The Secret of Operations
Starting your own venture in multi-family business but don’t know how?
I am a rags to riches real estate millionaire who started out with no money or credit and quickly grew a portfolio of cash flow in apartments. Not to mention, I did it all with other people’s money. I am the owner of Kahuna Investments, I work to provide investors with a stable cash flow, returns, and long-term capital appreciation by buying multi-family apartments. I have flipped, acquired and sold over $49 million in real estate across the country. I have also been involved in the ownership and management of more than $31 Million dollars’ worth of commercial properties nationwide. I am the host of the Multi-Family Legacy Podcast and have been featured on FOX, CBS, ABC, and NBC affiliates.
I have shared with you some of my secrets in managing your own real estate business and how to handle your operations well. Grasping the secret to operations will definitely make a stark difference in your finances and you get a better result for the amount of effort or money that you put into something. To begin with, a clear understanding and a firm grasp on your long-term goals must be set on the table but grasping it is not enough, though. You must learn how to embrace it and envision yourself as the person you want to be 10 or 20 years from now. Do you see yourself as a CEO and even more successful than that? Do you want to run your own business and at the same time empower the people under you to do their job with their full potential? If the answer is yes, then all you have to do is focus on one thing: the money. That’s the most important and vital part of running your own show.
If you’re new in this kind of investment but dead serious in pursuing it, here are some recommendations from the Big Kahuna himself:
REALLY LEARN HOW TO FIND MULTIFAMILY OPERATORS
Look for management companies. One major mistake that newbies commit when starting out in this kind of business is deciding to do all the job by yourself. According to Corey Peterson, this kind of idea is not suitable for operations. One advantage with management companies is they are actually willing to take less money, which is between 4% and 6% (the industry standard. Unlike in single family homes where it rises up to 10% or 12%, in multi-family real estate investing, you don’t have to pay with a lot of money. For the multi-family side, it’s actually beneficial and cheaper because all your tenants are in one spot, in one location and it’s right there with you.
TALK SMART, LEARN SMART
When talking to management companies, its advisable to approach them with the proper questions. Ask them how do they turn a lease into a tenant to a client? What’s their sales process for getting people in the door? Inquire about their managers and their style of work. Know your manager’s responsibilities. Corey personally advises that if they’re doing all the data entry and all the bookkeeping at the property level, don’t accept their offer. You want everything to be done at a home office because managers will steal, they’ll lie, they’ll cheat, they’ll cut corners.
Other relevant questions to ask are:
- How much staff do you want me to put on a property for the blank amount of doors?
- That’s a How do they collect the money?
- Do they accept cash from tenants which you should never do, you never accept cash.
Simply put, get to know their systems and processes of that management company.
INVEST IN MAINTENANCE
As what we always say, first impressions last and it doesn’t hurt if your impressions let you earn too. In taking over a property, it will definitely look crappy, overgrown and old. Most of these properties were built in the 1970’s or ‘80’s we are not afraid to take these properties and cut it down and give it a magical and beautiful do-over. Consider the fact that we are in the technological age. A little upgrade of the facilities won’t hurt. Decent lighting in the area is also another advantage. Explore options like the automated timer in lighting, it will help to make your property clean, and safe. It can help you get rid of people loitering in the building.
In our properties, we have been implementing a 24-hour turn policy. If someone moves out of the unit or building, it has to be advertised within 24 hours online. Before a client goes inside the unit, it has to be vacant and the maintenance does his job. A funny story worth sharing is their experience with the carpet cleaners. Usually, this certain job is a blow and go. Sometimes they don’t show up in their time slot, and when they do they do their job unusually fast, and with a poor maintenance quality. To solve this, they invested in a equipment installed in every unit. With this, they were able to hit two birds in one stone: it resolved their problem with not having the units ready within 24 hours, and it’s the property manager, not the maintenance who makes sure that the units are ready and if not he just calls the maintenance guy. This arrangement helped them save $50. It may seem like a small amount, but if we do the math on it, a 100-door building can save $50,000 times the year of a property. By saving a small amount for carpet cleaning, they were able to increase the property value to $700,000. By saving in some of the expenses, they were able to generate more money aside from raising the rent. Small things like this can make significant changes.
By understanding fully the ins and outs of operations, we can make sure that we can operate lower than most operators can operate while providing decent services to the clients. A lot of times when we look at deals, we see this is a nice cash flowing property, we already know we can do some rent bumps but we also know that we can save quite a bit of money just through operations because we know our operational numbers. When you start multiplying those things together, and then you can get right money at the right cap rate or at the right price and do what we do, it leads to nothing but sunsets and palm trees. That’s the cash flow life.
If you want to learn more, go to:
Kahuna Wealth Builders, and download our Kahuna QuickStart Workshop.
Subscribe to the Multifamily Legacy Podcast and learn more about the CashFlow Life!