How to Host Investor Events That Draw Massive Crowds
Today, on The Profitable Property Management Podcast, we are talking to Rich Drake, CEO of the Houston franchise of Renters Warehouse. In the last four years, Rich and his team have built out the largest Renters Warehouse franchise in the nation, in terms of revenue, growth rate, and number of units.
In this interview, we talk about how they market and how they’ve been leveraging local networking events to help build a lead generating machine.
- (01:00) – Rich’s background and how he got started with Renters Warehouse.
- (01:50) – ‘Flipped’ his first house before flipping was even popular.
- (02:03) – Grew one of the biggest and now longest running HomeVestors in the nation.
- (02:22) – Started to scale the property management side of his business.
- (02:53) – Discovered Renters Warehouse.
- (04:10) – The differences Rich sees between HomeVestors and Renters Warehouse.
- (06:13) – Where Renters Warehouse is today.
- (06:27) – The numbers tell the story.
- (07:37) – Rich’s goals and ambitions in the Houston market.
- (10:39) – How Renter’s Warehouse differs from other property investors in the area.
- (12:17) – Renters Warehouse’s successful use of radio.
- (13:58) – Use of endorsements.
- (15:25) – The costs and numbers.
- (16:18) – Associated labour costs.
- (17:01) – Use of a call-centre to implement quick response times.
- (19:04) – Follow-ups.
- (22:21) – Quality control.
- (23:55) – Labour costs.
- (24:34) – Rich’s local event strategy.
- (24:55) – Partnership with Jet Lending.
- (26:48) – Featured content at the events.
- (27:29) – The nuts and bolts of hosting their live event.
- (27:29) – Frequency.
- (28:28) – Logistics.
- (30:29) – Nurturing relationships with clients.
- (33:15) – Marketing and promotion.
- (34:28) – Associated costs and vendor contributions.
- (36:47) – Renters Warehouse’s average customer details.
- (39:17) – Average properties per customer.
- (40:51) – How much is too much to pay for a new property management contract?
- (43:22) – What advice do you wish that somebody had given you on day one when you started this business?
- (45:41) – Who do you learn from?
- (48:41) – Are entrepreneurs born or bred?
Where to learn more:
If you want to learn more about Renters Warehouse you can reach out to them at 713 224 RENT. And if you want to contact Rich directly, or come to one of his events, you can do so at Rich@RenterWarehouse.com.
Jordan: Welcome closers to another episode to another profitable property management podcast, I am your host Jordan Muela, and this week we are talking to another smart property management entrepreneur, Rich Drake, CEO of the Houston franchise of Renters Warehouse.
In the last four years, Rich and his team have built out the largest franchise in the nation, in terms of revenue, growth rate, and number of units. Specifically being a Renters Warehouse franchise. In this interview today, we’re going to talk a little bit about how they market and specifically, how they’ve been leveraging local networking events to help grow the business. So, let’s dive in. Welcome to the show Rich.
Rich: Jordan, thanks for inviting me out. I was excited to be here. I’ve always been told I had a face for radio, so I think this is perfect for me.
Jordan: Well that makes two of us man, it’s a great fit. 0:01:00.8 So rich, give me some background here. I could ask you how you got started with the Renters Warehouse, but what I really want to know is how did you get started in business at all. I know that you have a background in the navy. 0:01:16.8 What kind of led you down the entrepreneurial path? Why was that a fit for you?
Rich: 0:01:20.9 So I got out of college – went to OCS and became a pilot for the navy for about six years. I was just about ready to get out, and my now current partner reached out to me to invest in a flip.
So that was kind of a flip this house thing about 20 years ago. There really wasn’t much of that going on. It wasn’t on TV yet, it wasn’t a business model that people understood. So I actually financed his first deal. 0:01:50.1 I got a percentage of the profit and I was highly impressed with that.
Got out of the navy, plans were to be an airline pilot, and they were laying off, so it was timing for me. 0:02:03.3 So I got into investing, and he and I grew one of the biggest, and now the longest running HomeVestors in the nation. 0:02:12.3 Closing in on 1600 deals, almost 20 years. And we’re in ’97, so it’s right at 20 years.
0:02:22.5 Several years ago, we decided to start scaling the property management side of our business. We owned, at one point, a few hundred rentals that we had acquired over the years, and we did it the absolute wrong way.
We buy, fix and sell, and the ones we couldn’t sell we kept for rentals. So we ended up with this big pile of sludge. I call it sludge. All the bad houses were in our rentals and we were doing a pretty good job of managing them ourselves, so we farmed it out to a property management company. They were worse than we were.
0:02:53.1 So, we brought it back in-house, refocused on doing it properly and building the process. And we were doing pretty well. Then ran into Renters Warehouse. I was at a networking event, saw it in a magazine. They’d run an ad in a personal real estate investor magazine. Reached out to them, was very impressed with their – how they operate, and scale.
You know, growing up in the 80s, I wasn’t a computer wiz so to speak, so I was unfamiliar with sales funnels and CRM softwares and things like that, and they really have jumpstarted us on the route to – spend money on 0:03:37.7 [Inaudible] housing, do things unique and do to get people in the door and how to take them down the road to become a customer, versus not. Versus not. 0:03:49.6 Versus meet them one time, forget about them.
Well, a follow up is important. How to drip somebody and all these different things. Really impressed with Renters Warehouse in that respect and the way they operated their business and the scale that they had built. So that’s what took us to them and where we are today.
