Jan 09

Real Estate Ideas for 2013 Part Five: Tech Meets Real Estate

What can be done collectively to improve our businesses, save costs or generate additional revenue?

On January 1st I posted a list of ideas that I had that some of us could consider to collaboratively work on.  I intend to pursue one or two of the ideas presented and may entertain partnering with the right person or persons.

This post is the fifth and final of my more in depth notes on the ideas.  I will post others over the next week or so as time permits me to clean my notes into coherent sentences. If any of the topics interest you comment either on the list or directly to me at:Tim@ApartmentsMilwaukee.com


Part Five:

Tech Meets Real Estate

There certainly huge opportunities for software/web solutions for things that cause frustrations for owners and perhaps tenants.

I see this as the greatest opportunity of those presented by me.  We are in an industry that has low margins and high expenses. A 10% swing in effectiveness can mean the difference between wildly successful and a miserable failure.

Some thoughts on where tech and rental real estate may intersect:

  • Setting rents to market rates. How much are you losing because your rents are too low or how much have you lost due to your rents being too high and your vacancies languish? Me, too, to some extent. ;-(  What if there was a site that effectively tracked what other rents are at in your area?
  • Property acquisition. Look at what sites like SpotProperty are doing elsewhere, but not here.
  • Vacancy filling Craig’s List used to work, but now there is too much spam and fraud. What about a system where the tenants need to prequalify before actually applying. While pre qualifying without processing the full app  by an individual owner may be problematic from a fair housing standpoint, a proper third party system could work.
  • Tools for  group maintenance supply buying mentioned in Part One of this series where owners could opt into a group purchase of bulk supplies
  • Improved tenant screening.  Things like “Bad Tenant Lists” are illegal, but there must be things that are not being done today or being done in a manner that is more difficult than necessary or simply be improved by tech solutions.
  • A site for creating and serving 5-day notices etc. by certified mail or personal service from your computer without ever having to leave your home or office.
  • Put your solution here…

Where tech helps our industry today

Obviously MLS is the big tech tool of real estate.

The right property management software is essential for all but the smallest of property owners.  Our company uses very customized management software that makes many tasks and decisions automatic or semi automatic. In general a click a button and the machine does exactly what a well trained person would. Receive a WE Energies service termination notice and a work list item is created to check for vacant. Tenant collection actions are automatically determined on amount due, last pay date and how long they have been a tenant. One button and it select the proper notice or reminder for all tenants. Of course there are overrides as special circumstances require special treatment.

Automation of routine tasks frees our employees to think about things that need thought about, rather than thinking about the repetitive and mundane.  Computers are great at those tasks.

Another example of tech meeting rental real estate is the free eviction notices we provide members on the AASEW site.

Outside of MLS, management software, five days and the examples above, there are certainly other solutions and improvements just waiting for us to identify.  Well, waiting for you to identify, as I’ve put all I can think of in the above list.

If any of the topics interest you comment either on the list or directly to me at:Tim@ApartmentsMilwaukee.com

Jan 05

 Real Estate Ideas for 2013

What can be done collectively to improve our businesses, save costs or generate additional revenue?

On January 1st I posted a list of ideas that I had that some of us could consider to collaboratively work on.  I intend to pursue one or two of the ideas presented and may entertain partnering with the right person or persons.

This post is the forth of my more in depth notes on the ideas.  I will post others over the next week or so as time permits me to clean my notes into coherent sentences. If any of the topics interest you comment either on the list or directly to me at:Tim@ApartmentsMilwaukee.com


Part Four: 

Group purchase of a distressed block or two

There has been this wild idea floating around in my head for years. Long time AASEW member Carl Baryl and I spoke of this many times during the early 90’s. Acquiring a distressed block with a group of active owners and turn it around for fun and profit.

So how would this work?

Choose a very small geo area of Milwaukee. Think something on the terms of both sides of the street for a block or two maybe three at the max. It should be depressed, as in make Detroit look like a nice place to live, depressed. Apologizes to Detroit, but many people know of Detroit’s challenges and fewer of similar challenges of Milwaukee.

