Subscribe via:
Show Summary
In this episode of the Real Estate Pros podcast, Derek Morton, founder of NetGain Property Management Services, shares his journey into the property management industry and discusses the importance of balancing the needs of both property owners and tenants. He emphasizes the significance of understanding the motives of both parties and the creative solutions his company has implemented to address challenges, including mental health issues among tenants. Derek also highlights the realities of property management, the importance of trust in choosing a management company, and how technology can enhance communication and efficiency in the industry.
Resources and Links from this show:
-
Listen to the Audio Version of this Episode
Investor Fuel Show Transcript:
Derek Morton (00:00)
the other issue that people don’t always understand is thatPeople are people. Yes, you have a lease. Yes, you have all the recourse in the world, and you have rules and regulations, and you have all sorts of bells and whistles to try to make things as easy as possible for residents and our owners. ⁓ But people are people, and people are gonna be what they are and do what they’re gonna do sometimes.
Kristen (02:04)
Welcome back to the Real Estate Pros podcast. I’m Kristen and I’m here with Derek Morton. Derek started NetGain Property Management Services, LLC in 2016, focusing on striking the right balance between both the owner’s wants and the tenant’s needs. Having worked in the real estate industry for the past 20 years, he brought with him unique experience and insights to help separate NetGain from other property management companies in theSince starting, they’ve pioneered different and creative solutions to the many issues facing the housing industry. Excited to get into it. Thanks for being here, Derek.
Derek Morton (02:29)
ThankKristen (02:34)
Derek?Derek Morton (02:35)
Thanks for having me. I’m excited to be here.Kristen (02:38)
Well, it sounds like you’ve really carved out a great area for yourself in the Utah market. Tell us about how you entered the industry to begin with.Derek Morton (02:46)
So when I started NICAN about 10 years ago, I was just coming from the title industry. And I had been in that industry for about 13 years and just realized that kind of plateaued with the company where I was at. And I mean, we’re in a small town. And so everyone already knew me. The agents that were going to use me were going to use me. And those that hated me were going to hate me still. And there’s no overcoming that. I was just kind of like, well.Is this do I want this to be the rest of my life? And ⁓ so I had a buddy that about a year before we started net gain was Going well, let’s start a real estate brokerage and I’m like, I really don’t want to start a real estate brokerage I don’t like transaction or real estate ⁓ And so we settled on property management and started doing research and little did I know I had to start a real estate brokerage and become a licensed real estate agent So everything I didn’t want to do I had to do anyways
Kristen (03:40)
Yeah.Derek Morton (03:43)
And so we were off. ⁓ We started really slowly and just tried to build ⁓ the business model based on relationships and just try not to suck and do right by our owners and our residents. And as we do that, that’s been the secret sauce to our growth. Being able to bring in employees that buy into that ⁓ has been huge because it just keeps that culture as we grow and people genuinely know that we care.Kristen (04:12)
Yeah, absolutely. And how do you strike that balance? What are some tips where you kind of keep everyone happy?Derek Morton (04:19)
Understanding everyone’s motives. know, tenants want to stay housed and owners want money. That’s why they did the invest. That sounded really ⁓ coarse and I didn’t mean it to, but that’s why they invested. ⁓ It’s, you know, it’s supplemental income or it’s their main income, but that’s what they wanted to do. And so striking the balance and going, okay.How do we minimize turnover or how do we get this unit filled quicker ⁓ to make things work with tenants? like we, couple of years, well, it was during COVID, we actually dropped our rent to income. Went against the industry norms, for instance, instead going from 3X, ⁓ being at 3X like is the industry norm, we dropped it to 2X because we realized incomes were going up way faster, rents were going up way faster than income.
but we also needed to balance the owner’s investment and be able to protect it. So we increased our standard deposit instead of 1X. We went to 1.5X and then we balanced and go, okay, is that gonna make us more or less competitive? So we looked into different security deposit alternatives. So with that, we were able to go bring in Obligo, which is integrated with our software, and then we use LeaseGuard.
which is like an insurance product. So they pay a monthly premium, just like it’s their car insurance or homeowners insurance, those sorts of things. And then just make a claim at the end. it actually, between Obligo and LeaseGuard, if they use those, they’re actually paying less ⁓ for the deposit than they would be and getting more protection than they would if they were paying the cash deposit. So it’s actually making our products weight or our units more competitive.