Jordan: 0:04:10.0 So you were already sold into the idea of working with a franchise, getting a value add from the organization, etc. So you had some comfortability going from HomeVestors into Renters Warehouse, organizationally for your franchise, how long did it take you to ramp your Renters Warehouse property. management business as opposed to the ramp time on the HomeVestors side of things.
Rich: 0:04:39.0 So the HomeVestors is a completely different model. And don’t get me wrong, you can scale a flip business. We have not scaled it. So ours, although we’ve done a lot of deals over the years, we’re still doing the same amount in these years, sometimes less than we’ve done in the past, per year.
When you think about the type of business a property management is, it’s kind of like an insurance company. Add a customer, add a customer, add a customer. You build up a cashflow over time. 0:05:10.9 With flipping houses, you’re buy, fix, sell. Buy, fix, sell. Buy wholesale. Whatever. But if you stop doing that, you’re not going to grow.
So, the only way to grow that, is to get more acquisitions people and start advertising. Ramping your advertising. And for the most part, that’s not done in that industry very well, or very often. 0:05:31.0
It’s a big ask for a business owner to let go of that purchase process and to start trusting other people to do this, whereas property management is much easier to scale, because you’re having employees to do a reasonably repetitive task. Renewals, rent collection, accounting.
So, it’s not necessarily letting go of somebody to say, “Hey go offer $200,000 on that of my money on some house down the road based on your analysis.” So, property management is much easier to scale on something like flipping houses.
Jordan: 0:06:13.9 That totally makes sense. Let’s talk about how it has scaled. Let’s fast forward to today. Where is your Renters Warehouse business at today? Just walk me through some numbers.
Rich: 0:06:27.4 So, when we started, we were somewhat small. We dumped our houses into the system, and we had less than 100 rentals at the time. 70 or 80, or something like that. So, it takes time.
Obviously, with a brand new company, to get a foot hold in the city, that’s why RentersWarehoue has kind of changed their focus where they’re buying someone in a city instead of opening from scratch. Because you have some revenue to start with.
0:06:55.0 So we – it took awhile. We started in, let’s see – it was December of ’13 was the first time we advertised. And since then, we’ve doubled every year in units, and more than doubled in revenue. We’ve become a little more efficient with different types of fees and things, so our revenue has grown a little faster than our size.
We’re now 1160, close to 1200. If you looked at our number today, we’re probably in the neighbourhood of 1160, 1170. With 90% of those are single family houses.
Jordan: 0:07:37.5 So talk to me about that in the context of your local market. What kind of market penetration do you think is achievable? How many management companies can Houston support? Obviously, it’s a huge metro.
I interviewed Noel the other day and we were talking about the penetration that the original Renters Warehouse franchise founded by Brenton Hayden had achieved in the Minneapolis, St. Paul market. A crazy level of penetration. What are the goals or ambitions that you have in the Houston market?
Rich: 0:08:09.1 Well, I think what Brenton did, was really smart. He went after the unintentional landlord. The one-off guy that no one is really paying attention to. There’s numbers that float around in our space of 80-85% of properties are sub-managed by the landlord. Which, if you look at Australia, which is a much more mature market for property management, it’s like 90% professional management.
Jordan: 0:08:35.8 Yeah, that’s flipped. Although that’s driven by regulation.
Rich: 0:08:37.8 There’s almost a million rental properties in Houston, so if we had 10,000 under management, we’d be at 1%. So, it’s just an insane amount of rental property available out there. We get along really well with a lot of the other management companies.
0:08:56.6 And we share ideas. It’s kind of a rising tide lifts all ships mentality. We don’t consider each other competition so much. We’re competing to try to explain to the guy out there, “Hey you shouldn’t be doing this yourself. Go do what you do, go buy more properties, don’t sit there and try to do the flip business. Leave those low-value houses to somebody that does them every day and go spend time with your family, or go buy more houses, or go to your 0:09:29.5 [Inaudible].
Jordan: 0:09:34.4 Sure, of course, you jointly, with other companies, want to educate the consumer, create that progressive vision for the utility of the property management function, etc. But in fairness, Drake, in fairness, the counter of – Rich – the counter balance to that is that Renters Warehouse has had an impact on the market.
The way that Renters Warehouse is operating is different than your typical property management company, and some local property managers have felt a little bit of pressure by having a Renters Warehouse presence in their market.
Both in terms of the footprint that Renters Warehouse has in terms of advertising, but also price, introducing the ubiquity of the flat-fee pricing model, etc. So, let’s get into brass tacks about how Renters Warehouse is different. A lot of times when I ask people that question, people say, “We’re number one. Service. We care about our customers, etc.” What are, in your view, the most meaningful points of differentiation about Renters Warehouse versus every other company in the market.
Rich: 0:10:39.4 Yeah so, if you’re talking about service and differentiators and tenant warranty, rent feeder, which is our syndication tool to the listeners. We can talk for 45 minutes about differentiators, but the real thing is, the guy that’s been the Joe Blow property management company has never really been happy.
Didn’t really realize that there’s other companies out there until they turn on Sports Talk and they hear 0:11:03.3 [Inaudible] say every single day, and they figure out, “I had an option”. And you’re absolutely right, we take properties from other management companies every single day. We call them management takeovers, where they’re managed by someone else and then, heck, we know the person – the people at those companies, and our people just call the person they know and say, “Hey, I got another one.”
And there’s occasion where we had a customer that doesn’t like the way we do business and they want to go to them, and we call them and say, “Here’s the stuff you need.” But for the most part, you’re right, we do impact those other companies quite a bit, because our presence in 0:11:44.5 radios mostly, that the way we handle our SEO, we’re always page one, we’re always at the top of the map on Google.
