Real Estate Expense Management

John Harcar (00:01.006)
Hey, guys. Welcome back to the show. OK, we’ll start over again. One, two, three. All right. Hey, guys. Welcome back to our show. Today we’re here with Larry Levine. And what we’re going to talk about is real estate expense management. Kind of a mouthful. Remember, guys, here at Investor Fuel, we help real estate investors, service providers, I mean, really all real estate entrepreneurs, 2 to 5x their business, which allows them to build the businesses they want to build.

and live the life that they’ve dreamed of. So Larry, welcome to our show.

Larry Levine (00:34.282)
Thanks so much Don, I appreciate being here.

John Harcar (00:36.076)
Yeah, man, I appreciate you the time to come on. Real estate expense management. I know that it’s important. I know not a lot of people pay as much attention to it as they should. But before we get into all that, why don’t you tell our audience a little bit about, you, your background, you know, how you came from, how you got here.

Larry Levine (00:55.082)
Sure, thanks so much. some 40 somewhat years, almost 40 years of experience, my most recent experience before working for P3 cost analysts, I owned a home care business in Massachusetts for 14 years, helping families with their elders take care of them at home. I had business partners, I had a franchisor. I was there, like I said, for 14 years, but we ended during COVID and it was time to leave the business for numerous reasons. My daughter’s graduating college during COVID, relocating to Maryland.

So I essentially ended the business, sold it back to the franchisor, followed here to what we call DMV, DC, Maryland, Virginia area. And soon after moving here, I joined P3 Cost Analysts and were able to help through our auditors and intellectual property, help business owners reduce their indirect vendor overcharges. So we can talk about what an indirect vendor overcharge is.

John Harcar (01:32.322)
Mm-hmm. Mm-hmm.

Larry Levine (01:53.13)
If you’re in a business, a business owner, a real estate business owner, you’re probably paying a lot of attention to your top line, to your portfolio, to building your business, buying properties, the value of the properties, whether it be multifamily, commercial, or hotels. You know you have other expenses to support this business. Telecom, electricity, if you’re a multifamily community or even commercial real estate or hotel, you have waste expenses. You definitely have property tax expenses.

John Harcar (02:08.11)
Mm-hmm.

Larry Levine (02:22.289)
If you’re a really large group of if you if you have a large group of properties, may very well if you’re like multifamily communities or hotels, you may very well have leased copiers to support the business. You probably have telephones. I’m sure you have telephones to support the business. You may have uniforms and linens if you’re focused depending on what the business itself was contained in those properties. These are all expenses and we consider those to be indirect expenses.

while you’re paying attention to these top line expenses that are very visible to the business, may not be, you’re probably not paying so much attention to the utilities or the waste or the property taxes I said, and everything is negotiable. The worst they’ll say is no. But if you ask them, you may have an opportunity to reduce those expenses, but not as much as somebody that has the experience, the cost reduction experience, such as a business such as ours.

John Harcar (03:18.464)
Okay. And what is your introduction or experience to real estate? How did getting that or maybe applying this to that bring up maybe some challenges that you might have went through, maybe some things that you had to overcome?

Larry Levine (03:34.506)
My personal introduction to real estate, so I used to own properties as a homeowner. I currently don’t own a portfolio, although I’m looking at some creative financing options for the future. At present, my sole interaction with real estate are with real estate owners. As I said before, commercial real estate owners, some of our clients, commercial real estate owners, multi-family real estate owners, hotel owners, senior living, the majority of the revenue comes in through rents, actually.

John Harcar (03:53.912)
Okay.

Larry Levine (04:05.113)
Any kind of manufacturer typically has real estate. Any other business, automobile groups, any multi-location business might own real estate. We’re able to help them and other businesses as well reduce some of their indirect vendor overcharges. As I said before, for the most part, a building, I didn’t say this is not necessary, but a building is a building is a building. We’re able to help the owner reduce some of these expenses.

