Conquer Property Management: Powerful Tips for Lasting Success

Stephen S. (00:03.322)
Welcome to the show where we interview the nation’s leading real estate entrepreneurs. Welcome back if you’re joining us for a second, third or hundredth time and welcome if it’s your first time you’re in for a treat today. We’re gonna get a ton of value from this episode. I’ve got Aaron Reel in the studio with me today. He has been in the real estate investing space for over two decades now. As a property manager and investor himself, he has repositioned.

Thousands of troubled assets to bring the sell at a premium value and has also created thousands of opportunities for homeless people To connect with housing and services. So we’re gonna talk about Managing an asset with the owners in game in mind today and before we get into that just remember 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 of that being said Aaron. Welcome to the show

Aaron Reel (00:48.881)
Thank

Aaron Reel (01:00.43)
Hey, thanks for having me.

Stephen S. (01:02.144)
Super excited for our conversation today and in talking about this specific topic of of how there’s this symbiosis in this balanced relationship that I think it’s missed a lot between property manager and an asset owner, if you would call it. And we’ll get into that. But, Darren, before we get started on that, can you just give our listeners a little bit of a background as to how you got into real estate investing, property management, when you got started and how you’ve gotten to where you’re at now?

Aaron Reel (01:30.64)
All well, I mean, started right in college picking up duplexes on land contracts and then doing flips on those. I’ve stayed in it ever since, working for large property management companies and doing my own investments. that’s been it, man. It’s all I’ve been interested in.

Stephen S. (01:55.598)
That’s awesome. So now, how did you go from getting interested in it, starting doing it in college, to 20 years post now where you’re at with over 3,000 doors under management? What was that process like?

Aaron Reel (02:09.519)
Diligence, learning from your mistakes. I feel like by this time I’ve made enough that I’ve learned a lot. So that’s huge. Just getting out and getting dirty and learning from your mistakes.

Stephen S. (02:27.246)
If somebody’s like looking to get started doing something similar to what you’re doing, what would you tell somebody to do?

Aaron Reel (02:36.75)
Well, you gotta stick with it, man. There’s a lot of times you can get discouraged. You can hear no a lot. You can work on deals that just aren’t winners, and you can’t throw in the towel. You gotta stick with it, and you gotta figure it out, and don’t get discouraged.

Stephen S. (03:02.158)
What are some of the things that you see people making as mistakes when they first get started in real estate investing?

Aaron Reel (03:10.411)
Well, chasing a deal. So a lot of times people want to do a deal just to do a deal. Run the numbers, run them well. Don’t tweak them because you want the deal so bad. If it doesn’t work, it doesn’t work. So stick to your guns and go find the next one. If you rush it, you might find yourself upside down and you don’t want to do that.

Stephen S. (03:37.816)
Why would somebody rush a deal just to get one? What would be some scenarios of people doing that?

Aaron Reel (03:43.695)
man, the feeling of closing a deal. I got one. I added a door. I got another one. you get a rush when you get closed and it feels good to add something to the portfolio, but that stuff catches up with you, so make sure you do a good one.

Stephen S. (04:00.408)
What are some things they can do to actually not fall into that pitfall, do you think?

Aaron Reel (04:05.438)
I have a good system for running your numbers, for figuring out your ARV and your comps and your construction costs and be realistic about your expenses on a deal. see owners come to town a lot and their expectations aren’t really aligned with reality. They come in and they say, know, here’s what we should be making every month. Well, you don’t have a

a figure in there for vacancy loss. don’t have any figure in there for a commercial water heater blowing on you or an underground slab leak. And you don’t, if you don’t plan for those type of things and if you don’t budget for those type of things, then you’re cash strapped pretty quick.

Stephen S. (04:56.078)
Yeah, that makes sense. Now, let’s hop into kind of our main talking point of the show and our main topic, is managing an asset with the owner’s end game in mind. How did you come up with this strategy within property management? Can you explain a little bit about what that means to you?