And then, of course, our networking events which you alluded to earlier. We’re putting six or seven hundred people in the room every month to talk about real estate, and when it’s time for that wholesaler, or that flipper to take the next step into being a landlord and being a professional investor and start building wealth, they’re going to call us first.
Jordan: 0:12:17.2 Love it. Makes sense, and I want to get into the events thing more, before we do that though, radio. That’s the flash piece. It’s the sizzle. It’s the thing that is noticeable, but also disorienting and confusing. Like, how are these Renters Warehouse guys making this work? Nobody else is doing radio out scale.
On occasion I’ll have people say, “Yeah, I’ve done radio” and they’ve done something nominal, but not at scale. What was your relationship or your orientation with radio prior to working with Renters Warehouse? Had you ever – run any radio ads and how did – what was it like for you to work through working with radio as an advertising medium early on?
Rich: 0:12:55.9 Well, in the HomeVestors side, they tried radio in the past and failed pretty miserably. They do pretty well on print, as far as 0:13:03.7 [Inaudible]. They do well on TV, but they’ve never had real success on radio. And I think there’s a couple reasons.
One is, and I hate to be an advertiser for Tracy, but Media Bridge Advertisers, they’ve partnered with Renters Warehouse. 0:13:20.5 [Inaudible] a friend, he’s a business coach, he’s done his first radio run, he spent $3500 his first month, he had 900 shares, 900 impressions.
I said, “You should’ve called Tracy over at Media Bridge. She got 1.2 million for the same money. And so, we’re getting more for our money than most advertisers can. The second part of that is, we always use endorsers.
You can’t just run a pre-recorded spot that says, “Oh, Renters Warehouse will redeem 0:13:58.4 [Inaudible] … nobody really – 0:14:01.6 [Inaudible] affects every ad. But when the local DJ that you’ve been listening to for 20 years says, “Call my buddies over at Renters Warehouse, we were playing golf the other day, and I know they do a great job because they sure as hell aren’t playing golf.”
You know, they identify with that. People will deal with you because – they’ll say, “Hey my friend Lance said to give you a call.” “Oh you’re friends with Lance?” “Well, I’ve been listening to him on the radio.”
0:14:25.2 So, that endorsement is a key part of 0:14:27.6 [Inaudible]
Jordan: 0:14:30.0 And what about reach? What is your current service area, and how targeted or broad are the different types of radio advertising that you do.
Rich: 0:14:38.7 Yeah, so radio is scattershot. You can’t tell it not to go all over town. You really have – we didn’t do a lot of radio when we were small. We wanted to be big enough to handle. And for people that know Houston, we’re from Conroe to Galveston to Katy to Baytown.
And we take an entire market. We have 16 leasing agents that cover certain areas. 0:15:04.5 So we can cover any area as far as – in today’s day and age we all know that with the cloud and everything is web based, it’s irrelevant where you’re located and where you can handle business. As long as you have 0:15:17.5 [Inaudible] ground, for the leasing and for the maintenance, they can get there in a reasonable amount of time. So, we can handle the entire [Inaudible].
Jordan: 0:15:25.6 Awesome. So it is a broad, mass market tool. You guys have made it work, I think that’s really interesting. Big distinctive about what you guys have done. But from a cost perspective – I think you mentioned your coach put down $3500 – the spend is significant to keep up with it, was it the sort of thing where you were able to see an easy profitable arbitrage up front? Or was it something where you had to invest one, two, three months in before you actually saw the kind of return that you were hoping for?
Rich: 0:15:58.8 Sure. So, hosting we started out small. Somewhere around that $3000 range. And then what we do, as revenue went up, we raised the advertising. I don’t know how much you want to get into numbers, what we’re doing is significantly larger amount than $3500 now.
0:16:18.8 They’re generating a whole bunch of leads, and we had a team that takes the lead calls and assigns them to agents. And so, not only do you have to account for the cost of the advertising, but you have to account for the team that is taking those calls and processing those calls. I took the calls at the beginning. 0:16:37.7 That was my part of my duties when we were small. You’re a business owner, you do what you got to do right? Now we have people that handle that.
Jordan: 0:16:46.4 So the labour costs. Those folks that are handling it, are you doing a traditional ISA model of a couple of guys that are doing nothing but phone and emails and then delegating out to leasing agents to do the onsite?
Rich: 0:17:01.3 We actually have a call centre that takes our lead calls. It’s an outsource deal now for us. It’s pretty recent, but what we’ve found is, you know, the guy that calls on Saturday at 4:00 in the afternoon, if you caught him at 4:02 on a Saturday, that lead almost always closes, because he’s shocked that you called him back on a Saturday or Sunday.
Jordan: 0:17:23.4 Response time.
Rich: 0:17:26.2 So when someone calls at 10:00 at night normally, most property managers would call him first thing in the morning, or not at all. You know, we deal with that too. But we’re – they have certain hours, between 9:00am and 8:00pm on a Saturday, they call them back.
If it’s between 9:00 and 5:00 on Sunday, they call him back. If it’s 9:00 to 9:00 on a weekday, or something like that, I can’t remember the actual hours, but we call people back after hours and before hours. A lot of the morning drive stuff too.
On the radio, we’ll get a call at 6:30 in the morning. We answer the phone. And most people are going to get voicemail and hear back, maybe the same day, the closing ratio jumps up significantly because we have a third-party that they’re manned 24/7. So we’re getting response times way down for our customers.
