Navigating Property Management: Lessons from a Real Estate Veteran

Mike Hambright (00:00.75)
Hey everybody, welcome back to the show. Today I’m here with Robert Hart, who’s also a DFW native here, a local, I guess, I don’t know if you’re a native or not, not many are native to DFW, but some are I guess. But we’re gonna be talking about kinda getting clarity around your rental strategy and share some lessons learned from the trenches, if you will, of not only being a property manager, being a rental owner, being a real estate entrepreneur that has a ton of experience. So, Robert, great to see you today.

Robert Hart (00:29.977)
Thank you, sir. Good to see you as well.

Mike Hambright (00:31.502)
Yeah, yeah. So a little interesting tidbit. So I’ve done almost 2,000 podcasts over the last 13 years, and it’s very rare that I don’t interview somebody that I already know or at least know of. And you and I are fast friends here. We just met about 15 minutes ago. So looking forward to getting to know you a little bit better today. So before we kind of jump into this, you’ve got a lot of different experiences that we talked about in the real estate space. Like maybe just tell us a little bit about your background, about how you got to where you are today.

Robert Hart (01:02.295)
Yeah, so when I was a broke college kid, my roommate at the time had already graduated because at the time, a couple years after the fact I got out of the Navy, I started college, right? And so my roommate said at one point in time he wanted to own 10 duplexes. I’m like.

That kind of sounds dumb. You just want to, I didn’t understand it. Right. And so at the time I’m aging myself here, but Barnes and Nobles and Borders were very popular companies. So I ran down there and I bought every book I could and I would read them over and over and over. I, at the time I was, I think 25 years old.

And I graduated college, I chased money, I got the highest paying job I could find. And so at the age of 30, I bought my first owner occupied property. And about six months after that, I bought my first investment property. I came under the threshold because Obama at the time had a $8,000 credit.

they actually send you a check in the mail. And so I hadn’t filed my taxes yet for the year. So I still was within that threshold of income limits and the first time home buyer program. So they sent me a check for 8,000 bucks, which essentially covered my down payment for that townhouse. It was just me and my dog. I just lived in one room, know, bachelor style. And again, about six months after the fact, I bought my first duplex. And so I had that.

Mike Hambright (02:25.134)
Mm.

Robert Hart (02:36.569)
I that when I was 30 and I sold that when I was 42. So I had it, let’s call it 12 years. And so I sold it a couple of years ago. And since then, you know, when I bought it, I bought it for $115,000. Each side of rented for 700. There were two twos up in Aubrey off of 613 Cherry Street. You can look it up later if you’d like to. But…

Two-two’s, no garages, real simple, probably C-class property. And when I sold it, the rents had doubled to 1400 piece. And so before I’d sold it, I did full rehabs on after the tenants moved out, know, painted the exterior, new HVACs, new windows, all that stuff to maximize rent. And along the way, I had done a couple of cash out refis and started buying properties, you know, from there on out.

using that money. Initially, I was, we didn’t talk about this, but when I first started buying, you know this better than I do. You could just, it was like shooting fish in a barrel. You could buy stuff that was turnkey, ready to go, super cheap, great rent rates. And then as time progressed, it got more and more difficult to do because the prices went up and the rents didn’t go up. They weren’t, they weren’t in parity, I guess you could say.

And so I started investing down in Fort Worth area, Tarrant County. I didn’t like that as much. And so I sold those, came back up to Denton County, but I was scared to do value added property. I’d never done a full rehab, but in order to be able to do what I wanted to do, I had to, I had to make that leap. And so I did it. And after the first one, it wasn’t that bad. so lessons were learned and then you just progress, you know,

from there and keep going. I’ve used a couple different GCs throughout the years. I used one GC, he had great prices initially, right? And then as we would go, his prices increased. I met another guy, he was a painter and I helped turn him into a GC. For example, the…

Robert Hart (04:44.929)
The second project we did together, instead of using the P trap kit for underneath the sink, right? That you buy it as a kit, he just used a flex pipe and hooked it up. I said, no, no, no, no. I said, we can’t do that. We have to buy a kit. And so…

It was good because the prices were good, but I had to go back after him and check all these things. And so as time went on, his prices got to be the same as my old GC. So I ended up going back to my old GC. We talked previously about clay pipes and cast iron pipes. And so I didn’t learn that hard lesson until about five or six years ago.

