

So, partnering with the right people or partnering with new services and opportunities.

0:28:55.7 But frankly, I don’t think of the property management industry as a whole. Mostly the SFR side. I think multi-family they’ve figured this out a little bit more.

But on the single-family side, for sure, we haven’t done a great job in what I call, “monetizing tenancy.”

0:29:11.6 And so, most of our fees as property managers, go to our homeowners. Which makes sense. They are our clients. They’re the ones we’re working for and are in business with.

0:29:20.7 But there’s a lot of opportunity in this space to make money off of our tenants as well. And not in a way where we’re just nickel and diming people, and charging bad behavior fees like late fees and NSF fees, etc.

0:29:33.7 But to really deliver value to the tenant and get money coming off of them. 0:29:36.3 And I think that’s – you know, solving that and continuing to iterate on that is a unique way where we’re going to be able to increase our revenue per door on an annual basis.

0:29:46.6 Increase our customer lifetime value without having to increase fees to owners. And so that’s where a lot of our focus is today.

Jordan: 0:29:54.7 And are these the things that are actually rolled out or are these programs that haven’t actually come to fruition yet?

Kevin: 0:30:01.8 A little bit of both. Right? I mean, so we’ve done some ancillary fees that we’re starting to see pop up more and more in the marketplace just from fees that really have less value. Right?

0:30:16.1 But some paperwork signing fees or lease admin fees or, you know, monthly technology fees, so we can continue to enhance and grow our technology. 0:30:22.9 And so we have some of those in place.

But, you know, from things like working with service providers to provide utility discounts, cable tv, satellite tv. You know, utility connections.

0:30:35.6 Get our tenants a discount on those services but be able to make commissions on those sales as well.

Things that are becoming in the property management world, and we’re working on putting out great packages like that.

0:30:49.4 There’s concierge packages and other ideas that we’re able to roll out to tenants in value add.

0:30:53.6 So some of those things aren’t rolled out yet. Some are. And one of the things that we’re very conscious of is, I think there’s a lot of cool ideas out there.

We get pitched from vendors in the space all the time saying, “Hey here’s something that can add value to your homeowner, your tenant and can put some money in your pocket.”

0:31:12.6 But we really don’t want to be one of those companies that has to have an addendum on the contract that shows all the different fees we’re making. Right? We want to keep things simple.

0:31:21.2 And so we’re trying to figure out how we can really do that and almost make living in a Renters Warehouse home as a tenant more of a condo-like lifestyle for those who want it.

And be able to sell concierge packages or service packages and things like that that add on that people can opt into.

0:31:34.5 Say, “Hey this is real value add for me and my lifestyle, I love that.”

But it also makes us different from other companies that are out there. 0:31:42.1 As from a tenant’s perspective, and that they want to come into our properties. So, all things in the works there, but that’s kind of the mindset we’re taking as we look at expanding.

Jordan: 0:31:50.9 So let’s continue this theme of optionality. With enough scale, again, there’s so many distractions, so many opportunities to do this, that or the other.

0:31:58.5 Let’s pivot into technology and talk about the classic dichotomy between build versus buy. 0:32:05.1 Surely you guys have been tempted and probably bit in the rear a couple of times with this build versus buy paradigm.

0:32:11.4 You’ve got enough velocity, enough expertise, enough in-house knowledge about how this system should work and enough capital to be tempted to build a piece of tech as opposed to using something off the shelf.

0:32:24.7 What’s your heuristic or framework in general for thinking of build versus buy for tech?

Kevin: 0:32:32.4 It’s the ultimate question isn’t it, Jordan? And we struggle with it on a daily basis. And we are – we’re trying to walk that fine line the best we can.

0:32:50.0 There’s a real dichotomy there, you mentioned that. 0:32:52.6 And I think you need both. Frankly.

And we have – we employ a lot of technology for Renters Warehouse, and there are some things that fit our business model really well that we can buy off the shelf, implement it into the business and tie it all together in our backend.

0:33:07.5 I think one of the things we did early on that was really smart, a couple years ago, was build our own internal data warehouse.

0:33:13.8 And our rule, generally, is if we’re buying an off the shelf software that doesn’t tie in with other pieces of software that we have, it’s got to work with our data warehouse so we can have a single source of truth on the data and tie it all together. At least for us on the backend.

0:33:28.2 So we do use some third-party, off the shelf bot software. You know, SaaS platforms, that work fine.

0:33:34.7 But ultimately, you know, we can’t stop dreaming about the opportunity to build a piece of backend property management technology that runs our business the exact way that we think it should be run.

