Hey, simple passive cashflow listeners. Today, we are going to be talking about something we’re doing on a lot of our properties and some tips for you landlords out there to increase the community at your properties. Ultimately, it’s going to lead to higher rents and better revenues for you guys.
If you guys haven’t yet joined our club at simplepassivecashflow.com/club. We don’t bite, it’s free. I don’t know why you haven’t jumped in and hung out with us yet.
The new California SB nine bill. As you guys know, California has the population is increasing and there is a lot of homeless there. Basically, the way they used to have before is there were a lot of these single family home neighborhoods.
It’s one of those bills where it’s trying to distribute wealth and trying to get these traditionally single-family homes to be duplexes or multifamily so it can allow for more dense population growth and lower housing costs. What I think it’s going to be doing is opening up California.
In the short term, it’ll relieve some of that need for housing. A lot of these things take a lot of time and a lot of people freak out when they see stuff like this, they’re like,” oh my God, world is ending the California real estate market is going to crash because now you have all these single family homes now double in model supply and flooding the market”.
It doesn’t happen like that guys. In a year, I don’t think you’ll see a decrease in prices because I still feel like there’s a low enough supply and there’s a decent amount of demand so I don’t see, you’ll see prices go down at all, let alone crash.
But I do think that it’ll start to help out the situation where people need that dying middle market and the lower middle-class housing, or maybe it will not do anything, who knows? But I think the one president sending thing with this whole SB 9 California and Oregon are typically be durable, proactive states with these types of things where you might start to see this other more neutral states where they start to break open a lot of old money neighborhoods and bring in more debts building in those areas.
If you’re a rich person in a single family home neighborhood, you probably don’t like this. But for rest of the majority of the population probably allows and opens up the market a little bit. A lot of people are talking about this last week if you haven’t been paying attention, there’s a bill going in Congress right now to change many things. What this is they’re going after a lot of IRA owners and supposedly the rumor is this may or may not impact solo 401k folks. And so the big changes that are supposedly. Coming down the pipeline.
We don’t know yet and been telling people at my inner circle don’t freak out yet. Don’t be like these guys who watch YouTube all the time. I guess you guys are watching this. So keep watching YouTube. It’s fine. It’s good news. Good entertainment. Congress is saying now you guys can’t invest in their self-directed IRAs of private placements and syndications, which is jacked up in my opinion because it’s like how dare you tell us what to invest in. Some people who are the conspiracy theorists are saying, “well, it’s because the government is getting in cahoots with all of these companies like Vanguard, Fidelity, TD Ameritrade. It’s force them into all these garbage retail products where there’s high fees”.
Maybe that’s the case. It probably is the case, but I just find that connection loose a little bit. But what they’re saying, for those you guys who are investing in your retirement accounts, Lane told you a long time ago, not to do this stuff because I don’t know why you would want to invest in a retirement account into something that’s tax advantage already.
You invest in use retirement accounts for things that are non tax advantage, such as, like crypto, goes up but you gotta pay up bit lower taxes which is why you put it into your qualified retirement plans, such as this or things where you don’t get the bonus depreciation or even passive losses, like hard money lending, which is ordinary income.
What you want to be doing with iRA’s is those types of crypto or not tax advantage things. I wrote a really long article and it made multiple videos on this. If you go to simple passive cashflow.com/qrp, if you guys want the whole argument email me, firstname.lastname@example.org. I’ll give you the big blurb of why I’m not a huge fan of investing in retirement accounts, unless you make over $330,000 adjusted gross income and you already have like maybe more than half a million, million dollars in your IRA. If you’re both of those two such criteria, various portion of people out there where it actually makes sense to have a solo 401k or a qualified retirement plan or self-directed IRA even a Roth case, but a bigger topic. But anyway, going back to the news here, people are like “if you’re gonna not allow me to invest in private placements, what am I going to do?”
And then people are like freaking out. ” Oh, my God. I’m going to have to liquidate my positions”, and keep telling people this hasn’t been signed into law yet, but supposedly what they’re saying is they’re going to give to people two years to transition out of the IRA and to dispose of those assets.