Yes, unfortunately, there are many areas like this in Milwaukee and the numbers are increasing as foreclosures work their way through the system.

Oh, you read in the Journal that the foreclosure mess is just about behind us?  They may be correct in a overview of SE Wisconsin, but a walk though the neighborhoods will tell a different story in the City of Milwaukee There are actually more, not less properties sitting vacant and obviously abandoned in these areas than when I first wrote about walking the neighborhoods.

A highly visible face block would be best – something that faces the freeway, a school, a major road, shopping area etc.

Then assemble a group of investors to buy the available, preferably vacant & abandoned, properties in the identified area.

This could be done either as a partnership with all owners having an interest in all properties or as an alternative owners would each have individual ownership of their properties, with a homeowner association type mechanism in place as governing bylaws of the project. I am thinking of one standard screening criteria, perhaps a lawn service and other such bundled services.

Partner with a neighborhood group to provide services to the owner occupants. All aspects – crime, trash, maintenance, throw in some owner occupant foreclosure prevention and even some social help.

Then we work our butts off to turn that or those blocks around. Use this as a best practices testbed, putting private, neighborhood and public efforts and resources into a turn around.

Personally, for me to participate the project would have to be on the Southside (8th and 12th Aldermanic Districts) as that is where my interest lay.  Others may see areas of the Northside that would offer the biggest bang for the buck.

Choosing the correct first block is very important. There are five potential areas I have in mind today. It would take a bit of work to make a final selection. Considerations would be how many bank and city owned properties ( more the better ) how many rental owners we know and their potential level of cooperation. (again more the better ). My preference would be a neighborhood I currently have a presence in, of course, because there would be an advantage for me. However three of the five target areas I’ve selected are not on blocks that we own houses.

Pretty simple eigh? Of course not.

Doable? Absolutely. Worth the effort? Either yes, or don’t bother doing it. This should result in increase rents, occupancy percentages and resale values.

The outline

Organize the existing property owners; everyone – owner occupants, rentals and commercial properties.  Then go at it and buy everything else that is available; vacant land, city owned and banks that are holding etc.

We pitch the idea based on benefit rather than strong arm people to participate. If our initial selection doesn’t result in willing participants we move on to block selection two.

We have our neighborhood group partner find and apply every grant, resource available for both rental owners and the owner occupants in the target area.

The realities of the project

This project would require a lot of work and certainly a bunch of cash as you are not going to typically finance something like this. The City of Milwaukee, despite gaining a benefit from the efforts, will not make it easy.  Having bought a bunch of foreclosures over the past couple of years and putting a bunch of effort into making them solid rentals I can attest to some of the pettiness that goes on.

There are success stories in a similar vien.

Bill Doyle of Milwaukee Lead fame did it with northern Bayview.  On a larger scale, Tony Goldman in SOHO NY, South Beach and Wynwood, Miami, FL.

 

Jan 04

 Real Estate Ideas for 2013

What can be done collectively to improve our businesses, save costs or generate additional revenue?

On January 1st I posted a list of ideas that I had that some of us could consider to collaboratively work on.  I intend to pursue one or two of the ideas presented and may entertain partnering with the right person or persons.

This post is the third of my more in depth notes on the ideas.  I will post others over the next week or so as time permits me to clean my notes into coherent sentences. If any of the topics interest you comment either on the list or directly to me at:Tim@ApartmentsMilwaukee.com


Part Three: 

Become better at sharing our collective knowledge 

The ApartmentAssoc@YahooGroups.com is good beginning.  However it does not work real well as a reference tool as the posts are not organized by topics nor apparently easily searchable for many users.

What if the archives were used to form a new reference tool, perhaps a Wikipedia style “Best Practices” Guide for Milwaukee rental owners.  My vision is a user contributed, user edited tool that would be a ready reference to many topics we discuss on these lists.

It would include everything that a property manager runs into. Who is the best plumber, what notice do you use for the tenant that decided that partying till 6 AM everyday is being neighborly.