0:33:50.5 And for over a decade now, we’ve been building our business processes around the available technology.

And, you know, I think in that perfect world we would like to obviously build our technology around the right business process.

0:34:07.4 And so, while we do buy some off the shelf platforms, we’re actually currently, probably 90 days away from wrapping up a new technology build that we think can be game changing for the business.

0:34:20.2 We have certainly, to your point, been bit in the butt a couple times on that. And this isn’t our first attempt.

0:34:25.9 We think we’ve taken what we’ve learned from those other attempts and our going to have a really cool, robust platform that’s going to make sense for the business.

0:34:33.5 Make us super efficient, and really allow us to run the business the way we want to run the business.

Jordan: 0:34:40.8 Is this more or less internal property management software? What you’re describing?

Kevin: 0:34:42.5 Yeah, internal property management software. Right. And it will run all the – you know, all of our backend work that happens in property management – will be done through this one platform.

0:34:52.2 Which is really exciting for us, and I think that is just – that build versus buy, that status quo versus not – again, that goes back to what’s in the DNA of our business. And how we grew our business rapidly and how we did things differently. 0:35:09.1 It’s still there. Right?

And, you know, the other part of our DNA that we talked about earlier on the podcast, is trial and error. 0:35:17.6 We’ve tried things and we’ve failed. We tried again and we failed. And we try again and hopefully we succeed.

We’re really taking that approach with technology. Sometimes it’s been a few more expensive mistakes in there. Or expensive lessons, so to speak, in there.

0:35:30.3 But we’ve really taken the lessons we’ve learned in the last couple of years and we’ve tried to develop other tools and, you know, we’re giving it a go here and we’re really excited to kind of see what the results are.

0:35:42.1 I don’t know. I’m not certain that we’ll give up until we really have that platform that fits our business exactly the way we want it fit it. 0:35:50.2 But it’s rewarding – I’ve been working on this for years. It’s taken a lot of money and I’m not done. So, I can’t tell you for certain what the right answer is.

Jordan: 0:36:03.0 Years. Yeah, that’s a fair red flag. I want to play a clip for you from Gary Keller talking during the 2018 Vision Speech at Keller Williams, and get your take on this.

0:36:15.0 Alright, I’m not actually going to play the clip, this is going to be edited, but this is what the clip says,

“Property management is the holy grail of data. If you use off the shelf property management software, who owns that data? They do. You don’t. 0:36:28.5 That’s why property management software companies are trading at massive multiples. Not because of the money being made off of the property management software fee.”


0:36:37.1. What are your thoughts? What’s your take on that? How do you think about a realistic approach to assessing the opportunity that data represents?

There’s so much noise, AI, big data, BI. There’s so much noise around data right now.

0:36:53.8 You and your description of build versus buy, you talked about control, workflow, process, etc., but on the point of data specifically, what do you think is the near-term opportunity?

Or maybe one or two use cases where there’s actually some meaningful leverage that could be gained by owning your data full stack.

Kevin: 0:37:13.9 Yeah. Our data is really important to us, and every contract we get into, we really look at that.

We have the discussion with the vendor and oftentimes change how the boilerplate contract is written. 0:37:25.5 So for other property managers out there listening, know that sometimes you can do that.

We may have some additional leverage sometimes because we are a large account, but I think that’s important.

0:37:35.6 And I think data, as the world grows and changes, we’ve all seen this – data’s becoming more and more important.

0:37:43.7 And I think, in our space, there’s a huge opportunity that exists. I think Gary Keller’s right in what he’s talking about.

Because, again, as we talked about earlier, Jordan, this is an infant, very young industry. Right?

0:37:59.8 And so, people are still figuring out the data of the industry. People are still figuring out the technology of the industry.

And, you know, there’s an old saying of he who holds the keys holds the power. Right? 0:38:11.6 And I think it’s kind of like, he who holds the data holds the power.

0:38:15.2 I don’t know all of the different ways that we’re going to be able to leverage and use data, but we’ve certainly had those conversations internally that we’re really starting to gather some really interesting data on the single-family space. Right?

0:38:26.9 There’s a lot of data that’s been developed over the last five years for institutional level, large portfolio owners on how their portfolios perform.

0:38:37.9 Maintenance metrics, cap x information. Down to the zip code on net operating income and returns and yields and all that kind of stuff.

0:38:50.1 There’s not yet that same level of data for the retail market. Right? For lenders who underwrite a property in a different way. Because we can talk about how they historically perform.

