Nikonomics - The Economics of Small Business
00:03:14 · Peter Lohmann, Nikolas Hulewsky
[00:03:14] S0: Yeah, so there's three main things you do as a property manager. Collect the rent, deal with maintenance, and lease up vacant units, and deal with lease renewals. So rent collection, maintenance, and leasing is sort of the three big categories that I think of. [00:03:27] S1: And what are your typical, I'm going to say, I'm going say clients for property owners, and I'm going to say tenants for tenants. So your clients, what's their typical profile? Are they, they have one or two units or are they a 100 units? Like what, what does that look like? [00:03:42] S0: The one or two units for sure. We have a lot of folks, we call them accidental landlords. These are people who moved out of the property and decided to rent it out for one reason or another instead of sell it, or maybe they inherited it or something like that. And then we have intentional investors. These are folks who purposely bought a rental property. And these are the kind of folks you'll find hanging out in like bigger pockets and going to the real estate investing meetup groups in your city. And those folks are more likely to have a handful of units rather than just one. I believe about 60% of our clients have just one unit. And then like, you know, it kind of scales up from there where our biggest client has like 60 units. [00:04:24] S1: This is my own ignorance, but I would think if I owned one or two units, I would manage the property. Like, would I have a property management company come in and do that?
00:04:24 · Nikolas Hulewsky, Peter Lohmann
[00:04:24] S1: This is my own ignorance, but I would think if I owned one or two units, I would manage the property. Like, would I have a property management company come in and do that? [00:04:33] S0: Great question. So, first, a lot of people do. So, about about half of those folks do self manage but reasons you would hire a property manager, there's a few. One, bear in mind, a lot of these folks are moving away or they don't live in Ohio. So it becomes much more challenging to manage the property when you're not local. Also, there are a lot of legal and regulatory gotchas when it comes to landlord tenant law, fair housing, and things like that. And so using a professional property manager will help you insulate yourself from those risks and make sure that you're kinda doing things the right way so that your tenant doesn't sue you. Or if they do, you have all the right insurance and protection. [00:05:12] S1: Okay. So that that makes sense. If they're if they're these accidental landlords or they inherited it, whatever, you know, they're probably overwhelmed by, at the prospect of managing the property. So for them, like out of sight, out of mind, cool. I'll pay the property management company just to take my plate. Cause I don't want to worry about it.
00:05:12 · Nikolas Hulewsky, Peter Lohmann
[00:05:12] S1: Okay. So that that makes sense. If they're if they're these accidental landlords or they inherited it, whatever, you know, they're probably overwhelmed by, at the prospect of managing the property. So for them, like out of sight, out of mind, cool. I'll pay the property management company just to take my plate. Cause I don't want to worry about it. [00:05:27] S0: Yeah. So it could be for like a risk reduction, but it also may just be sort of like for convenience. It's like, why do people hire house cleaners? They don't know how to clean. It's like, well, no, they do know how to clean. It's just they'd rather have someone else do it. They got other things they'd rather be doing. [00:05:40] S1: So for the accidental landlords, how do they pay you? Is it a percentage of collections or is it a fee based, oh, thanks for managing my property. Here's a $100 this month. [00:05:51] S0: So you can do both or either. So we happen to do a flat monthly rate, a flat monthly fee per month, but a lot of property managers, I would say actually most property managers charge a percentage of collected rents. [00:06:03] S1: Okay. And for your your clients that are large, that don't just have the onesie twosies, they're not accidental landlords. Is it the same? You're just [00:06:11] S0: charging a flat fee? Similar. Yep. We do offer discounts. Like, if you have 20 units with us, gonna give you a better price than somebody who has one or two, but yeah, same thing, flat monthly fee. [00:06:21] S1: For your business, you're just doing residential. [00:06:23] S0: Correct.
00:06:23 · Peter Lohmann, Nikolas Hulewsky
[00:06:23] S0: Correct. [00:06:24] S1: Are there commercial property management companies? [00:06:26] S0: There are. Yep. Far fewer of them because there's far fewer commercial properties, and they're also a lot easier to manage actually. But yeah, that's the thing. [00:06:34] S1: When did you launch your business? [00:06:36] S0: 2013. [00:06:37] S1: Oh, you've been in this a while. Okay. I was thinking like, oh, maybe 2020 because you saw a bunch of people buying homes and then a bunch of people thinking, oh, I'll house hack or oh, I'll, I can buy a rental property or probably a lot of people who bought Airbnb's that are now either can't get rid of it or are just turning it into an investment property. Tell me a little bit about the history. So 2013 until this year, 3,000,000. How long did that ramp take?
00:07:03 · Peter Lohmann
[00:07:03] S0: The history is that prior to 2013, I was working as an engineer. I have a degree in electrical engineering and I was working as a control systems engineer. My partner and I, my business partner who's also an engineer, he and I had started buying up single family rentals here in Columbus, Ohio in 2008. We bought our first one. So, we were buying and owning and self managing single family rentals for a few years there while we were working as engineers and we were self managing and then in 2013, about a year leading up to that, we decided, hey, we wanna own our own business. We wanna do our own thing. We don't wanna work for other people. What can we do? Well, we already know how to manage properties. Why don't we just start a property management company? So, in 2013, I quit my engineering job and started RL Property Management. At the time we had zero units, no clients, nothing. It was me in my apartment and that was it. And over the next year, we just we just started adding clients and my business partner quit his engineering job, came on board full time. So from 2013 till today has been just a slow but steady ramp up of units under management, revenue, employees. You know, we figured everything out the hard way because we had no experience in professional property management or real estate other than the small handful of units we owned. We didn't have any family in the business or anything. So we honestly made every mistake in the book and I, a lot of what I do these days other than keeping an eye on my own management company is trying to put out content that's helpful for other people who are starting or growing a management company, sharing a lot of the stuff that I wish I would've been able to read or consume when I was getting started.
00:08:42 · Nikolas Hulewsky, Peter Lohmann
[00:08:42] S1: Alright. Now's the part of the show where I feel the most uncomfortable, but my therapist says I need to face my fears. So here we are. I've started a newsletter, and I want you to subscribe. And what you're gonna get every single week are the aggregated conversations from that week that I have on this podcast with an overview of what their business actually looks like. I'm also going to throw in a review of one or two businesses that are listed for sale. I'll give you my opinion on whether or not the EBITDA multiple is good or there's customer concentration or there's red flags or green flags. And then lastly, I'm gonna give you one piece of actionable advice every single week on how to buy your first business. So click the link below, subscribe to my newsletter, and let's get back into the shelf. [00:09:16] S0: There's so much to it with all the accounting and all the ins and outs of leasing and how do you deal with these clients and what happens if you have to file an eviction and there's just a lot to it.