Property Management & Renovation Tips with Terry Kerr and Liz Nowlin

Terry Kerr And Liz Nowlin (00:00)
When the music stopped and nobody could get a loan, we had five employees and they needed to eat. And so we had a few rental properties, but that didn’t pay the bills. So what we did is we got the go ahead from one of our banking partners to continue to buy houses. So when everybody else had to stop dead in their tracks and I had nine buddies,

that were in the business with me and I’m bummed to say that all of them but one had to file bankruptcy. We kept rolling because our banks allowed us to continue to buy houses, fix them up and put them on an interest only line of credit until the ice broke up about six months later and we were able to sell houses. it was dicey but it was having those tight banking relationships and then only having to pay interest on those loans instead of principal and interest.

that created enough cash flow for me to continue to pay salaries for a little while before financing came back.

Michelle Kesil (02:25)
Hey everyone, welcome to the Investor Fuel podcast. I’m your host, Michelle Kesil And today I’m joined by someone I’ve been looking forward to chatting with. We have Terry Kerr and Liz Nowlin who have been making serious moves in the management and renovation space. So Terry and Liz, I’m so glad to have you on the show today.

think our listeners are really going to take something away from how you’re approaching property management and your renovations. So let’s dive into all of that.

Terry Kerr And Liz Nowlin (03:04)
Thanks Michelle, glad to be here. Yeah, thanks Michelle.

Michelle Kesil (03:06)
Absolutely. So first off, for people who may not be familiar with you and your world, can you give us the short version of what your main focus is these days?

Terry Kerr And Liz Nowlin (03:17)
Absolutely, so we are a turnkey real estate seller. We specialize in selling fully renovated, fully leased up rental property to real estate investors that are looking for cash flow and appreciation.

Michelle Kesil (03:32)
Amazing and what markets do you operate in?

Terry Kerr And Liz Nowlin (03:34)
We are in Memphis and Little Rock, Arkansas.

Michelle Kesil (03:37)
Okay, awesome. Yeah. So what caught my attention about you guys is the way that you’ve been able to create this company with all of the different verticals that you guys have. So can you share a little bit about all of the offerings that you have and how you got into it and how you just created this business that you guys have been working on?

Terry Kerr And Liz Nowlin (04:04)
Sure. So, you we started out by selling houses to real estate investors that were looking for cashflow and very quickly within the first year or so found out that they needed good property management. I was managing my own properties and the investors that I’d sold to that first year or so were not experiencing as good of a return because property management is tough. So we started a property management company and anyone who’s been in

The real estate industry property management rental property space for long will know that property management is where the rubber meets the road. And since then we have opened up our own hardware store so we’re able to ⁓ buy our materials in bulk and provide them to our investors at way below market rates which allows us to keep ⁓ pricing down on the properties and do a full blown renovation.

And yeah, so we got a little bit of vertical integration all around the space, but we’ve been doing it for 24 years and have bought, rehabbed, and sold over 5,500 houses and currently manage about the same. And the vertical integration doesn’t just make us more efficient as a company. It’s hard to overstate how much it benefits our investors and our renters and their renters positively.

It’s very unusual for a

property management company to have licensed electricians full-time, licensed plumbers full-time, and a 30,000 square foot warehouse filled to the brim with the paint, the carpet. If anyone looks at, you we’re able to keep all our houses up on the website. So can kind of cruise what our cash flows are, price-to-rent relationships, and you start to notice a running theme really quickly. Every kitchen is the same, every bathroom is the same.

But man, it makes us efficient. It keeps repairs down. We have the same thermostat in all 5,700 houses we’re managing, the same water heater, the same roof shingle. And ⁓ it keeps maintenance costs down for our investors on the long term. It helps us fix things for renters very quickly. Our average renter stays almost four years. That is double the national average.

There’s a lot that goes into that long stay, but one of it is certainly that things are almost never breaking, but we certainly fix them fast when they do.

Michelle Kesil (07:07)
Yeah, that is so valuable. It sounds like you guys haven’t really dialed in, which is not easy, especially in this climate. So what has been like the key to keeping that machine running smoothly.