0:39:01.2 And unless you have bulk data collection on rent histories and rent increases and, you know, on-time payments and delinquencies and all that kind of stuff. And maintenance expense and cap x, and all the stuff that goes into managing, maintaining this asset.

You need a lot of that to be able to say that this is how this one asset is likely going to perform, owned by some random person. Right?

So I think there’s huge opportunity to be able to leverage that data and get a real life trends on how one single-family rental property performs in certain regions of the country. So that’s one way. Right?

0:39:41.9 I think there’s tons of different ways to be able to do that. Ultimately, as an organization, we rent so many homes, have so many homes, that we’re starting to be able to look at running some of our own rent analysis tools. Right?

0:39:54.6 We obviously use a lot of the rent analysis tools out there, but we have a lot of internal data on this.

And frankly, from a value standpoint, as we’re talking to our clients, we like to be able to compare what may be the average rent for their home – might say it is on some of the different rent tools and on the MLS and everything else they’re seeing.

0:40:10.9 And maybe what Renters Warehouse has been getting historically for those types of properties.

How are we competing against the industry as we’re talking to our clients, whether they’re new clients or existing clients coming on board?

0:40:21.5 So there’s even benchmarking yourself against some of the data that’s out there, I think is a profound sales and marketing tool. That’s just internal.

0:40:29.4 So I think there’s going to be countless ways that you’re going to be able to leverage data. I think as property management companies grow and expand, understanding who owns the data, who doesn’t, what data you can leverage, what data you can use, is a really important to be thinking about.

Jordan: 0:40:45.1 Love it. 0:40:44.1 Hey, quick time check. Are we free to keep going to the top of the hour?

Kevin: Yeah, that’s fine.

Jordan: Alright. 0:40:50.6

0:40:50.7 Alright, Kevin, I do want to keep moving here. And instead of doing the traditional rapid-fire section of the close up of the interview, we’re actually going to do some questions from the audience.

0:41:02.5 I put it out to my audience earlier today that I was going to be interviewing you, and I asked for some feedback.

And there was some specific questions that came through. So I want to pose some of those to you now.

0:41:11.7 The first question is from Mathew Tringali. The question is this: Why does our industry insist on valuing businesses based on management fees? When will we progress to valuing and selling businesses based on some IBDA multiplier like every other industry?

Kevin: 0:41:30.8 That’s a good question. I think the best answer to that I think is because so many of the businesses in our industry, property management industry, is they’re probably very small businesses. Right?

0:41:43.4 I don’t mean that in a negative way like, “You’re small so you don’t matter.” It’s just – manage two, three, four, five hundred doors and a lot of small business owners run a lot of different expenses through the organization, or have been spending a lot money advertising and marketing.

Taking Jordan’s advice and growing their business.

0:42:01.1 Frankly, there’s a lot of the companies, at least that we look at acquiring, have, on paper, very small profit margins. Or very low IBDA numbers.

0:42:12.5 And so, an IBDA multiple actually does no justice to a seller. 0:42:17.9 It doesn’t actually talk about the true value of what they could get.

0:42:21.6 So, oftentimes, especially with deals that we’re looking at, we’re finding that we actually pay a higher price based on contract terms, or we usually bid on a per door basis depending on the fees that are charged.

0:42:36.3 We pay higher than we would if we were just doing a straight IBDA multiple like traditional – you know, other businesses sell.

0:42:40.9 So I think it’s because of the nature of our business, the fragmented world of property management and how people are running their businesses. 0:42:50.0 That it’s just not, today, a very practical way.

When we’ve looked at some larger deals, and we’ve bought some 1000 plus unit property managers, we have gone in and discussed the IBDA multiple.

0:42:59.7 So it’s not that it doesn’t happen, just that for many, it’s not the right calculation.

Jordan: 0:43:06.0 Next question is from Brad Larsen. How do you think about customer acquisition costs? What mental framework informs what range is considered acceptable?

Kevin: 0:43:16.6 That’s a great question. I think you really need to understand – to figure that out for your individual business, I think you need to understand your customer lifetime value.

So, over the term, the life of that customer with you – from the day they start to the day they leave, what’s that contract worth? 0:43:34.8 What’s that customer worth to your business?

0:43:36.7 So it’s one thing to know your annual revenue off of a contract. And you guys did a big study, a benchmarking study – what last year? I think you said $1700 bucks was the average benchmark for that.

0:43:50.3 So that’s one thing to know, but then how long is your client lasting? What’s your average churn?