Some kinds of businesses don’t have as much expenses as other types of businesses. example, all of them have electricity expenses, but a multifamily community passes on those expenses usually to their tenants, where a hotel or commercial real estate business usually carries those expenses themselves and has, depending on where they are in the United States and how large their property is.

John Harcar (04:36.706)
Okay.

John Harcar (04:48.002)
Mm-hmm.

Larry Levine (05:00.649)
those expenses might be quite large. And I should say I can give some examples of some savings we’ve provided to some businesses recently. just typically, these are some of these are large groups and some of these are pretty small groups, but a six location portfolio, mixed portfolio out of Connecticut. One of the businesses was a one of the properties was a multifamily community of 120 units or so, I think we’re able to save that particular property $8,000 a year on their waste expenses.

John Harcar (05:05.88)
Yeah, please.

John Harcar (05:29.688)
Wow.

Larry Levine (05:30.922)
When we combine that one property with the other five commercial real estate properties, again, the multifamily property, the the electricity is passed on to the tenants, but the five other commercial real estate properties, they carry the electricity charges themselves. Combined the common expense on the commercial real estate and all the real, all the electricity on the five others, we were able to reduce those expenses by $43,000 a year. Those are real midline expense reductions that, that increase the bottom line profitability.

John Harcar (05:54.883)
Mmm.

Larry Levine (06:00.487)
Another property we saw here, sorry.

John Harcar (06:00.504)
So how?

I was gonna say, how are you, how do you have the, mean, is there a special knowledge that you learn, special something you had to, how are you able to do that, that the normal person that is the owner of these assets can’t go and do?

Larry Levine (06:15.337)
This is great. So our team, on our team are a group of auditors. auditors focus on their areas of expertise. Waste auditors, utility auditors, property tax auditors. We have vendor payments, we have insurance auditors as well who have deep experience, usually having worked on the other side of the conversation, work for these providers, know how to work with them, know what their processes are, know what they’re looking for.

And over the 30 years that this company has been in business, we’ve created a bit where we call a cost level benchmark database. So anytime we work with a client or potential client, we take their data, put it into the database. We negotiate with the vendors and we arrive at the new, we arrive at the, we arrive, we negotiate down to a new level where we, as we approach, as we negotiate the rates down lower and lower and approach what we call our cost level. And we have cost level data on a zip code by zip code basis, skew by skew basis.

service level by service level basis. And while we may not know exactly what your neighbor’s charges are, we know what the charges should be in that zip code in general, whether it be for property tax, waste, insurance, utilities, as I said before. And as I said, we’re able to negotiate that. So you as a property owner, may be quoted, let’s talk about waste for moment, you may be quoted $1,000 a month to pick up the waste at your particular property. You may find that acceptable, you may find that unacceptable and say, you know.

thousand dollars that sounds like a lot can we do nine hundred dollars and the vendor says okay let’s do nine hundred dollars you’re happy you’ve got a hundred got ten percent off they’re happy because they gave you only ten percent off you don’t know what their cost level is but we’re able to negotiate as I said with our cost level data and the skills that the order has down to what is effectively fair cost level perhaps four hundred dollars a month and bring that price down from a thousand nine hundred to four hundred dollars and you the next obvious question is well how do we get compensated

John Harcar (07:52.142)
Mm-hmm.

John Harcar (08:07.096)
Hmm, interesting.

Larry Levine (08:11.849)
So our fee is a contingency fee. We get paid only if we’re able to provide you with savings. So if in that example, 900 was cost level and we weren’t able to go any further, you walk away with peace of mind that you got the right charge. You weren’t wasting any money. But if we were able to negotiate that down to say $500 a month, saving you an additional 400, we’re gonna share that 400 on a 50-50 basis for 36 or 60 months, depending on what service level you want from us.

John Harcar (08:28.323)
bright.

Larry Levine (08:41.021)
We can monitor for you because waste vendors and other vendors tend to reintroduce errors and they may be small errors. Have you ever looked at cable bill? It goes up a buck and a half a month and over the course of three years, it went up 60 bucks. Those kinds of things happen in the waste world as well. So we’re able to monitor that for you and keep them at the level that they agreed to or not if you don’t want to pay for that service.