Mike Hambright (05:11.256)
Yeah.

Robert Hart (05:26.231)
because a lot of these properties pre 1980 or so are essentially hitting end of life with these cast iron pipes with leaks. these leaks cause, and what Texas properties in general have foundation issues because of the clay. And so these leaks are causing excess foundation issues on top of the clay issues that we already have. so having to go re-pipe.

Mike Hambright (05:41.315)
Right?

Mike Hambright (05:48.482)
Yeah.

Robert Hart (05:51.819)
a house like that, gonna be an easy $20,000. I haven’t done one in a few years, I’m sure it’s gone up since then, but.

Mike Hambright (05:57.804)
Yeah, yeah. Well, let’s talk about some things that really move the needle for rental owners, right? First, let’s talk a little bit about property management. So I outsource mine to somebody that I know. mean, generally most people don’t, they hate property management. They don’t want to do it themselves. It’s the lesser of the evils to outsource it, but they know they’re not being watched as closely as they would if they did it themselves.

There’s all these trade-offs, right? So not only were you doing some of your own, you started a property management company and I know you’ve sold it now, but grew that to, I think he said, 900 doors or so. Let’s just talk first about just the importance of solid property management to a landlord. And then let’s talk about some of the pros and cons of doing it yourself. But first, let’s talk about, you know, from your perspective, because you’ve been an investor and a property manager, of how important that is to a rental property owner.

Robert Hart (06:53.849)
honestly don’t know which is more, and this is gonna sound weird to some people that are listening, I don’t know which is more important, either the asset itself or the property manager, right? Because they can kill you. I mean, they can hardcore kill you, right? Because you also have to think about incentives.

Mike Hambright (07:06.668)
Yeah, for sure.

Robert Hart (07:14.391)
because if say a repair order comes in, right? And it’s like, we need to send out the plumber for this or whatever. Instead of taking the time to possibly troubleshoot it somewhat with the tenant, some managers will just send a plumber out, even versus just sending a handyman out first. Cause you know the start difference between a handyman and a plumber, right? And then not only just that, not only just troubleshooting it, but…

figuring out where the fault and responsibility lies. You know, do we go back and build a tenant back for this because they were dumb? Or do we just put it on, or do we just put the onus on the owner and just build the owner for most times? They just build the owner for it and the owner doesn’t pay attention or they don’t, they don’t read their owner statements. None of that stuff. I’m not gonna look at owner statements for six or eight months and then come back and like, Hey, what happened here? By then, you know, nobody, nobody remembers anything from even two weeks ago, especially for managing a fair amount of doors.

Mike Hambright (08:05.624)
Right.

Yeah, and one of the big things is really, like lot of people, like vacancy doesn’t show up on the P &L other than just lack of revenue. So, you know, a lot of times people will say, well, I’ll just, if I were doing it myself, I know what would happen is we wouldn’t turn properties as fast as a professional company.

should be able to. And so we’d be looking at, it costs us a lot less to get it done. But it’s like, yeah, it also set vacant for an extra month that it would have anyway. maybe give the perspective of the property manager side on, and everybody’s probably different, but the sense of urgency to kind of turn those things around.