Aaron Reel (05:14.843)
When I first started signing these complexes, I was always amazed at the secrecy around a property going to market. some of them, and this was a hundred years ago, but some of them would go as far as to just say, hey, you know, we’re just doing an insurance inspection or we’re just checking out the property for some work we might want to do down the road. it’s, they’re broker. it’s, so it’s, I was always just wondering, why would you keep that?

from your property manager well you know turns out a lot of investors they don’t the manager to know they’re selling the property and they feel they’ll become disinterested that they’ll manage it differently maybe they’ll even hinder the deal they want to keep the management so badly so it was I just realized you know that’s that’s awful relationship you know you have to you have you have to manage with the owners in game in mind you start asking them up front what’s your exit strategy everybody’s got an exit strategy

figure it out, understand it on the front end, and help them get there. Because you can’t steer a ship as a property manager to a destination if you don’t know what the destination is. And so I started asking owners up front, know, how long you going to hold this? And they’ll all say, I want to hold it forever. They don’t want to hold it forever. So they have a five-year plan. They have a three-year plan most of the time. Get to the bottom of that and figure it out. then you can help them get there.

You’ve got a 24 month plan. Maybe you need to pressure them harder about that deferred maintenance list they didn’t want to fund last year. Help them get there, but you got to know where there is.

Stephen S. (06:53.944)
How does that help them in the long run?

Aaron Reel (06:57.788)
well it it it helps prepare the asset there are a lot of it if you manage for a twelve month or twenty four month exit you know there are certainly things you wouldn’t put off because you know you’re going to sale there you know just understanding it will could help you know help the whole closing process go but go better don’t don’t tell your manager something that you know like it had had to just

routine inspection. No, mean if it’s a broker coming to evaluate the property, then know that so that you can get out there and put your best foot forward on the morning that that broker shows up or that potential buyer shows up or whatever the case may be. You have to be a partner in that.

Stephen S. (07:47.758)
How does it benefit you as the property management company on that end of the spectrum?

Aaron Reel (07:54.599)
uh… you lose doors uh… but you’re ethical and you and people will want to use you uh… and it’s it’s just more professional relationship so you know i’d be lying if i didn’t say it was it was kind of depressing to lose a hundred doors uh… in one fail swoop but i would still work incredibly hard to make sure it closes whether we’re going to retain management or whether that new company has their own management doesn’t matter

you gotta get that thing to close, you gotta bring value to your client, and that’s the only ethical and responsible way to do it.

Stephen S. (08:32.174)
Now what’s got you passionate about doing property management versus another sector of real estate?

Aaron Reel (08:41.19)
Well, in property management, you have an opportunity to change communities. mean, I’ve been in urban markets forever. There’s nothing more I love seeing than a neighborhood with a lot of blight or lot of vacancy take a different direction. If you manage a property well, you can contribute to that whole community. it’d be better for everybody. So you have a real opportunity.

property management to not only network with all the players and rub elbows with investors and all of that, but you have an opportunity to make a real difference.

Stephen S. (09:22.744)
Why is that important to you?

Aaron Reel (09:26.469)
You know, it’s just I care about the neighborhoods I’m in. When I first started buying my own stuff, I said to myself, I’m only going to buy in a neighborhood that I would want to live in. I’ve very much been interested in urban areas. So I never wanted to be too far out or way out in the suburbs or something. So it was really important to me to buy in those areas where there are

diverse, eclectic, good walkability, perhaps, all that kind of fun stuff. But I want to see those neighborhoods come back to their glory. So I like buying in them. I like maintaining affordability for those projects. And a property well-managed is great for the community.

Stephen S. (10:21.422)
Was there a particular moment or experience that you had or went through some sort of story that shifted your perspective on that from where you were to now, hey, I want to do this to be able to give back, build a better community. Was there anything that led to that?