Or you can just take, do what I said, you know what I told everybody to do it. Just take a distribution, pay the taxes and the penalties. It’s not that much, any way.
This will probably change a lot of times that they’ll put something out there just for negotiation to get something else and some other. And call me asking why is this all happening?
You can think uncle Peter Thiel backdoored a lot of like class B shares of PayPal and created like a $10 million plus IRA. And he’s screwed the system. And now the system is looking to get back at him. Unfortunately, the millions of Americans who use a retirement accounts as a mechanism for sheltering taxes is also being collateral damaged.
What I personally think they should do to just fix the Peter Thiel’s of the world is just put a cap at $10 million on IRAs. Most of us fit under $10 million in the IRAs so that would solve that problem. But again, why are they not allowing people to invest in private placements?
I dunno, maybe that’s again, that’s the conspiracy theories out there that think that it’s possible trying to force peopleinto this retail, mainstream wall street products.
If you guys have any questions, comments, type it into the comment box below, I’m sure it’ll make people angry and probably wondering what to do. Well email your Congress person, whoever that is. I’ve never personally done that before, but supposedly that’s what a lot of people do.
I have Pete Kelly here. If you guys want to go to apartment, life.org if you guys want to Google their website, also take a look at what they’re up to. Welcome Pete, thanks for jumping on.
Thanks for having me lane.
So what is apartment life? What is the service that you guys provide?
Sure. Back up a little bit, we are a faith-based nonprofit that’s been serving the multifamily industry for 21 years. And so we help apartment owners and operators with two of their greatest needs, which is resident retention and resident satisfaction. And we have a program that saves our average client $188,000 a year and turnover, marketing costs and staff retention. And the way we do that as we address one of the biggest needs that residents are facing, which is loneliness.
Interestingly enough you’ve probably realized this since the pandemic, but America is dealing not just a COVID pandemic that they’re dealing with the loneliness pandemic. It was bad before the pandemic, but it’s gotten a lot worse since then. In 2019, the insurance company Cigna found that 60% of Americans would describe themselves as lonely.
Now, initially you may be thinking, okay, I’m an apartment owner. Is that a really big deal? If you are an apartment owner, that actually is a really big deal, because what that means is that your residents don’t have any roots in that community and it’s a community just down the road offers a good enough rent incentive.
They’re going to pick up and move and go to that community. What we found is that the more relationships an apartment resident has in their community, the happier they are and the longer they stay. The magic number seems to be seven. If seven of your neighbors, you’re almost twice as likely to renew your lease.
We have a program that facilitates building relationships and apartment community. We have two models: we have an onsite model and an off-site model. The basic idea is that they create this environment where people actually know their neighbors, they feel connected, and they do that through welcoming people throwing parties and events, looking out for opportunities to care for people, connect them to one another. And as they do that, it’s just the sticky community where people love where they live and they don’t want to stay.
At some point, resurface countertops, new flooring, nice stainless steel appliances only can take you so far and especially when competition is getting a much higher for the apartment owners or real estate investors perspective, tenants are gonna go to where the best value is and that value just doesn’t necessarily mean that box for the house that they live in the community.
Whether it’s, as the business owner, you see this as your responsibility or not, it is what it is. And this is where we got to a certain point. We would take over an apartment. We would do all the things you’re supposed to kick out a lot of the deadbeats, the shady characters and the way we feel is that benefits the greater community. That’s what most people want. They want those people out, right? Rehabbing units, exterior improvements, playground equipment, all those such new clubhouse. They start to put the money in, but the hard thing to get the property managers on board with all these extra curricular activities that didn’t really hit KPIs.
A lot of our properties we use third party property managers on. We hold their feet to the fire in terms of expenses, how much revenue, how much they’re leasing. Hard KPI numbers but it’s really hard and for those of you business owners out there who have staff or employees, you guys know it’s really hard to keep people accountable to these more softer KPIs on trackable KPIs.