Many of us know a lot, but none of us know it all. Things change in our industry nearly daily.   Contractors and suppliers who were the best may have become expensive  sloppy or retied.   New vendors and contractors come on the scene every day. Bad tenants learn new ways to circumvent screening. Laws change. Judges and Commissioners change their views on how laws are implemented.

Similarly a Mastermind Group could reap benefits if the right people were involved. Here is a good overview of how Mastermind groups work.

Another model is what groups like StartUpMKE are doing in the tech field.  It is similar to what the Apartment Association does, but they seem  more involved in actual business creation.

Lunch with  AASEW board members was an interesting idea.  If you don’t recall this you can read more about lunch with AASEW board members here.  When I look back on our prior attempt, I think this would work better if the sponsor board members would set a date, place and topic.  Then if there was enough interest for that particular meeting it would move forward.

Bottom line: There is power in shared knowledge and we should do more to harness that power

Jan 03

Real Estate For Ideas 2013 Part Two

What can be done collectively to improve our businesses, save costs or generate additional revenue?

On January 1st I posted a list of ideas that I had that some of us could consider to collaboratively work on.  I intend to pursue one or two of the ideas presented and may entertain partnering with the right person or persons.

This post is the second of my more in depth notes on the ideas.  I will post others over the next week or so as time permits me to clean my notes into coherent sentences. If any of the topics interest you comment either on the list or directly to me at:Tim@ApartmentsMilwaukee.com


Part Two:

More Effective Maintenance Labor/Contractors/Service Providers

As mentioned in part one, maintenance, replacements and improvements to rental housing represents nearly $100 million per year in the city of Milwaukee alone. A savings of even 1% is a lot of money

More Effective Maintenance Labor/Contractors/Service Providers

The ability to have skilled, cost effective maintenance available on demand is typically a missing element for small owners.

If all of your unit preps are done two days after move out you will have far less vacancy income loss. If you can respond quickly to emergency repairs less tenants will move.

Even larger owners such as our company can’t do this efficiently with typical staffing. Either you have too few workers the first week of the month or too many the rest of the month.

The million dollar question is ‘How do can you have an on demand workforce without the risk of uninsured “contractors” who may later be deemed employees by taxing authorities or injured and not covered by your property insurance?’

A couple of years ago Affordable Rentals rolled out Rental A Worker, where we ‘rent’ other owners our maintenance people by the hour for small or large jobs. We benefit as we can have a larger workforce to meet the up and down demands of maintenance, while being able to share them when our workload is lighter.  We can also justify having highly skilled people on staff full time, such as certified heating techs.

The big advantage this offers other owners over hiring Joe off the street is our people are insured and have taxes withheld. There is a real danger and expensive otherwise. For the longer version read: Your Handyman-Cheap Contractor or $60000 Mistake?

The real vision for Rent-A-Worker is to expand it to a temp like service where there is an on demand workforce that can ramp up when there are a lot of preps etc and then can work for another temp agency on slow times.  This would hold an advantage for our company as well as other owners who participate.

Such a system would have a worker rating system, whereby the owners would grade them and their opportunity to work and future pay rate would be based on those grades.  So the best workers would achieve full time employment at a decent wage.

All the workers, whether they are laborers or small uninsured contractors would be treated as employees with the temp agency withholding taxes, maintaining worker’s comp etc., thereby eliminating a potential career ending risk for owners who were hiring “handymen” for cash.  The guy in the Cheap Contractor or $60,000 mistake went under.  I assume this was the cause

I pursued the temp angle a bit a year a half ago.  We hired a college grad who was formerly a manager a temp agency that moved out of the area. Excellent resume and references. I held a lot of hope for him to do well at this, but in the end it did not work out. By that time I was distracted with the purchase of a commercial property in Hollywood FL to house my wife’s businesses.  The basic software framework exits as well as some operating procedures.

I still believe an available,  flexible workforce  is the brass ring for our industry; seeing so much benefit for my company as well as many other owners. This may be the top new project to aggressively pursue this in 2013. The open question on this is does Obamacare make this in anyway less practical today if the number of temps exceeds 50.