John Harcar (08:54.488)
Yeah.

John Harcar (09:04.696)
So you’re kind of doing like a full service, not only a negotiation, but also a management, I guess you could say in a sense. Right.

Larry Levine (09:11.101)
So we’re managing the invoices. We’re not going to tell you that you should be putting out more waste or less waste. We’re not going to suggest. We may suggest a different size bin. We may suggest, as we’re doing very frequently with one of my clients, we might suggest a different compactor pickup frequency. A compactor that is able to take 10 tons is being picked up every one and half tons. You’re wasting pickup fees. Maybe three times, four times a month for a…

John Harcar (09:16.748)
Well, right, right. Yeah, I mean, that’s what mean.

Larry Levine (09:40.498)
Incomplete pickup if we can monitor that for you and reduce that pickup frequent suggest to you reduce the pickup frequency Maybe a different size compactor maybe different maybe a different vendor will we may offer that as a suggestion to you? But we’re gonna keep the same vendor same relationships and reduce those pickups pick up expenses for you But we’re not going to suggest to you that you change the waste you put into these bins. We’re not gonna say We’re not gonna tell you to turn off your lights. You know your business

John Harcar (10:08.354)
Yeah.

Larry Levine (10:08.361)
whether you’re a real estate business or any type, you know your business. So we’re just going to, based on what you do, optimize, perhaps optimize the service, but certainly work with the vendor to renegotiate rates.

John Harcar (10:20.75)
So why aren’t more people doing this on their own versus having a need to outsource? mean, why do you think people don’t pay attention to these, what did we call them, midline indirect expenses?

Larry Levine (10:32.693)
I think it’s two primary answers and there’s potential third controversial answer. Primary answer is number one, they’re paying attention to top line. They’re building their business, they’re managing their clients, they’re paying, they’re buying new properties, they’re selling properties. there’s that. That combined with the feeling that, as I suggested to you, they feel that 900 is as low as they could possibly go. Why would the vendor cheat me out of…

out of any more money than I already negotiated with them. And then in general, these charges are these charges and they’re not negotiable. In fact, they are negotiable. If you’re coming in with $200 a month, it is not enough for us, for either of us to, it’s not worth our while to get into, but if you’re at a thousand, two thousand, multiple thousand dollars, if you have 10 properties and they’re each at a thousand dollars a month and we’re able to negotiate down 30 % on average, that becomes $3,000.

John Harcar (11:08.142)
Mm-hmm.

John Harcar (11:17.986)
Yeah, not enough juice in the squeeze.

John Harcar (11:29.534)
Yeah, 3G soon. Right.

Larry Levine (11:30.089)
That’s real money. If it’s only $30 for one, it’s not worth it. I think the other thing is, occasionally depending on if you’re talking to a property manager or some CFOs, there’s a pride that you can’t do any better than I can. That gets in the way, I know how to do this for 30 years, how could you know better? We don’t believe you. That’s the controversial topic here. Some of them may be right.

John Harcar (11:48.003)
Hmm.

Larry Levine (12:00.234)
Our statistics demonstrate that only 10 % of them are right. Our statistics, 90 % of our clients, we’re able to help 90 % of our clients reduce those expenses by 30 to 40 % average. Some are not. My first ever client, we’re able to reduce his waste expenses by 75%. As a retail business, they didn’t own property, but the waste expenses that everybody has, 75%. I was recently told about another…

John Harcar (12:05.784)
Mm-hmm.

John Harcar (12:14.158)
Got it.

John Harcar (12:26.083)
Mm-hmm.

Larry Levine (12:30.057)
Another fitness business that had hundreds of properties. How much waste does a fitness business generate? Not much. The auditor saved them tens of thousands of dollars a year because they thought the waste expense is the waste expense. What am I going to do there? But we were able to save them.

John Harcar (12:38.52)
Yeah.

John Harcar (12:46.126)
Right, That’s very interesting and it’s true. Not a lot of people really think about it. Do you guys ever provide education to folks on that? mean, besides just being able to do it for them, do you ever provide education?