We decided to bring in apartment life folks into the apartments in order to focus on this one aspect of the business and to really give it the emphasis that it really needs. These are the things like a mother’s day, barbecue or Easter egg hunt. It was really hard for us to get the property manager to do that type of stuff, because as things get busy, what’s the first thing that gets thrown to the wasteside.
Pete, I want you go over those two types of models, like how it works coz the first thing I thought of is ” Hey, this is like those two teenagers of the college kids in the red bull car that run around and spread joy and give free red bull around”. This is kind of the same thing.
It’s like that only they’re there to stay and they keep coming back. Our two models that I mentioned, one is the onsite model and what we do is we place a couple that lives in that community. They’re like the welcome wagon like they agreed every new resident when they move in, they throw all the parties and events.
They look for opportunities to care for people. Sometimes it’s the birth of a child, sometimes it’s a layoff or maybe a neighbor’s car broke down in the parking lot and they just help them out. And 90 to 120 days before that residence lease has set to renew, the team will go by and visit them again and just say, “Hey, we’ve really enjoyed getting to know you. We’ve liked, the feel of this place. And we’re just wondering, are you thinking about sticking around for another year?
As they did that time and time again we see retention go up. We’ve done focus groups actually on this. We’ve sat down with residents and said, “Hey what was it that motivated you to stick around? To what degree did the community make a difference?”
And I can remember one focus group out of South Carolina they said,” rent went up by 18% this year and we’re still here so that tells you how much we value it. That’s the on-site.
Those two guys are they like undercover? Does everybody know that they work as an extension of the property management company or apartment life, or are they seen as undercover, like field tenants that happen to give you a helping hand when you move in to carry your boxes in?
We come and we represent the management company and so rather than doing it undercover. We want the management company and the owner to get the credit for the program and so we just say, we’re apartment life. We’re here on behalf of your management team. We’re also residents. So we also live here.
And so they live in that interesting spot where they’re representing the management company but they’re not technically part of the management team. They’re a third party but they live there so they’re also a neighbor. And so that’s why we love the onsite model is because it’s that mediator between the two entities.
And so residents often will tell our teams things that they won’t tell the management company. And so they’re in a wonderful place to get Intel.
Even though in some cases they are wearing the polo of the third-party property management company.
They are but they relate differently because they really are seen as neighbors and friends. So I think about this one woman in Houston, her name was Kathy, single mom. The team went by to do a renewal visit with her and they were friends with her. She came to all the parties and events and said, “Hey Cathy, are you thinking about sticking around? “
She goes, “no, actually I’m not. I’ve had this bug infestation that the management has not been able to address and I already put down my deposit on the next place and they’re like, oh gosh, we’re really sorry to hear that. We’ve just really enjoyed getting to know you. And we’ve loved getting to know your daughter. And so they politely left and then she wrote him back that night and she goes, I’ve been thinking about you guys ever since your visit and the kind of community that you’ve built here.
And this is the kind of neighborhood I want my daughter to grow up in. And so she goes, I decided to let go of my deposit and then I’m going to remain my lease. And so that’s an example where maybe she was frustrated with the management company, but she didn’t voice it quite as directly but because there was a neighbor there that she knew was associated with the management team. But she viewed them in a different light.
Yeah. Like your resident your RA back in college dorms in a way it’s an intermediary, but understand your guys’ business. Like the people are those intermediaries are they typically younger people or I am assuming they’re getting free rent, that’s part of their compensation? Is it to help the people in those situations?
The economic benefit to our teams is the reduction of rent and that’s, what’s in it for them. I would say our two biggest groups of people who do the program would be young marrieds either without kids or just with one or two young kids.
And then the other largest group would be empty-nesters. We’ve had several empty-nesters that have sold their houses or rented their houses out and said, “Hey, we wanna go back to living in an apartment community. We don’t want to have to sweat mowing the lawn, and we love the idea of getting to know our neighbors.
So they’re usually like pretty extroverted people and you just find them off job boards. Unusual job description, right?
It is! Although we can promote it all kinds of ways, the best source of teams or other teams and so we find that the highest quality coordinators come from other coordinators who tell their friends about it and ” Hey, you would be great at this”.