on the market as opposed to less competitive and being able to increase actually the protection for the owners. And that’s been huge. And so just being able to look at that and, okay, what are we seeing? What’s the problem? Whether it’s mental health issues, we’ve had a, we have a lot of mental health issues. So we’ve looked at different things like to do that. One of the things that we actually did and it didn’t work quite as well as we’d hoped.
is we’d actually had a partnership about six years ago with betterhelp.com. So all of our residents had access to one free month of mental health, ⁓ which was awesome. And I was way excited for it because we’ve just seen the rise of mental health and mental health impacts your ability to maintain housing. It impacts your relationships, impacts your ability to keep a job, all these things, right? The issue is
And I should have seen it coming. And like we were talking before we hopped on, sometimes you try stuff and it works and sometimes it doesn’t. But in this particular case, the hurdle was we kind of had to give the referral. So if someone is struggling to pay rent and they don’t want to talk to you ⁓ because they’re afraid of what you’re going to say, are they really going to trust you enough to be like, hey, I can’t pay rent because I
my depression just hit really, really bad and I haven’t been able to work ⁓ and I can’t afford mental health. ⁓ And so like I just don’t want to do it and then they’re going to lose housing, right? That’s a difficult conversation and that’s a high barrier of entry. And it makes it difficult. So we had, I’ll give a real life experience going into the student housing. We had a student that he had mental health issues.
that we didn’t know about, and I mean, nor do you ask. it’s, you know, it’s none of our business. But he had had a mental health break and he felt it coming. This poor kid felt it coming. Tried to get access to the mental health ⁓ center at the university and they put him on a two week period. At the same time, he was trying to get on Medicaid because he’s lost his job.
and he’s on a list for that so he could get his meds. All of this waiting period within there he had a break that was pretty ugly ⁓ and almost violent and so he lost his housing.
And so, I mean, that’s not going to help him. He was one semester away from graduating. And he had to try to find new housing, which he struggled to do. ⁓ Was still trying to get on Medicaid. He was, you know, and last I ran into him and he still hasn’t finished school because he had to drop out because he had to get money, get a full-time job so that he could try, but he
It’s just like this vicious cycle that he thought he had it figured
Different things in life happened. And now he’s when he was on the up, had everything going in the favor, doing everything he should do. And sometimes life happens and he wasn’t able to get the support and the help that he needed. And who does that hurt? It hurts him immensely. It hurt the owner.
⁓ because now he had a vacancy. Luckily it wasn’t, we had to evict them in the poor kid understood and we worked with his mom and were able to leave amicably. but it, doesn’t help anyone. Right. And so part of those creative solutions are understanding and trying to learn to recognize that there’s moments. I mean, one also in the investor’s life, sometimes an investor, they may have to pull out. There’s certain things in their life that it’s like,
You really can’t afford to have an investment right now. Like this is, this is high risk. If you’re, if you’re struggling the month to month on that investment and you’re not going to be able to do a repair. ⁓ like if it needs new carpet, you know, I really can’t afford to do that. Like I’m broke. ⁓ and you can’t replace it in the carpet scrap. Like what, kind of resonant are you going to get? And it just becomes this compounding thing. Right. And sometimes it’s like, well, maybe this property isn’t right for you.
Kristen (11:46)
Yeah.Derek Morton (12:13)
Let’s 1031 it, use the equity and find some else. And sometimes with the residents, like, okay, what’s the best case scenario to help you here? What’s the problem? How do we work to find the solutions? We tell our residents all the time, there’s very few things that we can’t work with you on if you’re not willing to communicate. If you’re willing to communicate, there’s really nothing unless it’sKristen (12:35)
Yeah.Derek Morton (12:41)
egregious and illegal like that we’re not going to be able to work with you on. And as long as you’re doing that like and sometimes that solution is going to be like okay like this is this is too far gone. ⁓ What’s the best way we can part amylocap?⁓ so you don’t have to be evicted because in Utah it’s pretty like you get evicted. can go three times rent to income or not three times rent to three times troubles rents and damages. say they owe a thousand dollars of rent. That turns into a $3,000 judgment plus damages. And then they have the eviction on the record. I mean, and that’s, that’s a pretty big punishment and it’s hard to overcome because you know, ⁓ you just got evicted and it’s
Doubly, doubly bad if it’s us because a lot of our, the other management companies at least know like, hey, we’re willing to work with people. And so it’s like, if you were evicted from NetGain, it’s like, you really screwed up. ⁓ And so how do we do that? Still protecting, sometimes it’s getting the owners involved. Sometimes we make the deal and then we just tell the owner like, hey, here’s the deal we made. Here’s the situation. Sometimes they’re a little mad. They’re like, I wish you would have brought us in. Cause I would have done like.