Jordan: 0:18:21.3 Now are you – is this a corporate asset that you’re working with, or did you source this on your own?
Rich: 0:18:25.4 It’s a third-party. It was important to me that they were US based. They’re actually based in Houston. And these are the folks that are handling higher level customer service for the Verizons of the world and the people like that who are handling complex problems.
You escalate a problem with one of your – you know, your electricity company, or your phone company, or whoever, you’re not calling that company, you’re calling a call centre. And these folks are the ones that are, I guess, the cream of the crop. So they’re able to – they operate our CRM. They do outbound calls, so they do our follow-up calls every day.
Jordan: 0:19:02.9 Oh wow! Wow!
Rich: 0:19:04.5 The neat part of the follow-ups is we’re able to vary the times that they call out. So, based on the day of the week, they do calls in the morning on certain days of the week, they do calls in the afternoon certain days, and they do after 5:30 certain days.
So, we catch more people on those follow-ups, because we’re not calling them every morning like we used to. 0:19:24.5 Because we had an employee from 8:30 to 5:30 handling it. Now, we’ve expanded our hours. And it’s been a pretty nice bump.
Jordan: 0:19:33.4 Wow. So this is really worth dissecting here guys, because the segmentation that Rick is talking about. First off, when you call Verizon, you’re talking to the lowest tier CSR until you say something like, “I want to cancel my account.”
Then you’re getting transferred over to a higher-skill individual that’s going to work you over and do everything that they can to prevent you from cancelling for revenue retention purposes. So, within a third-party call centre, there’s a segmentation of skill.
But additionally, what you’re talking about is the segmentation of the function. Because most of the outsourcing that I have seen thus far with our clients is outsourcing jus that first touch right? That body that’s going to pick up the phone and say, “Hey, this is so and so with Renters Warehouse, would you like to leave a voicemail, etc.”
But you’re saying, this person – basically, when does the handoff happen? At what point would this third-party call centre be handing off the call to somebody else?
Rich: 0:20:35.5 So they never hand a call off to us, they hand the lead directly to an agent, once the lead says, “I’m ready to meet with an agent, get an analysis of my property, and I’m ready to rent the house.”
If they say, “My house is already occupied, and I’m ready for you guys to take over,” then they change the status in the CRM and then our in-house folks just search that status daily, and they see that and they take it away from there. And if it’s a multiple property owner, someone that owns 20 or 30 houses, they change a status that we see where we get somebody on the phone that can talk shop. Because they may want to talk for – or come into the office and interview us and things like that. So, we don’t want to lose that – everything over five units, they take their hands off, because they know we need a higher level discussion with that investor versus homeowner.
Jordan: 0:21:30.5 What’s so interesting, is that, Rich, I know you are a discriminating consumer in this regard. Meaning that a lot of the folks that we see have interest in BDMs orientate around this being an – around sales being an unpleasant task or function that they’re wanting to make go away.
For some folks, that’s not the case. They really take it seriously, they’re a pro at it themselves, and now they want to take it to the next level through scale. You would fall into the latter category. You care very much about this process, you’re not just trying to make it go away, and in light of that additional scrutiny, you’re saying this actually works better.
So the question I have for you Rich is, how do you know that these folks are doing their job? How can you – this is the obvious objection that will come up. How can you trust these folks to be representing your brand? How do you audit the quality of the work, etc?
Rich: 0:22:21.9 Yes. So we have a process for that as well. They record every call, so we listen in on calls weekly. We actually send somebody, I usually send my Chief of Operations to their office, and he’ll stand behind them when they do their follow-ups for a few hours. Just to hear them.
0:22:41.2 But what we do, is we can analyze. We’ve got X amount of leads, and normally we assign X percentage, and now we’ve gotten Y amount of leads and we’ve assigned X + X percentage. So, we’re assigning more leads as our percentage of the number of leads coming in, and the agents aren’t saying that these are bad leads.
You know, we have some wrinkles. “Hey this is not my area,” or “Hey this lead, they’re management takeover, this should have went to the office.” Those things are happening much more often than they do know, but they still – they are going to make mistakes. They are not able to answer to the depth of what a licensed could answer, or myself or Mark could answer. They just can’t. But they understand how to direct the conversation to, “Hey the expert is your agent, that’s who you need to talk to, let me get you to your agent.”
0:23:40.7 And so that’s been their job their whole lives, so they’re very good at getting someone to agree to meet with our agents. And our closing ratio is still up, they’re not decreasing, so the agents are still closing the deals, they’re still more deals.
Jordan: 0:23:55.6 So, what about labour cost? How is that different now that…
Rich: 0:23:58.2 We pay per minute of call. So, it’s probably slightly cheaper than having an employee, because with an employee, we need to have an office, a computer, paid vacation, holiday, sick time, work man’s comp, you name it. We just pay a flat fee per minute, and they track it by the second and it’s actually less than having one employee. So, it’s not an additional cost for us.
Jordan: 0:24:29.9 How many leasing agents do you guys have?
Rich: 0:24:31.7 16.
Jordan: 0:24:34.3 16 leasing agents. Got it. Ok, so transitioning over to events, this is one of the things that I found most interesting when we initially spoke at last year’s PM Grow Summit. Talking about the local event strategy that you have been utilizing. What is it, what kind of results has it driven for you and how has that program changed over time?
Rich: 0:24:55.8 Yeah so, we partnered with a company called Jet Lending. They were having a small event, we were having a small event. I say small, you know 2-300. Smaller. Those are pretty big events. What we were able to do is, you know, we’ve known each other for almost 20 years, so a hard money lender is a perfect person for a property manager to partner with.
