Nikonomics - The Economics of Small Business
00:10:03 · Peter Lohmann, Nikolas Hulewsky
[00:10:03] S0: Yeah, and there are a few franchises in our space that are seeing success and they sort of help with some of that stuff, so that's an option you can look into. But a lot of folks who start companies, start businesses, they're doing it because they want the freedom, right? They don't want to be under a franchise or bound by someone else's idea of how things should be done. So it's interesting to watch sort of the different approaches that people take to help other people start management companies. [00:10:34] S1: So I think of property management. Again, I'm I'm an idiot when it comes to this stuff. It's like, oh, I gotta go out to the house if there's a problem with maintenance. Collections, you can probably just set up online, but you probably have to collect paperwork at some point unless, probably everything's all digital. Is your team fully remote? Are you on-site? Like what does the management of the actual properties look like from your team? [00:10:56] S0: Yeah. So we are a mixture. We have a pretty sizable office here near Central Ohio where most of our team works, including all of our maintenance guys and a lot of the day to day PM operations. You do need some real life component that's near to the properties you're managing because you need to go out there and deal with issues, meet inspectors, show vacant units, and things like that. So you couldn't have, like, a fully remote company. You do need people who live in the area where the properties are being managed. [00:11:30] S1: K.
00:11:30 · Nikolas Hulewsky, Peter Lohmann
[00:11:30] S1: K. [00:11:30] S0: But we've moved more and more of of the functions remote. So... And that's a mixture of US based employees, as well as global talent more and more. [00:11:42] S1: What functions are you doing remotely? What functions do you still have to do locally? [00:11:46] S0: Yeah. So again, anything where you need someone physically going to the property, obviously that needs to be local, But a lot of property management is communication, and that can be handled by a remote team member. And a lot of it is accounting and paperwork, you know, answering the phone, following up following up on emails. So a lot of, like, the leasing activity that's not actually showing the unit, that's handled remotely. A lot of the lease renewals, property management agreements, our sales function, marketing, a lot of the compliance and accounting. In our industry, we call them RTMs, remote team members, but basically global talent or even US based, you know, remote employees. [00:12:24] S1: Are the majority of the properties that you manage in Ohio, or are you all around the country at this point? [00:12:29] S0: They're all in Ohio. [00:12:30] S1: They're all in Columbus, actually. That's by design, I'm assuming?
00:12:30 · Nikolas Hulewsky, Peter Lohmann
[00:12:30] S1: They're all in Columbus, actually. That's by design, I'm assuming? [00:12:33] S0: Correct. Because I don't wanna figure out how to have a person in 50 different cities, you know, who's gonna run around and put a lockbox or whatever. Now, there's some groups who are going after that and they do like a city by city approach where like they they grow to a few cities and then they either acquire a management company in a new city or they start a new one and then they grow that and then they go to [00:12:53] S1: the next one. Yeah. I'm assuming the administrative functions, those are easy to outsource, right? Sending and collecting invoices, compliance, renewals, all those things. But like you said, showing the units, maintenance, anything that breaks, that's gotta be done by somebody locally. So you've gotta have a local network that you out Correct. To. It's like this weird... Not weird combination, but it's a combination of being able to do remote and locally. Have you ever seen these guys on Twitter or social media who were like, I started a remote cleaning business? Yeah. It seems like an oxymoron to me, but it's similar to what you're talking about, right? Where it's like, you can have remote components to it, but you have to have somebody locally in order to fulfill the services.
00:13:36 · Peter Lohmann, Nikolas Hulewsky
[00:13:36] S0: Yeah, I think a lot of those companies are kind of like glorified lead resellers. They're fulfilling a lot of that, or actually all of that work is through contractors, subcontractors. Now, I think that works with cleaning because cleaning is a very straightforward, narrowly defined type of business where it's like, okay, go to this house, clean it, tell me when you're done. And it's sort of like, it's either clean or it's not. If it's not clean, you send someone back and then you're done. With property management, it's such a huge surface area that you have to cover. I mean, from leasing to maintenance, to accounting, to everything in between that you could never just have a bunch of subcontractors and run a successful property management company. Now I do think you could... And I know some people who have started or run property management companies, and they don't live in that city anymore. But the the company will have an office or some sort of a location with w two team members, at least a handful who are... You know, where the properties are located. [00:14:36] S1: Parker Cox, who... Who's a friend of mine. He lives here in Boise, he has a property management company. They manage... I wanna say they have a thousand door. I don't know how many doors. [00:14:45] S0: Yeah. He's over a thousand. Yeah.
00:14:45 · Peter Lohmann, Nikolas Hulewsky
[00:14:45] S0: Yeah. He's over a thousand. Yeah. [00:14:47] S1: But they've got the Bay Area, Southern California, and Boise are like the three markets that they're kind of playing in at the moment. But how did you get your your revenue per door so high? I was just doing some math. It says it's like $350 per door per month. I just did 3,000,000 divided by 700 divided by 12. And you said a good revenue per door was like 150. [00:15:08] S0: There's one caveat there. My, when you calculated my revenue per door, which you did the math correctly, that's including revenue from our maintenance department. So we have an in house maintenance function that performs work at the properties that we manage. Now that's optional. A lot of management companies don't have that. And I was, when I was giving you like the benchmarks for a good revenue per door or revenue per unit, that would be without the maintenance revenue included. About 40, 35 to 40% of our revenue comes from that maintenance component. So once you back that out, I can't do the math off the top of my head, but it's mid 2 hundreds, I guess, is our [00:15:44] S1: Let's actual say it's 30%. 30% of 3,000,000 would be 900,000. So 2.17, so it's about $300 per door. I mean, still a really good. [00:15:54] S0: Well, 30% is from the maintenance. So 70% is from the other stuff. [00:15:59] S1: $2.50, about $2.50 per door per month. [00:16:01] S0: Yeah, there you go.
00:16:01 · Peter Lohmann, Nikolas Hulewsky
[00:16:01] S0: Yeah, there you go. [00:16:02] S1: Sounds right. If I'm sitting at home and I'm like, and I'm entrepreneurial and I'm listening to this, I'm like, man, okay, great margins. And it seems like I could go out and get some doors. I wanna try this business. How how would you go about starting one of these businesses? Would you start it? Would you acquire it? Where would your mind be if you wanted to get into property management? [00:16:25] S0: If you've not run a small business, I would not buy one. I would not buy a property management company to start. There's... I think there's other types of small businesses that you could buy with no experience running a small business and probably figure it out. I wouldn't wanna try and do that with property management due to the... Just the complexity of the business. I would start one if you wanted to do that. And the first thing I would do there is check your state regulatory requirements. Most states require you to have a broker's license, a real estate broker's license to start a property management company. Some states don't require it. It's easier or harder in some states to get that. Or sometimes if you have a buddy who's in real estate, you can ask him and he'll kind of let you operate under his brokerage for a while. So, that's the first thing is just check with your state requirements but once you get that figured out, yeah, I mean, you just basically put your shingle up and start going to real estate investor groups and. I was [00:17:19] S1: going to ask, how would you get your first door?