Kindness, Empathy, And How To Produce A Zero Vacancy Property

Stephen S. (00:04.27)
There we go. Welcome to the Real Estate Pros podcast. Welcome back to the show. If it’s your first time, welcome, or I guess if it’s your second, third or hundredth time, and welcome to the show. If it’s your first time, I am here today with Donovan Reese. As you know, we interviewed the nation’s leading real estate entrepreneurs and we’re gonna talk about some pretty incredible topics here today.

Specifically, he is the founder of My Rent Door. We’re going to talk about relationship management, which is what they call it, otherwise known as property management, and what they are doing in this space. At Investor Fuel, we help real estate investors, service providers, and real estate entrepreneurs, 2 to 5X their businesses to allow them to build the businesses they’ve always wanted, to allow them to live the lives they’ve always dreamed. So keep that in mind. And with that, Donovan, welcome to the show.

Donovan Reese (00:58.685)
Yeah, thank you for having me.

Stephen S. (01:00.662)
Yeah, super excited to hop into our topic today. I we talked a little bit before the show about how you guys are optimizing portfolios for the highest rent, how you guys are avoiding vacancies, get processes, all of that. And I know there’s going to be a ton of value for anybody that’s in this space that they’re going to be able to get out of it. But before we get into that, tell us a little bit of your background and how you got started. What what got you into the real estate space and then how you’ve gotten to where you’re at?

Donovan Reese (01:31.027)
Yeah, well my background is actually in building custom street rods. So I’m a long ways from my expertise, but I actually grew up in Minnesota and I moved here to Arizona in 2005 because one of my best friends, Kevin Ortner, was here and I was tired of Minnesota. He said, don’t you move down here? So he was going to real estate school. He was also a pilot. And so I decided to go to real estate school in 2005 and I actually got

my license, Kevin got busy and doing other things and he was doing some loans. mean everyone was in 2005.

And so we always talk about wanting to start a property management company. You know, we love the recurring revenue aspect of having a property management company. And one day in 2008, his brother, John Ortner called us and said, I just met this guy. He’s just starting a property management company here in Minnesota. You guys should, you guys should talk to him. So that happened to be Brenton Hayden, who was the original founder of Renters Warehouse. And so we partnered up with

Brenton and opened an Arizona office in late 2008 early 2009 And so we grew that Kevin moved back to Minnesota shortly after he started it and he took over as the CEO shortly after that So we grew a few more markets. We sold the majority equity stake in 2016 to a private equity company I stayed on and ran all the markets. We’re in about 40 markets at that point for about a year and a half

and it just, I wasn’t enjoying it at all to say the least. So we got divorced in 2017. Renters warehouse did go public in, was it 2023? And Kevin’s still the CEO. So I had a five year non-compete after I sold. Swear I would never get into property management again. Did a lot of different real estate related things and then got into doing some consulting.

Donovan Reese (03:40.689)
really like through the pandemic for how to improve employee engagement in the workplace. And I was doing it on a kind of a structure of emotional intelligence. And so I started doing a lot of research through that. And there’s a ton of different studies out there, but the one I quote all the time is it was like 80 % of all employees have either recently left a job or are seriously considering leaving a job, not because they don’t like the company anymore, but because of bad managers and management. And it got me thinking going, how many

leave a property not because the home no longer suits their needs but because the relationship with you know their landlord or property manager has become untenable and you know unfortunately I couldn’t find any hard data on that but you know I’d venture that it’s probably pretty much the same

Same argument there, same numbers. So I kind of realized in looking at a lot of the ways that even we used to manage properties and the way we treated and viewed our, you know, our renters, you know, I used to say they’re, you know, a dime a dozen, but they’re actually cheaper than that. and I could not have been more wrong about that. So, you know, now we say, you know, good renters are worth their weight in gold, you know, great renters make for great investments. So, I kind of got

A lot of people asking me to get back in space and start managing again and So I said I wonder if I can build the property management company based off kindness empathy and emotional intelligence and manage the relationships better because there’s a lot of Inefficiencies in property management specifically here just due to the relationship with all stakeholders not being you know, well aligned or respected so That’s kind of what got me, know back into the space

and I’ve really, really enjoyed it. We’ve got a great team and we’re picking up lot of portfolios and really being able to impact a lot of lives in communities in some cases here. really, really, really enjoying it this time around.