There’s no chance of competition and it’s a perfect fit because they’re dealing with investors every day, we’re dealing with the same clientele. So, our goal there was two-fold. 0:25:29.6 One was to have a continued relationship with our current owners and get them to understand that, “Hey you need more property. You don’t need to own one, you need to own 100.” The cheapest way you can add units to your portfolio is to get one of your owners to add another property.
Jordan: 0:25:48.2 Absolutely.
Rich: 0:25:48.7 You probably get a commission from it, helping him buy it, and there’s another property, not another owner. Much easier. And the second part is just new business as well. So, when we – every month, we off-load our entire new customer list into our email list. Any lead that we get goes into our email list, so when we email out for the new event, there added to the list.
Same thing with Jet Lending. Their people are added to the list. And we have about 25, 26 vendors and they cover almost all the costs of the event. So they’re paying to be vendors at our event because it’s the biggest one in town. We’re lucky in Houston. 0:26:32.7 You can eat free every night in Houston with a networking event. Real Estate related networking event. We have great presence of events, good content, and that’s something we try to do, is continually provide good technical data.
0:26:48.4 We’ll usually talk about something about building wealth in real estate, something about how to screen tenants. Things like that are going to get people in the mindset of property management. And then Jet, a lot of times they’ll do, “How to make an offer on buying a house.” You know, things like that.
So, we always provide good technical content. Free food, free beer, and a live band at the end of the night. 0:27:12.0 So, it’s a pretty fun event anyway. And we’ve almost hit 1000. Our record is in the mid-900s attending, so that’s pretty neat.
Jordan: 0:27:23.8 Attending one event. The mid-900 people attending one event of yours.
Rich: 0:27:29.6 Yes sir.
Jordan: 0:27:29.6 How often are you doing these.
Rich: 0:27:32.7 We do them every month, with the exception of December. We go dark in December, kind of like Vegas, right? So, we do a third Wednesday of every night at the place called The Redneck Country Club. We’re actually going to be there tonight.
My 50th birthday party at The Redneck Country Club. We sponsored The Bellamy Brothers tonight, so RentersWarehouse is the sponsor, and we’ll be in the VIP, they call it the VIR. Very Important Rednecks. 0:27:58.1 It’s a great place. They’ve got a nice schtick. They cater to the upper end of rednecks right. It’s a neat venue, they have a great sound system.
0:28:09.0 That was the biggest problem with out previous venue, was sound. So, we can get our message out. It’s a neat place to be, it’s a novel place for people to go. They have great food, and they have a good selection of nice whiskeys, and cigars if you want. So, it’s a good place.
Jordan: 0:28:28.7 I can only imagine you have logistical problems. Rich, I run events. 1000 people at a monthly event for a local company like this – I guess the question I’m wondering is, are you ever having 1000 people that are supposed to be an audience type format? What kind of a restaurant is going to have room for that many people?
Rich: 0:28:50.1 It’s more like a bar. They had a restaurant, but inside will probably hold 7 or 800 or maybe 1000 and then there’s an outside area that’s expansive. They’ve had Willy Nelson there. The place can hold a couple thousand.
What ends up happening is, there’s 2 or 300 people actually listening and then in the restaurant networking. And we’re fine with that. I don’t need you to listen to me tell you how to buy a house if you already know how to buy a house, or you’ve been investing for ten years, you’re my customer, you’ve been to our event ten times, 11 times. Let them be out there with the vendors, getting some value from those vendors and signing up with a new – finding them a new roofer or a new plumber or self-directed ROA vendor.
Those kind of things are great value to our customers and Jet’s customers, and I don’t care how many of them are inside or outside. 0:29:54.3 Makes you feel cool if they all want to hear you talk, but not everybody cares about the technical knowledge, they’re there to network and meet other investors.
Jordan: 0:30:01.9 Absolutely. I couldn’t agree more. Brand bias, brand affinity, etc. But what’s interesting, is that you’re not thinking of a cost centre. I could think about talking about this with other clients and they’re thinking, “Ok, hey these people are already clients, why am I going to feed them chicken wings and free beer?” Let’s go down to brass tacks, break this down from top to bottom. First off, how are you driving that many people? 0:30:26.7 Actually, let’s go a step before that.
Rich: 0:30:29.2 Let’s go back to your comment real quick before we do that. Why do you want to buy a beer for your customer. Now I’ll tell you why. I had a customer named John. He’s got four or five houses. And we completely dropped the ball. A tenant moved out of the house, and we didn’t do the move out and his house was vacant for a couple of months.
0:30:53.0 It happens right? You’re going to fail your customers occasionally, you’re going to make a mistake. We have – it’s funny, my CO said yesterday, “We have 32 people working for us, if everyone makes one mistake a week, I’m sorry, one mistake per month, we have a big pile of complaints.” We have to understand that.
People are human, they’re going to mess up. It just got put in the wrong column on a spreadsheet, or whatever happened, and that house is vacant for a couple of months. 0:31:20.6 I sat down with him, we talked, we made it right, we fixed his problem, and he’s not going anywhere, because he is a brand ambassador because he comes every month for that event, and enjoys it and we sit and lean up against the bar and have a beer together.
And he’s referring people to us after we dropped the ball on his house. This kind of stuff is for the – we call it the loyalty ladder for a customer. We put another rung on the loyalty ladder when you do things for them.
Jordan: 0:31:52.6 Absolutely. Totally makes sense. Lifetime value. If you understand lifetime value, if you believe in it, you make bets on it. That was the number one thing that distinguished Brenton Hayden early on when I first met him. He knew what the number was, then he actually believed in it, he was willing to make the investments.