Terry Kerr And Liz Nowlin (07:20)
I’m constantly working on sharpening the axe. We have meetings to have meetings to have meetings that’s zooming all the time. And really it’s all of our department heads working in lockstep because there’s so much cross departmental work that has to be done from leasing to repairs to renovations, the whole nine yards. And so we’re constantly not, we’re not sitting on our laurels.

just because something worked fine yesterday doesn’t mean it’s gonna work fine tomorrow. So we’re constantly measuring and making sure that we’re delivering the best product that we can to our residents because when you do that, they renew the lease. When they renew the lease, the property performs and when the property performs, everybody wins. So it’s a labor of love for sure. Yeah, I’ve definitely gotten a master class in scaling for a business from working here.

When I started in 2009, we were working out of a house. I was one of five W-2 employees and we were managing 83 houses. And then today we’re managing 5,700. We have about 120 W-2 employees. We kind of are operating out of multiple commercial buildings and multiple markets. you know, Terry’s always been great about…

hiring early, hiring frequently so that customer service didn’t go down as we grew. We’ve worked hard to keep some of the boutique feel that we had as a smaller agency now that we’re bigger, both for renter feel and investor feel. And we have two customer sets, you know, and we work to serve them both well. And it’s been really neat to get to see it grow so much.

Michelle Kesil (08:54)
Wow, yeah, what a massive growth spurt. That is so exciting. So let me ask, what are you most focused on scaling next?

Terry Kerr And Liz Nowlin (09:04)
We’re just looking to, you know, keep doing what brought us to the dance, which is continue to look for these houses that fit our profile. You know, we have to take a swing at a go take a look at a lot of houses before we find one that will work for us. And so we’re constantly out there making offers on houses that need the full blown gut read job or rehabs. And so, you know, one of the things that we added recently to the vertical integration was new construction.

So now instead of just doing rehabs, we’re buying vacant lots and doing new construction. So we’ll do probably about a hundred this year new construction and about 550 rehabs. So we’ll continue to grow the new construction side, but we can only find as many houses to rehab ⁓ as the market will allow. And since there’s more demand than there is supply,

is the reason that we started the new construction. So we’re just going to keep on working what brought us to the dance and keep sharpening the axe.

Michelle Kesil (10:01)
Amazing. So every operator I know has a moment in business where things got more real. Maybe a deal went sideways or you had to make a fast pivot. Would you mind sharing one of those moments that you’ve experienced?

Terry Kerr And Liz Nowlin (10:52)
Absolutely. Yeah. So the credit crisis, we’ve been around for a long time. So when the music stopped and nobody could get a loan, we had five employees and they needed to eat. And so we had a few rental properties, but that didn’t pay the bills. So what we did is we got the go ahead from one of our banking partners to continue to buy houses. So when everybody else had to stop dead in their tracks and I had nine buddies,

that were in the business with me and I’m bummed to say that all of them but one had to file bankruptcy. We kept rolling because our banks allowed us to continue to buy houses, fix them up and put them on an interest only line of credit until the ice broke up about six months later and we were able to sell houses. it was dicey but it was having those tight banking relationships and then only having to pay interest on those loans instead of principal and interest.

that created enough cash flow for me to continue to pay salaries for a little while before financing came back.

yeah, it was sketchy. whew. And I would say to this day, we have great banking relationships because Terry was one of the few people to survive the bloodbath that was real estate in that time. And even that passes on why some of our pricing is so competitive and affordable for our investors.

And it’s been wild to see on the appreciation side as well. In 2009, we were selling a fully renovated house that rented for $675 for $46,700. And I remember, I was about 29 when I came to work for him and thinking, I can’t believe people are buying houses. How do they know this isn’t the bottom? It’s crazy. And oh man, I wish I could have picked them all up, that same houses.

and would you say $120,000? $120,000, $130,000. Yeah, and that’s because the rent is way higher too. And so we’ve been in operation through the top of bubbles, the bottom of crashes and on and our investors have always done well. We’ve never seen rents go backwards. It’s just a very, very stable. Memphis itself is rather recession proof. It doesn’t have some of the kind of hot air that maybe an Orlando or a Vegas might have.

where it’s going to puff up really fast but then crash a lot. And so for people feeling uncertain about the future, this can be a great hedge against inflation. It’s just very stable.