0:43:54.7 I believe in your benchmarking study, Jordan, it was something like 25% was the average.

Jordan: About four years for average customer lifetime.

Kevin: 0:44:00.8 So if we take that and we say it’s four years, you now know what your total customer lifetime value is.

0:44:07.8 Which that – $7000 dollars. Up at Renters Warehouse ours is a little bit higher than that, but call it $7000 dollars, now you need to look at what you want as a return on your investment dollars. And also what your margins are on that. Right?

0:44:21.8 But we really look at it and say, “If we can make, call it four times, four to five times what it costs us to acquire a customer, we’re willing to pay that.” On a revenue basis.

0:44:36.4 But that’s kind of what really creates rapid growth. Right? 0:44:39.8 We probably are willing to spend a little bit more on a per customer acquisition base than others.

0:44:46.1 As I know, when I tell people they’re like, “Holy cow that’s crazy because I don’t have the margins to be able to sustain that.” But that’s kind of how I look at it.

0:44:51.5 So you really need to know that customer lifetime value, do some math and understand what your margins might be on that, and then figure out what you’re willing to spend to make that.

0:45:00.4 And me, even in the early days of the business, very simplistically, we looked and said, “Ok, if we can spend one dollar in marketing and make three dollars, that’s a good equation.” Right?

0:45:09.9 And so, I think it’s just as basic as that. You’ve got to really understand your numbers though and your business and really be managing those financials to be able to make those smart decisions.

Jordan: 0:45:20.5 Well, so, I’ll join the crowd of saying that is really unusual. So you put it out there, that ratio of 1 to 4 in terms of CAC to lifetime value.

0:45:33.1 So, you said that Renters Warehouse customer lifetime value is slightly higher than the $7700 industry average. Let’s assume it’s 10k.

Am I hearing you say that a $2500 to 10k ratio is what you’re describing in terms of kind of that upper bound of what you guys would still be willing to tolerate?

Kevin: 0:45:52.1 Yeah, $2500 starts to get us a little bit worried. But yeah, I mean, that’s somewhat the basic math there that we’re talking about. Yeah. Absolutely.

Jordan: 0:46:01.4 Guys, that is fascinating. That is really aggressive. And let’s use this to just kind of take a foray into this whole topic of profit.

0:46:08.9 Because if you guys are that aggressive with your marketing, there has to be some profit margin that is built into that.

0:46:13.7 People like to talk about CAC to lifetime value. 0:46:16.5 In my experience, CAC relative to customer lifetime profit is a less talked about but arguably more important conversation.

0:46:24.3 Because on an individual company by company basis, it doesn’t matter what the industry averages are, it matters what your profitability is.

0:46:31.4 Because your customer lifetime profit, if you take that and you back out sales and marketing, that’s basically the stack of chips from which you have to draw from to spend on customer acquisition costs.

0:46:44.2 So, if you guys are willing to have that aggressive of a customer acquisition cost to lifetime value ratio, there obviously has to have some healthy profit in there. Right?

0:46:54.6 I mean, you track what I’m saying? If there’s no profit, then – and your customer lifetime profit is, you know, $500 bucks, then you cannot spend more than $499 dollars or else you’re not making any money.

Kevin: 0:47:06.1 Exactly. Yeah. No exactly. And look, I think those are some big numbers. We operate – we’re acquiring customers – I won’t put the exact number out there, but we’re acquiring customers for less 0:47:18.7 <Inaudible>. We’re under $2000.

We have some markets where it’s been higher. When you enter into a new market, sometimes those numbers change.

0:47:25.6 We look at this on a per market level. We look at it nationally. We also look at it in each individual market. How to find out where to efficiently deploy our marketing and advertising dollars. 0:47:34.1 And our sales force is performing.

0:47:38.0 But point being, is, you know, everyone’s going to be a little different and we also have the advantage of economies of scale. Right?

0:47:46.1 And so, the larger we get, frankly, the better our margins become because we’re able to do – take advantage of that scale. Take advantage of the economies of scale.

And so, that number certainly has changed over the years as we’ve grown the business.

Jordan: 0:47:57.5 Next question from Greg Able. How does Renters Warehouse handle maintenance as a revenue stream?

Kevin: 0:48:03.4 That’s a good question. Maintenance is not a huge revenue stream for Renters Warehouse today.

We’ve never really had it be a huge revenue stream. And I think we might be missing out on some opportunity there. 0:48:15.9 And so, we’re actually evaluating that.