0:32:09.1 Rich what were you modelling? Do you know of anybody else that does local events like this at scale? What were you modelling when you did this?
Rich: 0:32:17.7 Not really. When we first started doing the events, Jet Lending had been doing their events. So I guess a little bit was Jet. They were doing a monthly event, so we partnered with another hard money lending company, and we ended up taking the two big dogs on the block and kind of going together.
0:32:37.6 We kind of just discontinued that because we knew that we were at our limit on size. We wanted to see if we could scale it even more. But not really to model after. 0:32:52.5 Houston is really unique because there is just so much networking going on.
Other cities don’t have this advantage and I think nationwide there is a big opportunity if you’re the first one in the market to do this. I’m telling you. These vendors, they’re getting business out of this deal. They wouldn’t be here for two and three years doing this deal and they’re paying the bill. 0:33:14.7 And they’re happy to do it.
Jordan: 0:33:15.5 So how’s driving the butts in seats? How are you getting 1000 people there? Is it just you guys doing the put…?
Rich: 0:33:22.4 Email lists. Email lists, that’s it. Facebook and email blasts. We don’t boost our posts in Facebook, we just post in Facebook. We post in a couple other different, whatever those Instagrams and Twitters and Tweets and twits, whatever you want to call them. But we just use – we’ve got MailChimp and we send out our blast. We do a Wednesday event. We email Friday, Monday, Tuesday, Wednesday. And we show up.
Jordan: 0:33:49.7 And our you emailing customers? People that just signed up for that list?
Rich: 0:33:53.8 Everybody that’s ever been on our list that hadn’t told us to take them off gets an email. We send out about 7 or 8 thousand on our list. And then Jet’s probably got another 7 to 10 thousand on their list. A lot of the folks are the same people.
But every month, the first thing we say is, “How many people are here for their first time?” And they’ll have a little orange dot on their name tag. We put a little sticker on their name tag if they’re a first timer so we can identify them walking up to talk to them. 0:34:21.8 So our staff will know that they’re new. And in the room, it’ll be 30% or more will raise their hand.
Jordan: 0:34:28.6 So no paid advertising. You’re doing a – you have one other vendor that’s helping you push it. What – talk to me about revenue streams. How can you afford this? Yes, you are making a financial investment, but you’re smart because you’re subsidizing it. How are these other – how does the – what’s the cost associated with the venue, the bar, and do these other vendors there also chip in? How do all the finances work?
Rich: 0:34:55.4 Yeah so, the vendors pay a flat fee per month to be a vendor. And that probably covers between 80-90% of the cost. So we’re spending less than a couple thousand dollars a month to have the event and buy beer and food for everybody.
0:35:14.0 Some months, we don’t pay anything. You know, what the tab looks like. So, it’s a great event for us, and over time we’ve learned that if we just focus a little bit on getting a couple good new vendors, we can cover almost all of it.
At times, we were writing a pretty big cheque, but we realized that if we really focus on the vendors, we bring more value to our customer at the same time and it just covers the thing. 0:35:43.4 You know, we don’t get a whole lot of direct business from it. We haven’t quantified a lot. But once one or two here and there will bring 20 units. 15 units. And then we do get them.
But you’ve got to remember, the person that’s at the event, that called off the radio and he pulls the trigger because of the event, that goes towards radio, because the source in our system is already radio right? 0:36:08.4 So, it’s really hard to quantify exactly.
Just like Google. When we look at the source of Google. We’re training our call centre to say, “Oh, how did you get to Google?” Because a lot of the self-sourced Google is really radio. We want to really drill down to where did they – where did this lead come from? And the hardest one to quantify is the event, because usually they got to the event because they were in somebody’s database already from some other source, but they may have pulled the trigger or increased the number of units they have, because of the event.
Jordan: 0:36:47.6 Alright. Let’s go a level up and talk about some of the unit economic issues. What does your assumption that you make for how long a customer will stick around for? Your average customer.
Rich: 0:37:00.1 You know, Renters Warehouse says an average customer is nine years. We’re not nine years old so I couldn’t tell you. But we assume it’s $12-14,000 value. And I know there’s numbers all over the board.
One of the things we talk about churn – churn rates in a property management. We all deal with that. And we have a goal of getting our churn below a certain percentage. And it’s – churn is inevitable. You’re going to have people leave you because they’re moving back into the house, they’re mother died and they need money, so they’re selling the house.
37:00 You know, so there’s some percentage you just can’t stop. You have to stop the bleeding from — if you’re not performing and they’re leaving, you want to stop that, but you know, the last time that I had a customer – most people when they throw out a number, they don’t really know, they’re making it up. I kind of made that number up too. Until you’re around for 30 or 40 years, how do you know that nine is average.
Jordan: 0:38:04.8 But the point is that there’s an assumption that you make and if you actually believe the assumption, it influences your behaviour. That’s why historically, RentersWarehouse has been willing to pay more to acquire customers. Willing to go upmarket, consider radio, etc.
One of the places I was going with this, is you just brought up churn. Well, there’s two types of churn. There’s customer churn and there’s revenue churn. But with the latter, that can actually be influenced by expanding wallet share over time.
So you’re hosting these big events, you’re reinvesting in the relationships, you’re hedging traditional churn. Why? Because most people leave out of apathy. It’s not that I was offended, I just stopped feeling anything about our relationship and therefore, I went with the next vendor that made me feel something.