Stephen S. (05:45.55)
So now like you mentioned a couple things in there about how You used to look at renters as you know dime a dozen and then now it seems like your your attitude or focus has kind of shifted with what you’re doing now What what led to that was there a specific experience that you went through that that made you realize? wow, like there actually is way more value to approaching it from this way than the opposite

Donovan Reese (06:14.359)
I think the epiphany moment for me was after I left Runners Warehouse, was flipping turnkey rental properties. And the very first house I did was a great house here in Phoenix, five bedroom and 85016, which is very hard to find. So fixed it up, put some renters in there. They were great renters. I put it on the market. I’m a broker as well. So I put it on the, on the MLS and I just couldn’t give the dang house away. And then every couple of months I’d have, you know, a wholesaler call.

me and say hey I’ve got a buyer but you got to take it off the market and so I take it off the market and of course the buyer never developed and so I did this for 11 months and I was cash flowing that house like $500 a month on hard money and so it was a really good

Really good opportunity, high appreciation opportunity, great cash flow, and I couldn’t sell the house. So I finally put it back on the market, end of November. So it had been a good 11 months I’ve been doing this. And instead of talking about cash flow or anything, I just said, hey, I have really good renters. They know I’m selling the house. I don’t need a 48 hour notice. You can come meet the renters, talk to them. And I literally had a full price offer the next day and five backup offers in there.

And that’s when I was like, maybe there’s some value to these good renters. And the perception of selling an occupied rental property is you’re selling it because you’re running from pain and you’re just trying to dump your problem onto somebody else. Obviously that was not the case here, but it was still kind of the perception. So once they got the chance to actually meet the renters, it…

It went quick and smooth and that was in 2018. And those renters are still there. I still talk to them every once in a while.

Stephen S. (08:08.183)
I’m kidding. Wow. So you kind of had an aha moment there where you realized,

It actually is way cheaper to have somebody stay in the house for seven, eight, nine, 10 years than to continuously have to flip and redo the space every couple years, few years, et cetera, to make it available for newer people to come in. at least maybe logically that makes sense to me that if I had an apartment complex and I was to put renters in that were good renters, and obviously this never happens, but if all of them were to stay there,

for 10 years and I knew I was guaranteed to make X amount of money in 10 years without having to do minimal or having to do a bunch of upkeep on the turning the units around side that would just make more sense right.

Donovan Reese (08:59.667)
Absolutely. mean if you look at you know one month of vacancy is you know what eight and a half percent right there And then you’ve got turn costs you’ve got you leasing costs a lot of times so people You know what I talked to a good friend of mine who does a lot of institutional brokerage stuff and

It’s interesting because 10, 15 years ago when these institutional buyers came in, they didn’t care about vacancy. They didn’t care about the renter. And it really, really has been a big effect negatively on their businesses. And so now they’re trying to figure out, where do we plug the holes here? And the vacancy is the biggest one.

Stephen S. (09:47.534)
So what are some of the ways that you plug those holes to get to zero vacancy, having no garbage feeds? Like what are some of those things that differentiate yourself from other relationship managers? And just for perspective, for those who don’t know about Renters Warehouse or your background, like you had over 20,000 doors that you were managing at one point. Am I often saying that?

Donovan Reese (10:13.137)
No, that’s correct.

Stephen S. (10:14.53)
Yeah, so I mean, you’ve done this on a major scale. So obviously you’re the go-to expert when it comes to this kind of thing. So what are some of those things you’ve done now this go around to differentiate and actually keep people in the properties?

Donovan Reese (10:30.855)
I think it starts from the very beginning. starts from having a clear mission of purpose of what we’re trying to do here and just working to live that. I’m a big student of emotional intelligence.

Certainly not an expert yet, but you know something I work on all the time. So, but just looking at the relationship with the renters, you know, we don’t charge any garbage fees to the renters, you know, and they appreciate that. But we just start off the relationship every time we thank them, we tell them we appreciate them, you know, we try to take anything off their plate we can to make that move-in experience as smooth and seamless as possible. But we also encourage our renters, you know, to communicate with us.