Robert Hart (08:46.113)
Yeah, because whenever you get those owner statements, all it does is have a zero line. It doesn’t show the mortgage payment and the escrow for the taxes and insurance and all that stuff. And again, most of these owners, a lot of times they’re out of state owners or they couldn’t sell their house. So they turn it into a rental. And so they’re just, you know, trying to understand it and get their feet wet. yeah, so going back to incentives, you know, it…

the priority manager is incentivized to turn it as quickly as possible to get re-rented, right? So they get that lease fee. And when they turn it, you also need to consider being a market maker. And what I mean by that is, they have their own people do it? And what kind of rates are they charging? Or do they outsource it, right? Because…

I went through, think, three different property managers before we started our own. Again, I just got tired of it not getting taken care of properly and not notify me about this and not vetting proper tenants and things like that. Because again, it goes back to, I don’t even know which is more important, the asset itself or the operator that you have helping you manage your stuff.

Mike Hambright (09:59.406)
Yeah.

Robert Hart (09:59.865)
Because a lot of times these property management companies, don’t even own properties. A lot of times they’re just young kids or college kids and they’re like, okay, this comes in, they’re order takers. That’s it. They don’t think about the owner on the other end.

Mike Hambright (10:11.555)
Right.

Mike Hambright (10:16.31)
Yeah, yeah. You could say that, by the way, know you also own a brokerage. You could say that about most agents too, is they also don’t, not, they might own their primary residence, but they don’t own real estate pretty often, most of time, right?

Robert Hart (10:29.881)
But it’s funny that you say that because that’s true. Most of the agents, they never buy anything along the way and they’re agents for, you know, if they’re good, they’re agents for, you know, 30 or 40 years and they stay agents for 30 or 40 years because they don’t buy any of own product. Here’s a good one for you. You know where Savannah is on 380?

Mike Hambright (10:52.046)
Yeah, I think so, yeah.

Robert Hart (10:53.465)
It’s in Denton County. real close to Providence Village where all that traffic is with it’s terrible up there. This agent friend of mine, she calls me in March of 2020. This is a good story. She calls me in March of 2020 and this owner that she knows, she helped him buy the property. She helped his daughter find a rental property. He called her, he’s a wedding singer and he goes, hey.

Everything is dried up or they have a cover band too, I guess and so all these bars are shutting down Nobody’s doing anything. He needs to sell his house He hadn’t been there in like two months anyway, because he’s traveling a lot for work She was can you buy his house and I can always buy a house. I’ve got plenty of dry powder. What do you got? She should have bought this house She didn’t do it. Anyway She just wanted her 3 % that’s all she that’s all she cared about was her 3 %

Mike Hambright (11:42.606)
Probably didn’t even think about it.

Robert Hart (11:49.593)
Anyway, so we start at the house at the time is probably worth 250 or so and keep mind this is March of 2020. The world is shutting down. Banks are everything shutting down. I’m like this is going to be a really good idea or a really stupid idea. Regardless, I’ve got the cash and I’ve got the cash reserves to float me however long I need to go. So he started at like, I don’t know, 200 or so. And I hit him in the shorts at like 167, 395, something similar to that.

He took it, I bought it and closed in like two weeks. I found out after the fact that I didn’t like this subdivision very much. So I had the property for, up, three bed house, two and a half bath. I turned the game room into a fourth bedroom. It had a cutout as soon as you go in it. I turned that into a closet. We put a window in there, sold it. After about three years.

I netted right around 150. I still had the initial investment, but I netted around 150 after about three years on the property, paid long-term capital gains on it. It didn’t cashflow hardly anything, because I had some really high maintenance tenants while we were in there. Going back to putting the onus on the owner, who breaks a toilet from…

Mike Hambright (13:01.838)
Hmm.

Robert Hart (13:09.773)
I mean, like the bowl literally cracked. I’d never seen that happen. And this wasn’t like a 50 year old house even. The house was 15, 20 years old. Anyway, they complained that when they set on it, it just randomly cracked. You know how just stuff randomly breaks? Anyway, so sold that and hadn’t invested back in there, but I think it’s always important.

Mike Hambright (13:12.408)
Yeah.