0:48:17.7 So on some of our larger contracts we work with, it specifically calls out that we’re not – in the contract that we will not make money off of maintenance. 0:48:28.4 We pass direct maintenance expenses through.

0:48:30.2 And then, on some of our retail clients and more of our smaller onesey, twosey owners, we’ll generally have – what we’ll go out and do is cut a deal with all of our vendors.

0:48:42.9 We use our large scale. Again, going back to those efficiencies and economies of scale. 0:48:47.1 We use our scale and markets to go buy down rates.

And we’ll keep some of that discount for ourselves. Generally around 10% of the total ticket price.

0:48:57.6 And our goal as an organization is to ensure that our clients will receive a discount off of retail price.

0:49:02.7 At the same time that we’re able to make some income off of managing the maintenance ticket.

0:49:08.8 Oftentimes we’ll go out and talk to our vendors and say, “We’ve got this huge pool of properties, we’re going to send you so much work that we estimate we can send you. For that we’re going to need some discounts. Here’s the discount we’d like.”

0:49:22.2 We pass some of it on to our client. We keep some of that for ourselves. That’s how we dispose of our contracts to our owners as well.

0:49:29.7 And so oftentimes we’ll make about 10%. But at the end of the day, certain markets we don’t do that. Depends on if we’re able to find enough vendors for that particular market.

0:49:39.6 I think maintenance management, vendor management, is one of the more important pieces of this business right now. Especially as we continue to grow across the country.

0:49:46.6 So, we’re not putting maintenance profit first, we’re putting having a good maintenance process and a good maintenance service for our homeowners and tenants first.

0:49:54.5 And as we reach scale in certain markets, we start adding on that ability to mark down some of the invoices and keep a portion of that for ourselves.

0:50:02.1 So, of our total revenues, maintenance revenue is well under, probably 5% of our total revenues today.

Jordan: 0:50:13.3 Got it. Question from Todd Ortshead. When will Renters Warehouse stop undercutting everybody else with these ridiculously cheap, flat rate management fees that aren’t sustainable long-term? 0:50:24.7 But I’m sure you don’t want to ask him that.

0:50:26.0 Kevin, let’s just take this question head on.

Renters Warehouse pioneered the flat fee model. There was a lot of friction about that. A lot of folks feeling like somehow this was like a sacred cow that was being violated going from a percentage to flat fee.

0:50:43.5 Give me the 411. Why did Renters Warehouse pioneer flat fee? And what’s your whole take on that? Because obviously it is a gripe for some people.

Kevin: 0:50:53.9 Yeah. Love the question actually. I think – look we did it because we came into this industry, we came into – to get into the property management space, we wanted to be different. Right?

And that’s how you stand out in a business. And I think that’s how you have successful sales and marketing campaigns. Is being different.

0:51:13.4 We wanted to simplify the world of property management for homeowners and investors that have single-family homes.

0:51:18.5 We said, “Instead of these complicated fee structures or this, that and the other, let’s make it easy. Let’s take a flat fee.”

On the leasing side we have a flat fee and it varies but it’s generally one month’s rent. Sometimes more for long-term leases.

0:51:30.7 And then we have a flat fee of $89-99 dollars a month for a property management. And it is less. But in certain cases our leasing commission’s more. And that monthly management fee might be less.

0:51:40.7 But if I really went through and benchmarked our fees, kind of our all-in fee structure across other property management companies, across all of our different markets, we’re generally somewhere in the middle. 0:51:52.8 We are absolutely not the cheapest.

In fact, I have the same question that this listener had for some of our competitors in some of our markets.

Like, “Holy cow, how are you going to sustain your super low $49 dollar a month flat fee?”

0:52:05.3 I don’t know the answer to that question.

0:52:09.5 And we’re also not the most expensive. 0:52:10.2 And so we spend a lot of time really actually looking at that, and we by no means want to be the cheapest in the market.

0:52:15.3 I think we kind of get a bad rap sometimes in the industry that we’re trying to really undercut people. We’re not.

0:52:21.6 We just wanted to have a basic fee structure that was simple to understand, simple to sell. 0:52:25.9 Things that are simple to sell and easy to understand are easy to buy. And it helps us obviously bring on clients and work that way.

0:52:33.1 And I think to the question of it being sustainable, I would argue that it’s not unsustainable, because I’ve been doing it for eleven years.

Jordan: 0:52:41.8 Touche. Fair enough. Alright.