So, you know, we have what kind of we call an upfront contract, you know, I want to tell them hey This is you know, we’re kind of partners in this now. So this is what you can expect from us This is what we expect from you. This is what’s gonna happen if we get off track This is how we’re gonna get back on track. So it’s kind of like I said the rules of engagement So when you do have, know, the inevitable difficult conversation you’ve already created that structure that framework that you can work through that conversation with but

You know, when it comes to maintenance, you know…

There’s a legitimate issue. don’t beat our renters up for calling us and telling us. We thank them because ultimately what they’re doing is helping protect the asset. And so we’ve got a very collaborative relationship with our renters. We say we have a three step process for that. listen, we empathize and then we solve together. So we have much less maintenance issues and we are able to solve them very quickly because we are shoulder to shoulder with our renters on those issues and it makes it a lot

Donovan Reese (12:15.733)
easier to get everything coordinated and you know just move through quicker but I think the biggest thing one of the biggest things is you know we have a very proactive approach to rent collection and one of the things in the space that just drives me insane is is

The approach that most landlords and property managers have towards the rent collection process and so it’s well the rents due on the first and you know after the second or fifth or whatever they don’t haven’t heard from them then we charge a late fee and then we send the The notice to pay your quit and then you know, we go through the eviction process and you know, and then well we’ll take them to court and you know, we’ll get the eviction but then you know trying to actually get that money back is right you can take them to collections and if you’re lucky enough to actually

get them to pay anything. The collection company is taking you know 40 % or whatever so the only people who win in those situations are the collection companies and the attorneys and you know I really like my attorneys but I’d rather my clients get the money than my attorneys so we tell our renters hey if you know something comes up and you’re not going to be able to pay your rent give us a call we’ll help you out we’ll work with you so we have a lot of relationships partnerships with local non-profit

profits, charities, government organizations to be able to get rent help for them and we’ll help them file the paperwork and do everything they need to get back on track. What is it? The average American has like $400 in their emergency accounts. So instead of kicking them when they’re down, they could have had major car problems or something that just got them off track. When they’ve otherwise been great renters, now’s the time to help them out, pick them up, hold their hand.

and get them through this as opposed to just making the problem worse. it’s ultimately, it’s better for my clients. So I tell my clients, I tell everybody, you our job is to collect rent. You know, if we didn’t collect rent, then we didn’t do our job. You know, and there’s obviously, you know, a lot of things that can happen that prevent us from being able to do that. But, you know, again, we’re very proactive in that as opposed to just sitting back and going, okay, well, you know, they didn’t pay, we’ll collect our late fees.

Donovan Reese (14:33.276)
We do charge a late fee, but we turn that late fee over to our owners as well. So we don’t keep the late fees. The other thing we do a lot is, again, encouraging this communicative relationship is, if a renter has to move for whatever reason, we work with them to get them out. So I tell this story all the time, but I moved a girl into a house down here.

like year ago November, right around Thanksgiving time. She was a great renter, called me about the first of March and said, hey, I just got an opportunity to…

Transfer for my work and you know had up this you know whole department in Texas and she’s like it’s a great opportunity I just don’t know if I can do it. I don’t know what to do with the lease here You know, and I was like, well, first of all, congratulations on the opportunity. That sounds amazing Let’s figure out how to get you to Texas So, you we as I you have three options one you can just pay out the rest of the lease Two we have a two-month lease break fee. You can pay that and move out or three. Let me put it back

on the market and make it available for showings and as soon as I get somebody else to rent it I’ll release you from the lease and you know if the property is in good shape I’ll give you your security deposit back so she

Obviously went with option three, which was the best choice for her. And I put it back up on the market. I had two showings the next day. It was a great house. I wasn’t concerned about it at all. Had two showings. One of those people applied. They got approved. They moved in about three weeks later. I moved her out Thursday night. The house was in fantastic shape and I moved the new couple in Friday morning. And so my client got a whole new 12 month lease. They’ve been there now for over a year. And so.

Stephen S. (16:17.659)
No kidding.

Donovan Reese (16:22.513)
You know, we always say if you know if someone needs to leave but we’re not the ones that are gonna stand in front of the doorway and prevent them from leaving we’re gonna go over there and help them pack their suitcases so by being proactive in that being able to have you know, those conversations and you know work with them to you know, create solutions that you know You know one of our biggest core values is, you we win together So in this case she you know, she was able to get out of her lease. She got her security deposit back She got you know her dream opportunity and my my clients

Zero zero vacancy zero turn cost zero loss of rent and a brand new lease with you know great renters who’ve now been there for again over a year, so Really really working partnering with the the renters is You know is I think the biggest key

But we have a lot of partnerships that we’re creating as well. So we’ve got a security deposit replacement program that I think is actually a really good one that can help them if they’re needing a little help on the move-in costs. We just partnered with something called Flex Rent where the renters can pay their rent in monthly or weekly installments or help them with the cash flow.