Jan 02

Real Estate Ideas for 2013 Part One

What can be done collectively to improve our businesses, save costs or generate additional revenue?

On January 1st I posted a list of ideas that I had that some of us could consider to collaboratively work on.  I intend to pursue one or two of the ideas presented and may entertain partnering with the right person or persons.

This post is the first of my more in depth notes on the ideas.  I will post others over the next week or so as time permits me to clean my notes into coherent sentences. If any of the topics interest you comment either on the list or directly to me at:Tim@ApartmentsMilwaukee.com


Part One:

Reducing Maintenance Supplies costs

Pre 1950 buildings in lower income neighborhoods require around $100 per month per unit for repairs, replacement reserves and improvements. Newer buildings in more affluent neighborhoods perhaps $50 – $65. This is all maintenance from leaky faucets and unit turnovers to new cabinets, new roofs, electrical upgrades, replacing parking lots ect.

Do the math on your units over an extended time period. Do not forget to include a reasonable value on your time. You chose $10 an hour? Why not work for me or McDonalds.  Make more per hour and avoid all the hassles of ownership? 😉

A quick check of city data files shows there are 159,658 rental units in the City of Milwaukee alone, inclusive of rented units in owner occupied buildings. Let’s assume a low ball $50 per unit per month in repairs, replacements and improvements. Annually that is a whopping $95,794,800. Yes, nearly $100 million per year. It actually could be a much larger number. Even 1% savings  is a lot of money.

So what can be done?

Improve supply sourcing: Collectively finding the best deals and creating good deals through group purchases.

We did this a couple years back when the CO detector law went into effect. Prices then for COs were in the twenty dollar range. My company alone needed around 2,000 CO units. So we shopped the best deal and found where the quantity price breaks were. We brought in a bunch of other larger owners and the final price dropped to eleven something each due to the number of pallets ordered. So four or five hours of my staff’s time saved our company and the other participants collectively tens of thousands of dollars in a single transaction.

Last spring myself and another midsize owner went to the Hardware Show in Las Vegas. Between us we buy some products in quantities that equal or exceed an independent corner hardware store. In Vegas we found good deals on a number of products and vendors we continue to use today. You can read more about this trip here: http://justalandlord.com/2012/05/13/thoughts-ideas-from-the-national-hardware-show/

This brings us to the million dollar question… ‘How can we use our collective shopping experiences and buying power to improve our bottom-line on a daily basis in 2013?’

Obviously group buying is a large opportunity.  There are some details that would have to be worked out to prevent this from being a burden to anyone.  The CO detector deal worked because the larger the group the lower the price for all of us.  I knew the other owners, but even then some backed out or reduced the number of units they wanted.  In this instance it was not a problem as the request I received after placing the order exceed the ones that were not taken.  But the situation could have left me with $11,000 of detectors I had no immediate need for, but a bill that would need to be paid within 30 days.

The most viable option that I can think of is a web based system where an item would be presented and people would commit to their purchase with a credit card that would have an authorization hold on the amount of the commitment, but the card would not be charged unit we reached the magic number. Once we were ready then the charge cards would be processed and the order placed.  For this to work we would need a pretty short time frame to order.  Seven days? If the quantity was not reached then the authorizations would be released and nothing would be charged to the owners’ credit card.

The website would show how many widgets needed to be ordered to get x pricing and how many to get y.  Emails would go out saying we are X number of units away from placing the order or X number of units away from the next level price break.  Some larger owners could quickly do the math and figure out if they bought an extra 50 widgets that the price break savings would make it less than they were paying for the original amount.  (That happened with the CO detectors.)

There would of course be some upfront costs here, but not a lot.  There would also be some admin costs finding and securing the orders.

Sharing our purchasing experiences could be an opportunity too.   If we had some easy way of sharing what we were purchasing from whom for how much we would all know the best places to buy.  I just do not see reaching a level of participation that would make this work.  (But I’d enjoy being proven wrong)

If any of the topics interest you comment either on the list or directly to me at:Tim@ApartmentsMilwaukee.com

 


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