Michelle Kesil (13:11)
Yeah, that’s great to hear. So a lot of the listeners are investors for this show. And are you guys getting new investors to support your properties? Or how are you working with investors in this current landscape?

Terry Kerr And Liz Nowlin (13:29)
Absolutely. yeah, we have many wonderful repeat investors on any given day. I’d say 80 % of the houses I’m serving out to people are under contract to existing investors coming back for their second, third, fifth house. But we love and welcome new investors through the door. We have a short wait list for our properties. I actually started having more investors than houses in 2011 is when I developed the

wait list, which is kind of mind blowing to me in and of itself. It was way before the concept of turnkey was really known. It was before podcasts like this were very well done and it was entirely word of mouth. And I actually run this wait list for those new investors, your listeners or anyone else that may want to invest with us because what had happened was we’d run out of houses on the website, but we’re always buying and renovating. And as I would get a new one in the door,

I would kind of hit send on this email to announce there was a new house available. And literally, my phone would start vibrating off the desk. My inbox would go, I’ll take it, I’ll take it, I’ll take it, I’ll take it, I’ll take it. I was having to send screenshots of my inbox to people because they were saying, what do you mean this house is no longer available to me? You emailed it to me eight minutes ago. Because our repeat investors are so confident in us. And I completely relate to the first time investor.

that wants to analyze the deal, call their spouse. And I also know that every time we get a new investor through the door, that becomes my repeat investor. That becomes my person that is referring their coworkers or their family members.

And we could have had an easy couple of years letting our existing folks soak up everything we had. The wait list is certainly more kind of work to control that process. But I did it to…

Make life easier for those those first time investors. And so we offer the properties out the first off. It’s easy to join There’s no commitment. It just lets me put you on the spreadsheet We offer the houses out and kind of a trickle-down way that just creates Anything from one hour to three days between when I offer the property and it goes under contract and it helps me, you Don’t be wrong. We have investors that

Own 700 houses coast to coast that own hotels. We have very sophisticated and experienced folks, but I absolutely love working with people on their very first house. I have investors that might be renters in Manhattan, renters in LA. Anything in their immediate area is millions of dollars, and I’m holding their hand through literally their first real estate purchase in life. And that always has a special place in my heart.

Michelle Kesil (16:43)
Yeah, thank you for sharing that. So let me ask you this. What is the next real goal for you?

Terry Kerr And Liz Nowlin (16:51)
The next goal for us, goodness, we were just talking about goals before this started and I talked about how I tend not to set too crazy lofty goals because we really do, we really have just been doing the same thing for just years and years and years. And so, you know, we’re at 5,700 houses almost under management. And so 10,000 houses has a nice ring to it. But you know, the main thing is, is that we wanna be able to provide quality of life.

Michelle Kesil (16:52)
Yeah.

Terry Kerr And Liz Nowlin (17:19)
to the folks that work here under Mid-South Homebuyers and Mid-South Best Rentals and Mid-South Hardware, all the Mid-South families. And we want to be able to continue to provide an excellent affordable housing to our residents and an excellent investment vehicle for our investors. So as far as anything like, you know, shiny out of the box, no, not necessarily. We just want to keep on doing what we’ve been doing and just looking forward to continue to grow.

Michelle Kesil (17:47)
Yeah, that’s super exciting that you guys have built such a strong foundation and that you’re able to just hold that. So what would you say has been the key to your success so far? What have those foundational principles been?