Aaron Reel (10:38.499)
Well, probably. Back about 20 years ago, I helped put together a supportive services program for youth aging out of foster care. And we built about 20 houses in a neighborhood in Indianapolis. a lot of the neighbors didn’t want us there. And I couldn’t understand it because the neighborhood

wasn’t disrepair there’s a lot of light there’s a lot of vacancy boarded up houses why didn’t want all this new construction so so i just didn’t understand it so we came in we we did get the project through was remarkable success i mean these were the greatest residents they were so appreciative of their opportunities we ended up you know

hiring some, our kids went to birthday parties together. It ended up being just an amazing experience. And it was with United Way, connected by 25. They did such a good job with the services piece. then so what ended up happening from that, the neighbors around there started fixing up their places the best they could. And then after that, investors started coming in and bringing vacant housing online.

and now every vacant lot’s got a new build on it. And it’s a diverse mix. We didn’t push out affordable housing. We just brought pride to the area. We brought houses back online and we increased affordable housing while saving a neighborhood that was in a lot of pain. So that’s something that I’ve seen more than once in more than one area. And so it can be replicated.

Stephen S. (12:32.194)
Why do you enjoy that?

Aaron Reel (12:35.04)
You know, it’s great to help people. It’s great to see that you’ve had an impact on a community or a neighborhood. It’s a good feeling to know that someone’s in a better position with their housing because of some of your efforts. And it’s just great to drive down those streets and see the changes for the positive.

and see that you’ve helped be a part of something bigger than making a few dollars.

Stephen S. (13:13.326)
And obviously you’ve made some dough, right? But where does your where does that heart for people come from?

Aaron Reel (13:24.354)
Probably living in those areas. you know, the only thing I can really point to, so when you, you know, if you were born and raised in those areas and you see them, you want to help your own. You want to help your own community. You want to, you want to, you know, do the best you can for your neighbors.

Stephen S. (13:46.04)
So you were raised in an environment like.

Aaron Reel (13:49.705)
Sure, always a few minutes from downtown, very urban environment and back before downtown’s sprawl hit those neighborhoods. it was a situation where we didn’t push all the affordable housing out. We invited it and let it…

coexist. So yeah, are there now houses that are way out of people’s reach in those neighborhoods? Absolutely. But ideally, we’re sprinkling in affordability in that environment as well.

Stephen S. (14:32.717)
Yeah, that totally makes sense giving back to your own. I love that. So now what is on the horizon for you in the next 20 years of your business? mean, where you’re at right now, 3,000 doors under management moving forward. is like, will it ever be enough or are you already past that hump where now you’re doing it for purpose or what does that look like for Aaron?

Aaron Reel (14:57.68)
No, I’d like to connect with as many investors as possible in various markets and try to grow that unit management for sure. So I definitely want to do more of that and do some work in other areas, Ohio, Tennessee, Indiana, and try to replicate some successes we’ve had in other markets.

Just keep on doing it.

Stephen S. (15:31.266)
Yeah, for sure. So what would be like the end game for you?

Aaron Reel (15:38.485)
the endgame just create a successful template in a variety of markets that

Aaron Reel (15:49.616)
that brings integrity to property management at the highest level.

Stephen S. (15:55.064)
What are some of those things that differentiate what you’re doing compared to the traditional property manager that you just can’t stand within that business?

Aaron Reel (16:04.411)
man.

Stephen S. (16:06.792)
Sounds like a long list

Aaron Reel (16:11.579)
well uh… you know there’s a there’s a there’s a lot of practices out there there’s a lot of you know a lot of people are moving towards you know piling fees upon the residents and they they might go to their they might go to their owners and say hey we’re gonna charge this reasonable fee but on the back end there’s twenty different things are piling on a resident well that’s left money that the owner can raise the rent if he needs to to cover his expenses that are skyrocketing like

insurance and utilities and anything else, taxes of course. it also just turns that resident into just a profit source for the property management company. then pretty soon you’re going to price them out and you’re going to lose them. So that’s one thing.

I’m trying to come to terms with all the fees I’m starting to see visited upon a tenant. Your rent’s not $1,000. rent’s $1,300 if I’m charging you for X, Y, and Z along the way. And then the owner has less money to fight the fight he’s fighting with insurance and taxes.