Larry Levine (13:02.505)
So at this level, certainly if someone comes in and we’re talking to them and they don’t qualify, because we have minimums to make it worth everybody’s while, if they don’t qualify or recently someone came to me and said, you know, 20 plus restaurants, again, different kind of business, but same issue, you know, I’m being pressured to renew the waste agreement at this particular location as I’m talking to you. And I said, you know what, don’t renew, let it flow for a while. Even if you’re overcharged, I don’t want to see you being locked into

John Harcar (13:11.328)
Sure.

Larry Levine (13:32.339)
high rates before we get in and help negotiate these waste rates for you. And that’s true for electricity, whether it be regulated or deregulated. And I was going to say most people don’t know what regulated electricity versus deregulated electricity is and what can or cannot be done in those spaces. We’re to come in with our electricity, our utility order expertise and say, hey, there may or may not be an opportunity here to change your energy classification, provide you with an alternate supplier. Maybe you want green.

John Harcar (13:34.243)
Hmm.

John Harcar (13:49.453)
Right.

Larry Levine (14:01.865)
which is probably more money, but maybe you want that and we can provide that to you. And in some cases, some of those services are free because we get broker fees rather than commissions from the client. Yeah, so midline expense. And then again, I said earlier, if you have a large portfolio, if you have one or two properties, they may very well qualify. You may very well be overcharged and we may very well be able to help. But beyond that, if you got, call it five, 10 properties,

John Harcar (14:14.478)
Okay, okay.

Larry Levine (14:29.363)
and you have leasing offices, you’re multifamily communities. You have a leasing office in every single one of them. You may have telephones in each these. Maybe they’re cell phones. You may have a leased copier in each of these offices. You may have a back office as well that supports these sites. We could bring in other services, other cost reduction audits for telecom for leased copiers, bring in vendor payment solutions, and maybe one or two others depending on what the business has. Again, most people think

John Harcar (14:57.368)
How much?

Larry Levine (14:58.227)
These are the expenses, they’re not negotiable. Everything’s negotiable.

John Harcar (15:01.038)
Yeah. How much of your business is real estate? Like how many clients are real estate versus or do you have like a main, like a probably like a main industry that you do a majority of your business with?

Larry Levine (15:06.131)
Bums.

Larry Levine (15:11.943)
So I don’t have percentages in front of me, but we’re organized as a franchise network. So I have my slice of clients across the country. I have my slice of clients across the country. I think it’ll kind of indirectly answer this question. If I’m talking to a hotel group or multifamily community commercial real estate in my community, and I think I said a minute, I’m in Annapolis, Maryland now, they may have this group might have properties across the country. The CFO that I want to be working with.

John Harcar (15:20.384)
okay. Okay.

John Harcar (15:38.776)
Mm-hmm.

Larry Levine (15:40.647)
might be in Dallas or Chicago. So I forget what question I was answering just now, but I would say that a large, so I was answering how much, what percentage, I don’t know what the other numbers are, but a large percentage of our business comes from these larger groups that have multiple properties. Again, whether it be multifamily, commercial, hotels, senior living, manufacturers, for the most part.

John Harcar (15:53.746)
Yeah.

Larry Levine (16:08.625)
utilities, utilities, electricity, Manufacturers that own the property are probably spending a lot of money on electricity where a small retail shop, hundreds of dollars a month may not be able to save them much, but you see it as property.

John Harcar (16:22.39)
Right, right. Where do you guys see your business or this industry going in the next couple years? Like any trends that you’re seeing or do you guys have any projections as to where you want to take?