So it’s really about helping the renter. We look at their people first and renters second to us. So we really focus on the people and then we just manage the relationships. Like I say, if you can manage the relationship correctly, managing the property is pretty easy.

Stephen S. (17:59.278)
Sure. Now you ultimately are talking a lot about relationships, people, like where did that heart for people come from in terms of like you saw when you had that experience in 2018 with the sale of that house of like, here’s how valuable this actually is to somebody coming in like as an investor, right? But like, where did the heart come from for the actual people in the properties and…

looking at it from that sense versus just the business sense.

Donovan Reese (18:31.783)
That’s a great question. No one’s ever asked me that before. I’d say probably from my parents and you know in my upbringing but you know I think a lot of it was

Donovan Reese (18:48.051)
You know, I obviously would manage a lot of renters at renters warehouse and you just kind of see how things can go sideways so fast and they don’t need to be, it doesn’t need to be that way. so, you know, I think too, just you see a lot of it now where, know, it’s, people feel like, you know,

Capitalism has to be a zero-sum game, right? And it shouldn’t be. In my opinion, pure capitalism is an infinite game.

But just as a consumer myself, that’s the reason I don’t charge all the fees is because I hate it. As a consumer, I hate being charged dumb fees. You know, and also there’s, you know, I did some traveling for work recently and my flight was 12 hours delayed and I couldn’t pick my rental car up and I then finally got to my hotel and the systems were down so I had to sleep in the lobby at 6 in the morning when my day started at 3 in the morning the day before and I was so

so irritated. mean, the flight is what it was. Delta did a great job. Communicated, but every other rental car company, they didn’t want to help me. And it was like, you know what? I wasn’t even mad about the flight, but I was mad about the car and the hotel. they had an opportunity to step up and help and make this right. And they chose to make this difficult for me. Just because that’s, I guess, kind of the culture. So, I love

I’ve got a phenomenal wife who is very much the same in the nonprofit space. And we like to be able to help where we can and do what we can. We’re big dog people as well. So like through COVID, we’ve fostered 14 puppies. So I don’t know.

Donovan Reese (20:50.163)
You they say that when you help somebody else, both people feel good. you know, I like the feeling of being able to help. I don’t know, that was kind of a rambling answer. Not sure how to answer that question.

Stephen S. (21:06.106)
That was great. So if you had to go back to the beginning when you got started in the space and in a way you almost kind of have in the past few years, but if you had to go back to like the real beginning

and you were starting from scratch, but you were able to take all of the lessons, the knowledge, the wins and the failures that you’ve had in the past decade, however long it’s been in total. What would you do different and what would you do the same?

Donovan Reese (21:40.552)
could talk all day about what I do different. yeah, I mean…

Stephen S. (21:45.866)
Maybe what are your top three things that you’d do different?

Donovan Reese (21:51.443)
certainly put more emphasis, more respect on the a renter relationship. You know I started Renters Warehouse when I was 25, 24, 25 and I’d never managed a property before and so I didn’t know so I thought hey if a renter is late you’re supposed to call and yell at them and so I caused a lot of unnecessary

issues there, but I think that I’m All in on the the relationship, you know the wind together And creating real real value, you know, there’s a lot of stuff in the space right now That’s you know renter benefit things that you know

I don’t really think are valuable. But that’s why I say kindness is the greatest resident benefit. Treat them well. So I would put a much bigger focus on that. We are transitioning this business. know, when I started this one, I was focusing on the individual accidental landlord like we had at renter’s warehouse.

and I’m pivoting to more of the asset portfolio management stuff.