0:38:49.1 But, by focusing on getting your existing customers to buy more properties, that’s the opportunity for negative revenue churn, which basically means the number – instead of having a churn rate of 2% per month, it’s actually a negative number because your existing customers are spending more money.
What was your original, if you know off hand, early on, what was your original average number of properties per customer? Where are you trying to get that number to?
Rich: 0:39:17.3 Yeah so, our average is about 1.6. We honestly would like to have 5. I don’t see us every getting there, so I guess it’s silly to have a goal that you don’t anticipate hitting, just because we constantly had that one property owner.
So it’s gonna keep pushing the number down. 0:39:40.5 Our goal for the end of this year is 1.75. So we’ll see how that works. But we notice – with 1200 units or so, one big customer coming in, or one big customer leaving – I mean, we lost a guy with 50 plus units because he’s vertically integrating his business and he wanted to do it himself. He said, “Please keep the door open. If I fail at this I’ll be back.”
But you know, that skewed our number a lot. One guy with 50 units leaves, that changes everything. So 1.75 is the goal for this year. Long term, I would hope we could do up to 5. 0:40:20.8 And there’s a lot of risk in those bigger owners too. When they do leave, that’s a big hit to your bottom line.
Jordan: 0:40:25.8 Absolutely. Talked to Steve Shultz the other day, President of NNARPM and he was saying he really likes to have that 1:1 ratio, and so you’re less vulnerable when people leave. I love that you have a goal with that ratio.
The reality is that is a gigantic lever in your business if you can actually move that number up. Rich, I want to transition now to some rapid fire questions that we do at the end of every show.
0:40:51.8 The first of these is, how much is too much to pay for a new property management contract? Average customer profile. Average customer profile, ballpark with me, how much is too much? Where do you tap out Rich?
Rich: 0:41:05.7 You know, it’s interesting, because Renters Warehouse corporate is acquiring so many units and they don’t publish what they pay for the units. I say a couple three thousand dollars is not out of the question anymore.
Because I see this industry going to a less fragmented, more institutional model and with economies of scale and the guys that are coming in the market, you know, Warren Buffet may be buying everyone out one day. 0:41:39.3 So, I think that the multiples will be pretty nice for us, because it’s just an annuity. You know, you’ve got this money coming in and you do, you know, two and a half, three and a half 0:41:49.0 [Inaudible] is a pretty nice number. It’s a pretty big number.
Jordan: 0:41:53.4 Now when you say that, are you talking about in the context of buying a contrast through acquisitions, or customer acquisition cost for, let’s say paid advertising?
Rich: 0:42:03.5 You know, how much to pay through paid advertising. I’m talking about to just write a cheque to buy units and turn a switch.
Jordan: 0:42:13.5 I’m talking paid advertising. Where would you tap out for…?
Rich: 0:42:16.8 We’re $840 is our cost. If I was over $1000, I’d be worried, and I would consider us failing at our sales funnel. I’m not real – because if you look at, again, we’re back at that discussion of overhead, when you pay $840 for a new unit, you’re really paying more for that, because you have staff that’s having to do that.
Jordan: Of course, yeah.
Rich: 0:42:43.9 So, my number’s $1000, so as long as we’re below $1000 I’m comfortable, but I’m absolutely not happy, because every penny counts on acquisitions in efficiency. If our closing ratios are faltering or our cost per lead is going up, or our cost per acquisition is going up, we’ve got to look at why and maybe we need to 0:43:07.0 [Inaudible] radio stations a little bit and switch to a different – maybe our message is off a little. So, we constantly look at lowering that. In my mind, $1000 is what we look at right.
Jordan: 0:43:22.1 Love it. I love that have a specific number there. Question #2, what advice do you wish that somebody had given you on day one when you started this business?
Rich: 0:43:29.6 That’s easy. So, I would have taken another several hundred thousand dollars, I would have put it in an operating account and ramped up advertising much faster.
Jordan: 0:43:41.1 From day one.
Rich: 0:43:42.4 Sure. Just dig a hole. The revenue will come as long as you have the procedures in place to handle the volume, and the personnel in place to handle the volume, there’s no reason to start advertising with 2 or 3 thousand and end up at 30, 40, or 50 thousand. Start at 20 thousand a month and just trust that you can do it. Have confidence that you can do it, and just do it. Because all it did was prolong the amount of time it took to get to a nice revenue number.
Jordan: 0:44:13.8 So how much infrastructure needed to sit behind that advertising? If you’re starting off doing 20K a month, does that mean that you’re also starting off to committing to have at lease one dedicated BDM in place?
Rich: 0:44:25.7 You probably need one for sure. We call it an inside sales. BDM type of person. We – you also have property management people and maintenance people, and accounting people ready to go. So you have to hire a little bit ahead if you’re growing that fast. Now think about it, if you’re at 1200 units and you had 300 units, you could absorb that and go, “Well, I’d better go hire another person, we’re starting to overwhelm everyone” right?
If you’re at 100 and you add 300 units, you’ve got a problem unless you have the people ready to go. So they need to be hired and trained where they’re almost bored around the office, because when you add 300 to a – when you double the size of a company, you’re going to have customer service issues is you’re not hiring ahead.
Jordan: 0:45:14.7 Yup, that totally makes…
Rich: 0:45:15.5 You can’t plan on making a big profit if you want to grow faster.
Jordan: 0:45:22.2 I think folks think of it as like a chicken or the egg type problem. What you’re saying is, for your specific ambitions and goals, you’d rather make an assumption of growth, commit to figuring out and plan to hire accordingly.