Kristen (13:42)
Yeah.Derek Morton (13:59)
this is the best we could get. Like we’ve worked with them, you’ve been frustrated because they’ve just struggled to be able to make it work and so this is the best we can get. And so take the win. And that’s the other part, sometimes educating the owners to be like, take the win. know, it’s not a great win, you didn’t run up the score. You know, it may have been a last second buzzer beater, but a wins a win. Take the win. ⁓Kristen (14:00)
Yeah.Mm-hmm. Yeah.
Mm-hmm.
Derek Morton (14:28)
So that’s some of the creative and finding that balance and some of the ways that we’ve been able to do so and recognizing, you know, where some of those problems lie and try to find win-win solutions.Kristen (14:41)
Yeah, you’re really looking at it with a personal approach, not just, you know, plugging and playing with a bunch of tenants, a bunch of investors. seems like you’re treating everybody as an individual, which I think goes a long way in the management industry. You kind of mentioned some things that, you know, maybe investors aren’t super educated on. What are more things that you wish more investors knew, first of all, before hiring a property management company, and then also just long-term rentals in general?Derek Morton (15:12)
⁓ it’s not always easy money. for one, like I, I, I hear all the podcasts, you know, all the books and all the social media ads, like real estate’s easy money. And it can be until stuff blows up. ⁓ and so it’s, it’s not always easy money and just bet on something going wrong and factoring that in.the other issue that people don’t always understand is that
People are people. Yes, you have a lease. Yes, you have all the recourse in the world, and you have rules and regulations, and you have all sorts of bells and whistles to try to make things as easy as possible for residents and our owners. ⁓ But people are people, and people are gonna be what they are and do what they’re gonna do sometimes.
Like we had a… ⁓
owner that we had to have a different conference. She’s frustrated. And I’m like, I don’t know what you expect me to do. We had rented a place to a young couple that was great. mean, I’m, I mean, we went through the application with her, like afterwards. I’m like, she’s like, how did you miss that? And I’m like, would you have rented to them? And she’s like trying to find stuff. I’m like, they have an 800 credit score. They’re making this much a year. Like that’s way above our requirements.
Please tell me where the red flags are. Well, about six weeks after moving in, they decided to get a divorce. And because they were getting a divorce, they basically just said, screw you to everyone and just up and left and turned into a big fight with us. And she’s like, was talking to the HOA
the neighbor that lived next door was just like, yeah, they just basically said the property manager is not going to do anything to them. I don’t know if I want that kind of a property manager. Here’s what it says on our lease.
now turn them into collections. We didn’t do nothing, but if they just up and leave, I can’t lock him in. Like, I don’t know what you what’s what your expectations are here. so just understanding that that it’s frustrating. But people are people and sometimes we’re the people that are idiots too. Because, you know, we all sometimes we look back, you do that right. ⁓ And so
Kristen (18:15)
Yeah.Derek Morton (18:22)
Like those are the two big things. And the three, like if you’re going to choose your property management company, choose it based on someone that you can trust. it shouldn’t always be based on price. Sometimes it’s like, I’ll do it for 5%. And you’re like, sweet. And you’re like, there’s a reason they’re doing it for 5%. They’re giving you the bare minimum. Or they’re feeding you up the yin-yang to make up. And you’re like, I’m paying more.⁓ then you know that i would have before you know an eight or ten percent ⁓ that that some of the others charged so don’t always base it on price ⁓ because price doesn’t really tell you
Kristen (19:02)
Yeah.Derek Morton (19:11)
Two, like take some time with them. If you’re trying to choose someone off for a 10 minute phone call, which a lot of them do, like it’s funny. like, wow, that was better at sales than I thought. Like you’re interviewing anyone else. No, just found you on Google at work, saying you have good reviews. And I’m like, you, but that’s a big investment, you know?Take some time. We’ve tried to kind of expand our sales process ⁓ just so we can get a better idea of the owners that we’re looking to onboard. ⁓ And then they can get a better idea of us and what we have to offer them to minimize ⁓ any potential miscommunication during onboarding. And then we’re expanding our onboarding.