Stephen S. (17:26.574)
Yeah, that totally makes sense. What do you think is the point where it becomes inappropriate for those fees, where it’s not creating value from the property company and it’s actually potentially even maybe running into that zone of where they’re almost even taking money away from an investor by charging the fees?

Aaron Reel (17:51.097)
Yeah, I mean look at rent cops in your area. So if the rent cops are $1,200 and that person’s rent is $1,200, then if you’ve got $200 in fees on that, then you’ve already created a situation where that owner’s not going to get more money to handle his rising costs. And that tenant is already in a scenario where they are now paying above market.

Yeah, doesn’t bode well for anyone but the property manager.

Stephen S. (18:24.76)
Now, so correct me if I’m wrong here, but like obviously like there’s still a cost to an asset owner for the property management. So like the property management company is still making money by being the manager of the property. And then so it’s just basically additional cashflow for the property manager at that point.

Aaron Reel (18:43.16)
Correct, you know, it’s like a lot of business models, of course, know, identify every possible income source and go after it, every profit center and so forth. We had one scenario that an owner told me said he was kind of beside himself. They had to deliver a letter to a tenant. The tenant was charged

almost seventy five dollars an hour because they gave it to maintenance to go deliver it and then they charge the owner letter delivery fee of like fifty dollars or whatever so then so in the owner’s mind you know how in the world is it that much to drop this letter off so and i get it you know i get it so i think you gotta have you gotta be smart you gotta be ethical in what you do and and you can’t just you know you can’t you can’t just fleece

Stephen S. (19:26.488)
Right.

Stephen S. (19:40.054)
What are some of the just like absolutely ridiculous things you’ve seen property managers charge for like 50 bucks to drop a letter, for example? What are some of some that are just like, what are they even thinking?

Aaron Reel (19:54.659)
you know, that one, that one probably is top of the list for me.

Stephen S. (20:02.808)
really with the letter yeah now so if you could go back to the beginning when you first got started here and you were able to take all of your lessons all of the pain the wins the losses all of it but you were starting over in your early 20s there early late teens what would you do different what would you do the same

Aaron Reel (20:31.477)
probably wouldn’t take every owner. it comes at a reputational cost. you take, yes, the property manager is the face of everything. But if you are in business with an owner that maybe doesn’t have the resources or doesn’t have the passion to put additional resources in a project, then as a manager, you’re wearing that.

and you’re wearing it publicly. And so, you know, I would certainly caution against just signing a door to sign a door. It’s kind of back to chasing a deal. Man, I want to close a deal so bad that I’m going to take this guy’s 20 units and maybe the guy’s not in a position to responsibly have these 20 units. So there needs to be, you know, some vetting of both parties on the front end.

because what happens is when you spend a lot of energy in your office catering to those maybe high maintenance owners or those problem properties, then you take away from the good owners because they’re not the squeaky wheel anymore. I’d like to, you know, if I had to do it all over again, there’s a lot of owners I wouldn’t have signed so that I could focus on the really good ones. Of which there are a lot, you just…

You just, don’t get the same attention as the squeaky wheel owners and then, so you got to those on the front end, which we do a good job of now when we’re, you know, finally when we’re signing business these days, we want to do it with that in mind.

Stephen S. (22:14.574)
Yeah, 100%. Well, Aaron, thanks for joining us today. If anyone wants to learn more about you or what you’re working on, where should they go for that?

Aaron Reel (22:23.491)
just check out a website, Intempus.net Intempusrealti.net I’m sorry, I-N-T-E-M-P-U-S, Realti, R-E-A-L-T-Y.net and take a look at that and drop me an email, areel at Intempus.net and I’d love to break out and discuss. I can talk property management.

non-stop so

Stephen S. (22:55.566)
Well everyone, I know you got some value out of this show. I hope you enjoyed this show and we’ll see you on the next episode

Aaron Reel (23:02.546)
Alright, thanks guys.