I’d say the ideal profile, if it’s a married couple, one of them, as you mentioned, would be extrovert. The other could be extroverted, but what we really need is at least one person who’s administratively gifted or organized because there’s a reporting function to what we do, because we can do all kinds of great things.
But if we’re not recording that and sending that back to the management team, they don’t have any idea of what’s really going on there and they don’t know how to quantify the value of the program.
I’m selfishly interested in how you do this because trying to get a little bit better outreach with on the investor relations side, see what people are, what we can do to help.
And as you said, most of the times, the example with the person who had the bugs or whatever infestation, they didn’t say anything, right? That’s very typical of clients. Of course you have the 5 to 10% of people who just complain about every little thing, but the majority of the people are just good citizens.
They don’t speak up. So what is like your guidance on those, your employees? Is there like a spreadsheet where they go down every single unit and they need to have a touchpoint barcodes for them to sign scan? What is the, how do you keep them accountable?
We have an in house tracking system that we use where they can do it in real time or they can do it at the end of the month but they have to do it at least once a month record everyone that they visited. What their sediment score was when on the move in so if they’ve visited somebody, they’ll weave it into the conversation, “basically on a scale from one to five, how would you rate your move in?”.
And anything that is lower than a three or lower that automatically get sent to the management team and so that they know, “Hey, here is a retention alert”.
Because what we find is that people are already making the decision to renew within the first month of living there. And so if there’s anything that the team can do onsite to improve that experience, we want the team to know about that and so that’s one of the things we do. We have an in-house tool that the teams log in and record all this but we also partner with Modern Message. And are you familiar with Modern Message?
It’s an interesting gamification, a tool that has become very popular in the apartment industry, but it’s basically an app or a website that rewards residents for engagement. So you probably have some kind of hotel reward system.
Let’s say you’re a part of the Marriott and every time you stay at the Marriott, you get points and then you can redeem those points per stay. Modern Message done is they created a similar tool for apartment residents and so we partner with modern message. There’s electronic tool and then our team encourage residents to use it.
For our clients that have Modern Message, some of the reporting is actually done through the modern message app and we struck up a partnership with them so that at the end of the month we have an API that pulls the data from modern message and we can print it up in a PDF that’s sent on to our client.
Pretty advanced stuff and then I think that data gets fed in with the property managers, as leasing comes up maybe influences dynamic pricing, maybe it doesn’t. But what about the workload of these people? Is it expected to be a 40 hour day, a week job or meant to be more part-time for them?
This would be a part-time role that they do and their nights and their weekends. Because when you think about your average apartment community, most of your neighbors aren’t around until the nights and the weekends and so we look for people who already have regular jobs, but they’ve got some margin in their life at nights and on weekends where they can serve the community.
Again, one of the dynamics could be: young, married husband and a wife, and maybe the wife is wanting to get pregnant. She’s not wanting to work. She’s wanting to work part time and this is a way to lower their cost of living and in a sense, having a part-time job that facilitates neighborliness and their partner and community.
And then the other type of arrangement you guys do if we don’t have a free unit, you guys just operate on a mobile service. Can I just stop it at certain times of the day?
We do. Our oldest model is the on-site model and we feel that by and large, that’s going to be the most effective longterm in terms of actually building community.
But we’ve seen a lot of our clients have them pleased with the offsite model. For a lot of management companies, they want to throw parties. They want to throw events, but they can’t put a lot of attention in it because of the demands of their job. Working in the office, you’re just worried about leasing and you’re worried about maintenance requests and people paying their rent on time.
So the idea of throwing some kind of event or party that brings community together, it’s just one too many things and so we’ll take care of that. In some situations we’ll do what we call electronic visits where we’ll email out or text out all the new residents and say,” Hey, we’re having an event this Saturday. We’d love for you to come down and get to know your neighbors.
Let’s talk about some of those events. What kind of sizes, shapes have you guys pulled in the past?
If you get on our website, you can see like an insane number of pictures and event ideas. People who aren’t yet our clients will from time to time send out event ideas, some of the examples, something simple, like what we call a wine down Wednesday, where you can come down to the clubhouse, get a glass of wine, get to know your neighbors.
