Nikonomics - The Economics of Small Business
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?
00:17:19 · Nikolas Hulewsky, Peter Lohmann
[00:17:19] S1: going to ask, how would you get your first door? [00:17:21] S0: Yeah. I think the way we did it is I spent a lot of time on BiggerPockets, and I would just go there and I would talk about the fact that I offered property management, and I would try to offer value to other folks who were asking questions about real estate in my area. [00:17:34] S1: So I don't know BiggerPockets that well. I mean, I know it's a thing, and I know they have forums. Why would you go to BiggerPockets? [00:17:39] S0: It's just probably the highest density of real estate investors anywhere on the Internet. Oh. And so you can set up search terms for their forums where, like, anytime someone mentions Boise, you'll get an email. Then you can jump in and see, oh, they're talking about, does anyone know a good plumber in Boise? And then you can jump in there and say, oh, yeah. Here's a great I used last week. By the way, I run a management company if you ever want to just be done with these headaches. So, it's kind of like that. [00:18:05] S1: Okay. So, you would start with bigger pockets. That's kind of the area that you would go first. [00:18:09] S0: I would go bigger pockets online and for offline stuff, I would go to real estate investor meetup groups and there's two or three or five of these in every city. They're usually held monthly and I would try to be at every single one. [00:18:21] S1: I don't know what those are. A real estate investor, I mean, I can figure it out, but who organizes them? Are these all just self organizing? Are they a part of an organization?
00:18:21 · Nikolas Hulewsky, Peter Lohmann
[00:18:21] S1: I don't know what those are. A real estate investor, I mean, I can figure it out, but who organizes them? Are these all just self organizing? Are they a part of an organization? [00:18:29] S0: They're usually independent. Just somebody or some small group of people wants to meet other like minded folks, and they tend to change hands over the years and to sort of be passed down to the new generation of real estate investors. These groups are are hit or miss. I would try going to a few of them. Some of them are really heavy on the sales pushes, sort of like get rich quick real estate stuff. Others are very much organic, just a bunch of guys hanging out and talking real estate. These tend to be amateur real estate investors, meaning this isn't their full time professional job. They usually have a job. They're buying. They're flipping. They're renovating. They're... There's hard money lenders there. There's realtors. There's title company people, stuff like that. [00:19:11] S1: How do you find those? [00:19:13] S0: Literally just search, you know, Boise Property Management or Boise Real Estate Investor Meetup. [00:19:19] S1: Oh, all right. So it's not like, oh, they're usually on bigger pockets or they're usually on Facebook or they're usually... [00:19:23] S0: No, they're kind of organic. Yeah, Definitely look on Facebook too, but I would start with a Google search.
00:19:23 · Peter Lohmann, Nikolas Hulewsky
[00:19:23] S0: No, they're kind of organic. Yeah, Definitely look on Facebook too, but I would start with a Google search. [00:19:28] S1: Yeah. Alright. So let's say I go to BiggerPockets or I go to real estate investor meetups and I've got a fish on the line. When you got your first customer... First client, excuse me, was it one door? Was it a package of doors? Like, how did you land that first client? [00:19:43] S0: I believe our first client was a small handful of doors. I think that was just chance. [00:19:49] S1: Did you offer a discount? Were you like, hey. I'm just trying to get into this. Let me let me do it for a month or