process for these owners to make sure, okay, so we’ve got them on about six weeks later, then we’ll, you know, at that point, hopefully they’ve received a payment and different things. And I’ll start walking them through like, hey, here’s your online portal. Here’s how maintenance works. Like, or here’s the, here’s our maintenance portal. Here’s how you get access to all of this. Here’s here. Here’s all the reports. you have any questions on this? And then we’ve got some other technologies that, that can help them walk through.
their life cap rate on their properties and it’s really sweet and Walk them through that so they’re educated and they get a live look at everything on their property and all the technology we use so they know
Exactly where they can get the information so they’re not wasting time Going what’s going on with my property? Because you don’t want to waste you like times valuable they don’t want to waste time and if they do have a question it’s a much different question if they’re like
Instead of be like, hey, my owner payment was short. Do know why my owner payment was short? I don’t know. Let me dig everything out. You’re like, there was a $200 repair. Did you look at your owner statement? ⁓ And so that’s always the first question now. It took some time over the last few years to reeducate owners that I’d onboarded right at the start where I’m like, I will babysit you. I will do everything. As we’ve scaled, we just can’t ⁓ to the same extent.
And so just being able to kind of prolong that onboarding to explain so they know where they can get answers so that they can find their answers quicker and they don’t have to reach out to us. And then when they do, it’s a much different conversation. So like one of my favorite technologies that we’ve added and it’s made life so much easier for us and our owners is ShowMojo and it’s a showing scheduling software. But the data on it is amazing that I’m able to get.
but it does a weekly update. Every Monday, my owners, when a property is on the market, they know how many leads we got, how many showings, how many showings we have this next week, and then if any of the showings gave feedback. So if they gave feedback, that’s all part of there. So if it’s like, this should be rent, you know, $500 cheaper and there’s five of them.
You know, they’re saying that on feedback. Let’s be honest if there’s, if it’s that overpriced, we wouldn’t have any showings. But you know, that kind of feedback, it helps the owner be like, oh, okay. Or if they’re like, oh, let’s just try this $100 more on the rent. You’re like, it’s not gonna rent. You’re not gonna get any leads, nothing. And after two weeks, they’re not seeing it, then they’re able to get it.
Or if we’re getting lots of showings and we’re not getting any feedback, it’s a different question. Like, hey, I saw we had five showings last week and we don’t have any applications. Do know what’s going on with that? And sometimes it’s like,
hey, this person, like they’re applying, here’s the paperwork they’re waiting for. And that’s where they’re at. That’s a
different conversation between a property manager and their owner, as opposed to being like, is anyone even looking at my property? Why isn’t this rented?
Kristen (23:21)
Right.Derek Morton (23:23)
You know,and then with that, the data when we’re onboarding or when someone doesn’t renew and we’re putting it on the market, I can tell the owner, okay, this unit, we have similar units. Right now we’re averaging between 20 to 40 days on the market, just depending, you know, within this range. And then they know, and those expectations are set. ⁓ And then now on day 21, are they probably calling me like, hey, is it rented yet? And I’m like, well, no, or yes, you know.
And it makes a huge difference. And being able to just give them that information, that’s, and if you’re not able to get easy access to that information as an owner, it’s frustrating. And you sometimes like the cheap management companies don’t provide that and you’re losing out.
Kristen (24:11)
Yeah.Absolutely, I I feel like NetGain, really does balance that line really well and it ends up saving you money down the road because you have someone that’s actually looking out for you and actually managing your needs. ⁓ Well, this has been awesome. Thank you so much for all of your insights and all of your stories. I think it helps a lot of people. Tell everyone where to find you and where to find NetGain.
Derek Morton (24:38)
So you can find ⁓ me and NetGain on our website, netgainpm.com, N-E-T-G-A-I-N-P-M for property management.com.Kristen (24:49)
Well, thank you so much for being here, Derek.And thank you everyone for listening. I hope you got some good information, inspiration for your business, and we will see you back next time. Bye.
Derek Morton (24:52)
Thanks for having me.