Sometimes communities that have a lot of pets will have what’s called a yappy hour and so we’ll have, bring your dog out. We’ll have a special treats. We’ll array for food trucks to come out. Sometimes we’ll have painting classes that we’ll bring in fitness classes. We’ll bring in a chef and teach them how to make a meal.
Pool parties are a big deal. You’re pulling it up right there at poker nights. You see all kinds of ideas up there. What we tell our coordinators is obviously you need to get to know your community and what works. And so we encourage them, especially when they’re new to trial, a wide variety of things to see what works with their community.
Some events are going to appeal to some of their neighbors and other events are going to appeal to other neighbors and so that’s the other reason you want to do a wide variety is you don’t want to keep bringing out the same 10 or 15 residents, but you want to really throw out a wide net that really helps people we’ll get to know others in their community.
Maybe talk a little bit about as the class changes, the clientele more A-class apartment communities versus the C class side. Do you guys cater more towards the other? If not, what are the events?
Historically we started out actually on the nicer end and so we’ve worked, I would say for the first 15 years of apartment life, class A and class B assets. More recently we’ve been doing more classy and even affordable housing. That’s actually a new division of ours is working on affordable and low income housing. The same principles apply, but rather than just throwing a party, which you can still do sometimes what’s helpful is to have what’s called wraparound services.
And one of the communities that we serve in Salt Lake City, our coordinator, who’s an offsite coordinator, organized 1500 meals in the month of July for 30 families. And with one of the residents who was blind, she helped him fill out lengthy paperwork in order to sign up for social services.
Again, we started probably more in the class A, class B assets but over the years, we’ve realized we want to have a tool in the toolbox to serve any apartment community that’s out there.
Yeah! You want to use the right tools. It reminds me of when the first had the pandemic and all these celebrities had sing that stupid song. It just made idiots of themselves. If you come to the wrong apartment community with the wrong event, you can come out the wrong way a lot of times. You would think a lot of the class C places, they need this stuff more than the class A side.
What we really encourage our teams, whatever community you’re serving throw the best looking event that you can. Cause what we don’t want to do is have like for a class C, like a Wiener boil or something like that, you really want the residents to feel like, “Hey, you put a lot of thought and effort in this”.
We have what we call eight layers of the event. Where the coordinators are thinking very carefully about the ambience, how do you create a sense of buzz around it? How do you facilitate people actually making friendships there? How do you take pictures and post about it on the back end? And so we just want the events to really have a sense of sparkle and shine to them.
Have you ever ran into issues with some tenants being like I don’t want cupcakes or on Thursdays, just cut my rent by 20 bucks. That’s where I really need the help has that ever happened?
To my knowledge, I’ve never heard of a resident asking to cut the program for rent reduction. What we actually find is a lot of residents say, I didn’t know, people still live this way in the United States. I think of one particular couple that moved down to Dallas. In the heat of summer and their apartment life coordinator was watching them unpack their truck. And just really unprompted.
They just went over there and took icicles for the kids or like lollipops or what do you call the frozen obstacles and waters for the parents. And this family happened to be moving in from Oklahoma and the wife, “I didn’t know people still did this in America. This blows me away”.
I was like, “oh yeah we have a great community here. We encourage you to come out to the events”. They became really good friends with them. What we find is that people really want to go, they want to get to know their neighbors, but they have lost the art of neighboring if you will.
And it just takes that one or two instigators, the catalyst to get that culture going in the right direction.
It does and I think all the more, since the pandemic has all of our social muscles have atrophied over the last 18 months. It was that catalyst that you mentioned was needed before the pandemic, but it’s needed all the more now because people really have lost that ability to make small talk and they’re frankly intimidated.
Again, they’re lonely. They want to get to know their neighbors but they almost need somebody to hold their hand and say, “Hey welcome! I want to introduce you to Bob over here. He likes hunting just like you like hunting or he likes fishing like you liked fishing”.