Mike Hambright (13:25.582)
All right. Yeah.

Robert Hart (13:36.353)
Real estate investors, if you’re a long-term investor and you’re not just having one and two properties, we always think of opportunity cost. You’ve got this cash sitting there. like, what can I do with it? What can I do with it? It’s always great, in my opinion, to sit on cash if there’s nothing really good to pull the trigger on because of situations like this.

Mike Hambright (13:57.518)
Yeah, you’re willing to jump on opportunities that you wouldn’t be able to otherwise. Cool.

Robert Hart (14:03.989)
Absolutely. I’ve never used hard money. I know when you’re starting out a lot of investors do. It’s a great product out there if you know what you’re doing, but it can also bite you if you don’t.

Mike Hambright (14:16.204)
Yeah, yeah. let’s talk about, so obviously property management critical. let’s just, just to wrap that one up, talk about, I know you sold a property management company, but like, what, I guess, what do you advocate now? Like people should do it themselves or do it themselves after a certain number or do it themselves up until a certain number or what do you, I basically tell people, I don’t think they should do it ever themselves, but.

Unless you want to own a property management company, like why would you be in that business? But what are your thoughts on that?

Robert Hart (14:51.031)
with you, I never self managed even when I bought that first duplex when I lived in my little townhouse, I found a manager, I didn’t know anything about it. You guys take care of it. There’s all kinds of laws out there and it varies from like city to city and county. I mean, it’s almost an impossible job if not an impossible job.

Mike Hambright (15:11.49)
Yeah, it’s a tough business, So let’s talk about just navigating these waters that are hitting everybody, really nationwide, also especially here in Texas as property taxes. There’s a lot of benefits to living in Texas, but property taxes is not one of them. Property taxes and insurance that are eating a lot of guys alive. So how do you navigate those things these days?

Robert Hart (15:36.439)
Yeah, that’s you’re exactly right. The insurance and the tax and I don’t even know which one’s worse.

Right? Because some of these renewals come up and we talked about that house I got in Roanoke. went from 1200 bucks to 2000 something. And then the following year it was like close to $6,000 for a renewal. My uncle is a broker and we shop every year and I’m always trying to find the deals. Even if it’s a premium, it’s like 150 bucks cheaper somewhere else.

Mike Hambright (15:57.294)
crazy.

Robert Hart (16:08.161)
I’ll swap because you know, if you got 20 properties, for example, all that stuff adds up over the course of the year. Do the work, save on the yield. But yeah, from what I understand, a lot of landlords that got in the business, especially that have a higher basis, that got into the business over the last probably two, three years, you know, they might have some good long-term fixed low rate debt. Right. However,

Mike Hambright (16:09.368)
Yeah.

Mike Hambright (16:15.65)
No doubt.

Robert Hart (16:37.049)
The insurance and the taxes are creeping up on people thinning their margins out.

So we’ve seen a lot of supply, think like 50 or 60,000 in DFW units have come to market in the last close to year or so, which I think there’s still some that that’s hitting, but a lot of that stuff’s going to dry up, I think, in the next eight to 12 months. And from what I understand is there’s not a lot of projects on the horizon due to, cause you know, you can see it coming two, three years out.

Mike Hambright (17:02.04)
Mm-hmm.

Robert Hart (17:11.257)
with these bigger projects. So a lot of these owners, from what I understand, are looking to exit and sell and turn these back into owner-occupied stuff. That’s going to take a lot of the supply out of rental properties that are available, which if the supply dries up, then what happens to the rent costs?

Mike Hambright (17:31.746)
Right. Yeah.

Robert Hart (17:32.855)
then we’re looking at more rent bumps over the next two or three years. So I’m more of a fan of holding onto it, thin your margin out, even if your cash on cash goes down to four or 5%, hold onto it because after all the dust settles, you’re gonna be thankful that you did. In my opinion.