Rich: 0:45:38.8 Know you can do it, and do it.
Jordan: 0:45:41.8 Who do you learn from Rich?
Rich: 0:45:42.7 I use a business coach, and I learn a lot from him. I’ve turned off the radio in the car, and I turn on Audible. I read about two books a week on Audible and I’m probably on about 1.5 to 2x speed, because I’m ADD and I can’t wait for him to say the next sentence, I need to speed it up a little for me.
Depending on the author, they don’t sound too good at 2x speed, but you know, you have to continue to evolve. You have to continue to adapt. I talk about that in the HomeVestors model as well. There’s a lot of real estate investors who are not real estate investors anymore, because 2008 happened. The model changes.
You have to be able to adapt to change in the market. You have to be able to say, “Hey now it’s time to buy when everyone else is selling. Now it’s time to rent.” Like today in Houston, the higher end stuff is suffering. It’s time to possibly buy that stuff and watch it appreciate when a 0:46:45.2 [Inaudible] comes back. Because it’s going to.
So, you have to adapt and there’s a lot of smart guys. I like Simon Cynic. Let’s start with why people do business with you because of why you do it, not because you’ve got a better mousetrap. So,
0:47:04.2 You know, and heck, I learn from you. You know, I’ll tell a story about you if you don’t mind. I met you at a Renters Warehouse convention, and you spoke about time to call back the lead. And you taught me a lot about how important it was that one minute versus four minute call back.
So since then, I have completely hammered my staff. Everything gets dropped when there’s a lead call. Everything. And what I noticed about you is, you spoke for about an hour and never said ‘uh’ or ‘umm’ one time. And I just – it stuck in my mind that it’s so important when you’re in front of a group to be knowledgeable and to be a little – you weren’t like this professional seminar guy, you were just a guy.
0:48:01.4 You came across as so professional because you didn’t stammer, stutter, and it really came across as more – it carried a lot more weight from somebody who spoke the way you did. I was pretty impressed.
Jordan: 0:48:18.5 I appreciate that. That was one of my early speaking gigs. Yeah, I spent a lot of time on that. And I deeply, deeply enjoyed speaking to that group, because I knew that I was on the same wavelength and being taken seriously. And it’s awesome to hear that from you, because I feel like speed to call is kind of like this pet issue of mine, but it’s nice to hear that some people take it seriously as I do.
0:48:41.4 Last question for you Rich. Are entrepreneurs born or bred?
Rich: 0:48:47.9 They’re born. We use 0:48:50.3 [Inaudible] on our business and you can’t tell somebody that is a C that all they care about is books and numbers and having everything a certain way. You can’t teach them to be a risk taker and be a visionary. You can’t do it. You’re either a visionary or you’re not.
And we subscribe to the Gino Wickman of EOS systems. That type of person – I have 20 new ideas a day, and I put them on a little – I got a little memo pad on my phone for those ideas. 19 of them are horrible ideas right. But I think they’re great every time I think of it.
0:49:27.9 My wife is an accountant. She is not ever going to take a risk, she’s not ever going to start a company, but when I start a new company, she goes, “I trust you. You always figure it out.”
When we don’t have money to pay our bills at home, she goes, “I know it’ll be fine.”
I go, “Honey I’ll take care of it, I know we need money.”
So, you know, you have to have that mentality. 0:49:50.0 And to be honest, most people consider being an entrepreneur a big risk. I really see the opposite. We own Renters Warehouse and we have 700 customers, and if a customer leaves me, the world doesn’t end.
If the market doesn’t do so great, and we don’t rent houses as fast as we need to, the world doesn’t end. If I’m working for GE Oil and Gas and they decide to merge with – oh who did they just merge with, I can’t even think of it. They just merged with somebody, and now there’s two of me and I get laid off because the other guy’s been there longer. I got a problem.
So, banks look at as an entrepreneur is more risk, the world thinks of it as more risk, but I think it’s less. 0:50:32.1 Because you don’t have somebody standing over you with the power to just end your career in one second.
Jordan: 0:50:38.4 Spoken like a true entrepreneur. It’s riskier to ask for permission than to just take initiative. I couldn’t agree more. Rich, I appreciate you coming on the show today. If folks want to learn more about what you’re up to, where is somewhere that they can go to learn more about what you’re doing out there in Houston.
Rich: 0:50:56.7 You know, nationwide, you could just go to Renters Warehouse.com and then just pick the Houston office if you’re not in Houston. If you’re in Houston, it’ll know you’re in Houston and suggest the Houston office. We’re at 713 224 RENT.
I’m Rich@RenterWarehouse.com if you want to visit about the events, I’m happy to do it. If you want to talk about real estate, I’m your guy. That’s all I want to talk about anyways, so.
And Jordan, I really appreciate the invite and it’s nice to see you again. I got your email for the PM Grow conference coming up, so I highly recommend to anybody that hasn’t been to that. You know, I know how much it took you guys to prepare for that, because you really – you guys went all out with the Scribe and with the videos and that really brought a lot of value to us, because you write as fast as you can in one of those two-conferences, and you just don’t get it all and then you forget about 95% of it when you get to the bar the first night. So it’s nice to be able to rewind and see that stuff again. Man, there was a lot of value in that for us.
Jordan: 0:52:00.4 Awesome, glad to hear it. You’re the kind of audience that we are catering to. Smart, motivated entrepreneurs. That’s what’s distinct about the PM Growth Summit. Well Rich, thanks again for coming on the show, and hopefully I will see you in this upcoming February at next year’s PM Grow.