Larry Levine (16:34.505)
More of the same, I think the services we offer will evolve as some, as their industries evolve and as politics evolve, we’ll be bringing in more services, dropping services, but I think the opportunity to grow for us and our competition who will remain nameless is primarily education. As I said in one portion, I think there’s an opportunity to…

educate the consumer, the CFO, the property manager, the portfolio manager that not all costs are fixed, although they can be seen as fixed, and there’s opportunities to negotiate that and necessarily, you don’t necessarily have those skills, focus on what you’re good at, at building brand, at building culture, at building properties, and you’d bring in an expert on social media, you’d bring in your tax expert, you’d bring in your accountant.

you bring in a marketing group that focuses on these things, on those particular topics, bring in a cost reduction expert that will focus on reducing costs in these spaces to bring more money into the business to do more of the top line.

John Harcar (17:47.032)
Yeah, I mean that makes sense. Like you said, I mean you bring in someone to focus on your social media because you don’t know how to do that. You bring people to focus on your SEO because you don’t necessarily do that. Why not bring someone and also to it’s it’s a you know, it’s that you know, giving that responsibility off or taking that responsibility off your plate and putting it to someone else or delegating it to a more of a professional. Alright, here’s your pitch man. Time for the pitch. Why and how could you help our real estate investors out there?

Larry Levine (17:55.593)
Exactly.

Larry Levine (18:05.415)
Yes. My pitch.

John Harcar (18:13.419)
their business and and what’s your you know, how do they get in touch with you all those cool things?

Larry Levine (18:18.121)
Cool, thanks so much. If you’re a real estate investor and you’re looking to own commercial real estate, multifamily real estate, hotels, and you’re not actively managing, even if you are actively managing your indirect vendor overcharges, give me a call. I can be reached at LLevin at costanalysts.com or my phone number, I don’t even know my own phone number, 401, I don’t call it, 401-205-2475. Again, I operate nationally. I can have a chat with you.

John Harcar (18:39.458)
Yeah

Larry Levine (18:47.913)
I can guide you through the process. I’ll tell you if you’re not a candidate and what suggests you on what you might be able to do on your own.

John Harcar (18:54.99)
Okay, is there any specific things if they were to call you and want to have that, you know, analysis type of thing that any information they need to bring to you kind of what just portfolio size, those type of things.

Larry Levine (19:02.633)
So it’d be ideal if you bring to me your annual spends on a few of these categories. Waste, utilities, property tax. If you don’t bring it on the first call, we’ll have a conversation about what it might be. If you have 50 properties, then I’d also suggest you bring in your expenses for your telecom. And we’ll have subsequent conversations there.

But all properties have those three expenses, waste, utilities, property tax. Even if you’re already working with an outside consultant or you have a property tax advocate, a property tax advocate would say, know, even if you’re working with a property tax advocate where his success rate was 90 % of the clients were able to save 30%, if I get this number right, it drops down to 80 % of the clients are still able to realize a 20 % tax savings. And if you’re talking about 100 or 100 more thousand dollars a year in tax,

John Harcar (19:56.43)
Mm-hmm.

Larry Levine (19:59.817)
That’s still significant money, so it’s worth the conversation. No obligations, we’ll talk you through it, you know. And if we’re a match, great. If not, I’m happy to chat with you.

John Harcar (20:11.566)
And let’s be honest guys, who out there in their businesses wouldn’t want to save a little money, right? So I think it’s worth a chat, but I think it’s also important too, to not let dollars slip through the crack, right? Especially when we know nowadays with costs and the economy and all that stuff, we want to make sure we have as much money as we can. Larry, appreciate it man so much. Say, tell our audience again real fast, how they get in touch with you.

Larry Levine (20:33.693)
My email address is LLevin at costanalysts.com. My phone number if I remembered it, 401-205-2475. You can also find me at costanalysts.com and I have a sub page in the location section under my name in Maryland.

John Harcar (20:50.766)
Sweet. Awesome. And we’ll put all that information down in the in the show notes. So all you guys, if you guys want to get in touch with him, you have all that information. And I hope you picked up some good nuggets, especially, you know, some of your business owners that maybe don’t pay attention to those indirect expenses. Maybe it might be time to start doing that. Hope you guys enjoyed the show. We’ll see you on the next one. Cheers. Thank you, Larry.

Larry Levine (21:12.426)
Thanks so much, John, I appreciate it. Thanks