Mike Hambright (17:53.858)
Yeah, and it’s interesting because every market, if you were to look like nationwide, this way you can’t listen to like national stats or even like large statewide stats is like national stats are, I would presume that home ownership is generally going down now. it’s just, interest rates are high, it’s harder to be an owner, but you know, that might be different in DFW for example, where we’re at because

there’s such an influx of population. Like even if the pricing seems high, it’s low relative to where that person’s coming from, especially if they’re coming from California or somewhere else, right? And so I don’t know what home ownership stats are in DFW. We could probably Google it and kind of find out, but yeah, that’s why you always have to look at your local stats, because that could change dramatically from national stats that we all look at.

Let’s talk a little bit about what’s the right rental property, because you and I were talking before this about this illusion of the cheap property. It seems cheap and the rent to value ratio is high, but they also turn more, there’s less pride of ownership. And so did you make some mistakes there? I mean, I know I did. So did you make some mistakes there?

Robert Hart (19:05.133)
lessons were learned. The good ones aren’t cheap and the cheap ones aren’t good.

Mike Hambright (19:09.942)
That’s right. And by the way, you could have the best A-class property in the world too, and it doesn’t mean that that person’s not going to be a slob, but less likely to be, I would say. The reality is, is it appears like if you were to just look at it academically, that those properties would cash flow the worst. However, there’s less turnover.

the values tend to go up more on the A B class properties, like there’s not as much appreciation in C and D class areas as there are in kind of A and Bs, guess. so share some of your lessons learned there.

Robert Hart (19:44.313)
Oh yeah, absolutely. mean, you can go look at certain class of properties and go look over the last like, let’s call it 30 years or so. And if you adjust for inflation, a lot of these lower end properties are worth the same amount in asset value or even less than they were, again, adjusted for inflation 30 or 40 years ago, as compared to the A and B class properties.

that have that consistent year over year of, depends upon how you pencil whip it, three to 5 % in appreciation, depending upon the town and the location of things. But yeah, I mean, you can even have more in certain pockets of like Dallas, for example, but yeah. And so looking on the spreadsheet, it might be a spreadsheet killer as far as the cash flow goes, because everybody talks about escaping the nine to five. And so,

when they go start looking at different properties and evaluating them on their spreadsheet, you know, like, oh, well, you know, I don’t see any point in buying, you know, this A-class property. Because a lot of people talk about the 1 % rule or 1 % or more type of thing. But, know, you go to buy this property and it has turnover, well, congratulations, as soon as that tenant left or got evicted or didn’t pay or whatever, you got a squatter moving in or breaking windows or vandalism, take your pick.

Mike Hambright (20:52.152)
Yeah.

Mike Hambright (21:06.424)
Yeah, yeah. Robert, why don’t you share your thoughts on it, because I know you own a brokerage, you’re adding offices and licenses across lots of states and stuff, and one of the things you were talking to me about before we started was how you do lead gen. So you generate leads and, know, worst case scenario, it could be a listing, but you might get a first crack at…

possibly a wholesale dealer or buy and hold or even a fix and flip. And I think there’s been this convergence of kind of the traditional agent business and investors, like more and more investors, especially in states that require it now have to get licensed. And I think there’s a lot of, I saw a stat recently that there’s more agents in America than there were.

houses that sold last year. So the average agent, on average, I know there’s people that crush it and there’s people that do zero, a lot that do zero, but on average, agents are struggling to make money as well. And so they’re basically kind of going down towards the investors and the investors are coming up towards them. But just talk about that phenomenon that you kind of see going on there.

and how it might make sense for more agents to get into the investing business or seek that out. And just talked about you worked with an agent that never even thought it didn’t even occur to her that she should have just bought the house herself. But just talk about that convergence that you see going on there.

Robert Hart (22:23.417)
Yeah, so I think the stat official for last year was like 76, 74, 78, some percent like that of all agents last year did not do one single deal. Right? And so it’s going to get worse. The new stats just came out. Pending home sales is at their lowest level since NAR has ever started recording it.