0:52:45.4 Final question of the day is from Brandon Scolton. I’d be curious to know about their centralized model and how they divide work between the satellite office and the main office.

Has this proven to be efficient for them and does Renters Warehouse find that they can deliver similar service in different markets? Or is still pretty dependent on the quality of staff in each location?

Kevin: 0:53:06.4 That’s a great question. I think this is a work in progress. Right?

And we do – he’s right, we do have a centralized backend where we do a lot of centralized work for all of our markets.

0:53:17.9 And that was one of the goals three years ago when we embarked on building a bit of a corporate model.

0:53:22.1 Was to be able to, again, reach some of those efficiencies of scale and develop something unique and different in the space. 0:53:29.1 So we’ve done that.

But I think there was also lessons to be learned from early on when some of the early funds started to centralized.

0:53:37.2 Whether it was Invitation Homes, or American Homes for Rent, or you know, those guys. They were trying to do it centrally too. Right? Out of Atlanta, or Arizona. You know, in Phoenix or Dallas. Wherever they were.

0:53:49.5 And I think what – the cautionary tale I took from watching their expansion was that they didn’t have good transparency and really aligned interests with the local market.

0:54:03.5 Because they oftentimes just subbed everything out to subcontractors in the local markets.

Whether it was leasing – went to just traditional realtors. Inspections went to third-party inspection companies. They’d use realtors for other property management tasks or whatever it may be.

0:54:18.4 And there wasn’t a good alignment of interests, and I don’t think it worked well. And I think that’s why some people saw the centralized aspect of single-family property management not working.

0:54:28.3 So what we did when we embarked on the centralization effort was, “What matters to be local and what doesn’t matter?”

0:54:34.9 And so, you know, things – real estate is local at the end of the day. And so, at every market that Renters Warehouse is in, we have dedicated Renters Warehouse W2 employees on the ground doing work. Right?

0:54:48.2 So that was step number one. We do have local people, we’re at a local office. We have an office. We have folks that work exclusively for Renters Warehouse. Not only as a W2 employee, we also have exclusive 1099 leasing agents that work for us as well.

0:55:00.9 So everything is done under the Renters Warehouse umbrella with our employees and our independent contractors so we can direct how that happens.

0:55:08.9 As far as how we break up those tasks, it’s very much, you know – things that could get done from anywhere, like fielding a maintenance phone call from a tenant, understanding the problem and finding the appropriate vendor can be done from anywhere.

So we centralized a lot that back into our call center. 0:55:24.1 Collecting rent. If it’s phone calls, text messages, letters, etc., oftentimes that can get done from anywhere.

But once you need to go past that phone call in the rent collection, or the text message or the letter, go visit the home, we have somebody in the local market to go be able to do that.

0:55:38.2 So we really look at – look at it that way.

And the last piece of the question is how are we able to perform on a service level for our clients. And, you know, we think we’re still doing a good job of that. But it does require us having good people.

0:55:52.8 Regardless of whether you’re a centralized business, or a very localized business, this is still very human capital intensive business.

0:56:01.8 No matter what technology we roll out or what technology we employ, I think we’re never going to get around the fact that this is a human capital intensive business and that requires us having some of the best people we can find be a part of our team.

0:56:12.9 And that’s where we’re really starting to excel, is really understanding how we identify those people. Find people who enjoy this type of work, enjoy what they’re doing here every day. 0:56:22.8 And it always ends up coming down to, “We have to rely on our people to do a good job.”

Jordan: 0:56:29.8 Great way to wrap the interview, man. Love that. For those that want to hear more about the Renters Warehouse story.

Maybe they’re interested in checking out your book or potentially talking about joining the Renters Warehouse family, what’s the best way for them to get more information or get in touch?

Kevin: 0:56:43.0 Yeah great. RentersWarehouse.com is, of course, our website. It’s got all of our current markets there. We’re always hiring, we’re always recruiting, we’re always bringing on more people.

0:56:53.2 Always looking at doing acquisitions and growing our family. So RentersWarehouse.com. It’s great there.

You can find me on LinkedIn. Kevin Ortner.

And, of course, the book that we released that’s been a big hit for us is Rent Estate Revolution. You can find that on our website at RentEstateRevolution.com or, of course, Amazon.

And that’s – through those methods, you’re certainly going to find a way to get in touch with me.

Jordan: Alright. Love it. Hey Kevin, thanks again for coming on the show. Thanks for being candid, answering some hard questions. Really appreciate your time. Let’s stay in touch.

Kevin: Alright. Great. Thanks Jordan.