They really want that. And again, the management team is too busy to really provide that kind of level of connection. The most they’re going to do for an event is throw food out on a table and say, “Hey, free food”.
It’s just like you guys at work, if your boss asks you to plan a retirement party for somebody it’s really, is this my job description?
That’s a great analogy and honestly some on-site staff because their interactions with the residents often are pretty negative and needed cause the residents, some are always complaining. The last thing they want to do is throw a party for these complaining residents and so having a third party that you can outsource that to can be a good move.
Is this something, some of the listeners might have single family home. Is this a service that you guys would provide to like single family home operators? As opposed to one apartment where you can control the community. Is this something that you guys have branched off or thinking about branching off into some point?
Yeah, especially for single family build to rent, we have given that a lot of thought because that is a really big deal. And that you see a lot of the big players in the apartment industry going that direction where they’re building whole neighborhoods in single family homes, but they’re all owned by the same entity.
So they’re run very much like an apartment community but they have the feel of single family homes. We’ve met with several people in that space who said, “Hey, we would really like the apartment life model, but we would rather not call it apartment life. And so for that group, we’re looking at the name neighborhood life.
And so a name like that would probably fit better for a single family, residential neighborhood.
Apartments have the common space, right? And like you said, if you can get them to be friends, you just create so much value for the tenants in that type of setting.
It will be more challenging to do in single family neighborhoods. Now, I’m looking out my front window and last night hung out and had a glass of wine with two of my neighbors. We just sat in our lawn chairs and caught up and talked about life and it was great. We didn’t have a common space to meet in.
It would be hard to do Texas in the summer, but we we did at 7:30 at night, so it was a little bit cooler then. Even without a community space, there’s ways to build community that sometimes weather is a factor.
Any other cool events or other things you think the folks would like to know about what you guys do?
One of the other things that we’ve realized through the pandemic is a lot of our clients said you’re the only amenity that’s open right now. And they’ve said, we’ve got a fitness center but we can’t let anyone in there cause we don’t want to spread COVID and so I think that was a kind of an interesting discovery.
We were wondering actually, if we would lose business in the midst of the pandemic, but actually the opposite happened. We had a great year of growth because again, we were the only amenity that was open and some of the needs that we were able to meet were just really cool. Like we had this one coordinator up in the Seattle area who was really burdened by the food and security in his community and he got a lot of food donated.
He just started to reach out to churches and government entities. Before you knew it, he just had this whole operation going, all this food being donated. He was able to serve his apartment community and then the one across the street and it grew into its own nonprofit that has in the last year delivered.
I want to say 8 million pounds of food to apartment residence. Which is just crazy. There’s a lot of needs out there since the pandemic and it’s been a joy to be part of helping people meet with those needs.
I think, you guys are a perfect example of trying and find consultants, you put to work with. You seem to pay more money on the front end, but it’s something that you could have never done in-house. It’s just a very special,unique t alent and focus that you guys provide.
If people want to get a hold of you guys apartment, life.org, is there your URL. Pete, you want to give your information in case somebody wants to utilize you guys?
If you’re interested in talking further, you can email me at Pete Kelly. That’s P E T E K E L L Y @apartmentlife.org and either I’ll follow up with you or connect you with the right regional leader. And if you want to read more about us, you can go to just our website apartmentlife.org.
Thanks for listening guys. I think normally I don’t really talk too much about improving the communities. This is the whole part of increasing value and ultimately that’s how we make money. You don’t make money in my opinion, for a long-term basis by buying something low selling high something, buying something on Amazon, flipping it on eBay.
And that’s what traders do but people who make the sustainable wealth create value. And in this case, improving the units, improving the community with services, such as Pete Kelly’s apartment life, those are the things that create longterm value and create wealth. I probably empathize more with the investors.
A lot of you guys are hardworking folks at home, investing your money the right way in tax advantage things that utilize great wealth building strategies. We try and help you guys out. You guys are people I think of first. At the end of the day, you can think of them as are the clients, really the tenants who pay us rent? Or the clients investors, you could go either way on this?
This is what we’re doing on the tenant side. But thanks for joining! We’ll see you guys next week.