And so you had this huge influx of investors, a huge influx of agents that got in the business over the last three or four years. It was relatively easy money. mean, and so.

they’re finding out what it’s like now. And it’s always done this. You’ve always had these cycles, just no different. Yeah, no different than real estate. And so what you’re talking about is a preto distribution where essentially 20 % of the agents do 80 % of the deals, right? And so you’re seeing a lot of agents get out of the business now. I went back and I reached out to some agents that I bought houses from.

Mike Hambright (23:02.766)
It’s a cycle, yeah.

Robert Hart (23:20.601)
over the last year or two, I’m like, hey, I know this person. Let me reach out to them see if they want to join the brokerage. And I text them and I didn’t never heard anything back. I’m like, okay, maybe it is don’t like what we’re having to offer or whatever. And I go and look at their license and it’s now inactive. So you’re seeing more and more agents get out now and they’re going to get W-2s or whatever. So there’s a lot of that going on right now. But as far as us,

Mike Hambright (23:33.966)
Hmm.

Mike Hambright (23:42.188)
Yeah.

Robert Hart (23:45.977)
You know, most of our agents, still a fair amount of them are part-time. We’ve got one that’s going full-time in the next month or so, but the full-time agents that we have, they’re still eating pretty healthy. They’ve got their own pipeline that they’ve built or they use our leads. We’ve got a team of cold callers that we target homeowners for a specific demo. And so those leads flow in. So we just try to hit them, them, me and the homeowners before anybody else gets to them, agent outreach.

So it’s not expired, it’s not for sale by owners, it’s people that might be more motivated to downsize or sell or whatever. The last two wholesale deals that we did.

Mike Hambright (24:24.63)
Yeah.

Robert Hart (24:30.689)
were from was because one guy hadn’t paid his mortgage in like three or four months, so he needed to get out. And then the other one she was behind like a month or two or so. And so we found quick quick exits for those folks and they still got paid and we made a little bit of cash and you know moved on. But.

Mike Hambright (24:49.741)
Yep.

Robert Hart (24:51.585)
more agents need to put more tools in their tool belt to be able to satisfy the clients that they come across. Because not everybody wants traditional, right? And so we’ve got a couple other products that we offer. We guarantee your house will sell in 120 days. Because we’re attached to that mortgage company, there are certain things that we can do that the traditional agent doesn’t have the ability to do.

Mike Hambright (24:55.938)
Mm-hmm.

Mike Hambright (25:05.037)
Right.

Mike Hambright (25:17.326)
Sure, yeah. I think that we’re going to see a lot more convergence there of just more ways to make money in real estate. So like I said, some people just want, they want to be done now and a traditional agent can’t help with that. And a lot of investors look at a lot of deals to find that one.

and if they can at least list it for them or refer it to a listing to make some money to kind of get some of their bait back from a marketing standpoint, that’s not a bad thing either. So a lot of that convergence going on there. Robert, so if folks wanted to connect with you, learn anything more about you or find a way to do deals with you or anything like that, where can they go?

Robert Hart (25:43.897)
Correct.

Robert Hart (25:54.433)
Heart of Texas dot com or Heart of Texas dot co we own both of those. They can shoot me an email directly if they’d like to at my investor email address robert dot heart dot property at gmail dot com. If they even just want me to take a look at a deal that they’re looking at you know I don’t mind looking at it for them to make sure they’re not getting in over their head or paying too much or you know what.

However I can help, mean, even if it’s just me pulling some comps for them and sending them the comps and say, hey man, look at your stuff, look at your buy box and know what you’re getting into.

Mike Hambright (26:29.858)
Yeah, awesome. Well, hey, thanks for spending some time with us today and sharing your knowledge. All right, everybody, hope you have a great day. We’ll see you on the next show.

Robert Hart (26:33.111)
You bet, thank you sir.