But I think, you know, we, I mean, that’s how we built Renner’s warehouse was off the, you know, accidental unintentional landlord, you know, and joke in 2009 or 10, you know, not that we were the first property management company, but I think, you know, we were probably the first that really kind of made it mainstream is, you know, I said, if, before this option, you, you were moving, you had two options, you know, you were foreclosing or short selling. And so we came in and provided another option for people that, you know, needed to

Donovan Reese (23:38.241)
move or whatever and you know didn’t want to you know short sale their home but I would have I would have set expectations better with my with my clients as well and then I would have managed them better as well I mean there was a lot of times where they were doing something I disagreed with and I would just go out there the client you know and I’m I

I should have been more forceful in guiding them. A lot of the times, you know, I’m not.

trying to say anything bad here, but you know, lot of times these unintentional accidents don’t know what they don’t know. They’re very emotionally tied to the properties and so they will make emotional decisions that are not in their best interest. And so I think being able to set that expectation with clients better and, you know, and manage to that would have made my job a lot easier as well.

A third thing…

Donovan Reese (24:53.213)
Hard to pick, just three.

Stephen S. (24:55.918)
It’s somewhat of a loaded question.

Donovan Reese (24:59.667)
Right. And I think we did, at least in my offices, I’ll say, you know, I think we did a pretty good job on the, you know, the company culture, employee culture. Um, but I would have focused on that more as well. Um, you know, there’s a couple of different things out there, but one is, know, that I really like is your, uh, customer experience cannot exceed your employee experience. So, um, you know, I would have, I probably would have.

given them more latitude, supported them more to make decisions, to run the business, and all the day-to-day stuff, and really supported.

them better in that. I did see it at Renner’s Warehouse and tried to kind of make that pivot to being more customer focused and renter focused a little bit. at that point, we had already sold to the P.E. Company and so it was hard to get that shift to turn. But it kind of made everything okay, not just from me, but just to…

to not solve problems, not treat people well, to not give back to people. And I get so frustrated because there’d be a problem. like, hey, did you solve it? I’m like, well, I emailed them. I’m waiting for them to email me back. I’m like, you didn’t solve the problem. The job’s not done when you respond to their email. You’re just playing email ping pong here. Solve the problem. so that’s, think, where you see it a lot of times. it’s inefficiencies in property management too.

Stephen S. (26:28.366)
Right.

Donovan Reese (26:35.765)
You know a tenants got an issue residents got an issue called a maintenance request and you know a Majority of property managers don’t pick up their phones

They don’t make it easy to contact, and so they’re constantly trying to get something done, and the renter is in some sort of stress or discomfort, depending on what that maintenance request is. And so when they don’t get ahold of somebody, they just get more and more angry or irritated. And then finally somebody answers the email or gets on a call, and now you have this charged atmosphere here that doesn’t need to be, and then it kind of goes back and forth.

and nothing gets solved and then it gets escalated to the mid-level manager and still doesn’t get solved and then it gets escalated and finally it would get to me and I’m like, we just spent 25 man hours on something that should have taken 30 minutes. So…

building a culture of just getting things done is something that we’re certainly doing this time around. because we also didn’t solve problems as well as we should have, we were overstaffed.

Our labor was way too high. We just kept throwing bodies at problems instead of really trying to solve for the real issue. I think all three things I said probably all wrapped up in that culture thought. I’m very, very big on building the right culture.

Stephen S. (28:07.438)
Mm.

Stephen S. (28:20.13)
You got, love that. Well, you know, I’m super appreciative, Donovan, that you were able to join us today. You know, if anyone wants to learn more about you or what you’re working on, where should they go for that?

Donovan Reese (28:33.055)
Our website is MyRentDoor.com. We’re also on the socials, most of them I think. You can find me on LinkedIn as well. My email is Donovan, D-O-N-O-V as in Victor, A-N at MyRentDoor.com. And my cell is 602-428-1991.

Stephen S. (28:55.086)
There you go. You’re gonna have all seven million of our weekly listeners now calling you Anytime somebody drops their cell phone and I drop that out and just see the look of horror on most of their faces and then I got I’m just kidding. It’s not that big but maybe it will be so that’s what I’m working for so Well, we we appreciate you coming today and everyone I hope you enjoyed today’s show if you got as much value as I did out of it I know you’re off to the races. So we’ll see you on the next episode. Thanks again

Donovan Reese (29:00.005)
I can’t wait to talk to him,

Donovan Reese (29:07.271)
Right.

Absolutely, I love it.

Donovan Reese (29:25.325)
Thank you so much, appreciate having me.