Terry Kerr And Liz Nowlin (18:05)
I would say that when the dust settles on every deal that has been done, and let’s just call it a deal, it’s a house, right? You buy it, rehab it, sell it, rent it, all that. Everybody needs to want to do the deal again, right? The renter needs to say, man, I wanna renew my lease, and the investor says, wow, I would buy this house all over again. And the rehab team that rehabbed the house needs to say, wow, this was…

You know, these guys were easy to work with. And the real estate attorney that closes the deal, the mortgage broker that is providing the financing, you know, ⁓ the management team here that is managing the property needs to say, man, this house was rehabbed really great. It’s easy to manage. You know, the phone’s ringing off the hook for the residents. So it’s basically just leaving enough meat on the bone for the deal all the way around the horn.

And then also have the deal be able to be profitable enough to where ⁓ we stay in business. And the only way that you can provide value, any outfit can provide value, all the way around the horn, is to be super duper efficient. And so that’s what we work on day in and day out is that efficiency. Yeah, an offshoot of that, because Terry, we really operate on that philosophy and

I always say with my investors that turnkey is kind of like getting married. This house is going to make you the most money the longer you hold it. And we get to really realize that rent appreciation, that property appreciation. Well, I’ve been with Mid-South for 16 years, and I’m not an anomaly here. The property manager that is over all 5,500 houses, Matt Van Horn, has been with us for 14 years. An investor’s direct point of contact after

close Naya she’s been with us for 12 years 10 years I believe and and it’s that story is told throughout our whole company and it just means I mean literally your renter hears a smiling voice answer the phone in two rings from a seasoned sales professional that’s gonna get your house filled quickly

The person, if you have a question about repairs, maintenance, heck, the person doing those repairs and maintenance have been with us for some of the only people that have been around longer than me are on our renovation side. So there is hundreds of years of experience collectively going on with the company. And some of it is not that we’re geniuses, we’ve just been doing it for so long, we did it the wrong way first and figured out how to do it the right way.

Michelle Kesil (20:32)
What did you guys do the wrong way?

Terry Kerr And Liz Nowlin (20:34)
Good grief everything You got to do it throw you buy in the wrong areas you buy too low you buy too high you Don’t inspect the attic when your HVAC and water heater on the first floor and you finish the rehab and then you look up in the Attic and the whole thing is burned out and you bought a burnout You didn’t even know it. I mean the horror stories are long and deep. Yeah, but every time you do that

you learn and you’re going down the road. So I won’t say it’s fun when you find those kinds of things and we don’t find them much anymore because we’ve screwed up enough times. But you never know. There’s always something else to learn. Yeah, we have stricter renter criteria than anyone else in town. If you get approved with our property management company, you would get approved anywhere within the limits of your income that you applied. And some of that is through the early years. Whenever a renter kind of fell off the rails, had payment struggles,

we would look back through that file and say, was there anything, was there anything that could have possibly predicted this? So that bleeds into just some like, you don’t have to just make three and a half times the monthly rent. also, let’s say your rent was 400 bucks a month because you were sharing a house with four guys and now you want something that’s 1500 bucks a month from us and your income is there. Everybody else would take you, but that’s like just one little layer of ways that we’re doing things differently.

⁓ Another thing that I love about working here about I buy my own investment properties is if we’ve seen certain materials show up on investors bills frequently, we have pivoted. know, so we used to use this light fixture on the exterior of our homes years ago and it had the jelly jar that you would unscrew to change the light bulb. Well, we kept getting the houses back and the renters would have dropped the jar and broken it or what have you. The jar was gone.

That light fixture cost us four dollars a unit Well, we switched to a light fixture that cost us $18 a unit and it has an open glass dome and the renter can can reach their hand up there to change the light bulb and Tada, we spend more money on the rehab, but now we see our investors bills lower on the back end So so much of this 24 years in business has informed these micro choices that we’re making throughout the whole day Yep, there’s no one big thing. It’s just all the little things that up

Michelle Kesil (22:48)
Yeah, absolutely. All those little things definitely add up and it’s important to focus on them because it makes the grand scheme of things move smoother. Thank you for sharing that. All right. So before we wrap up, if someone wants to reach out, connect with you, collaborate or learn more about what you’re doing, what’s the best way for them to reach you?

Terry Kerr And Liz Nowlin (23:10)
Liz? Mid-SouthHomebuyers.com is ⁓ the website. That website is my baby. I love it. I’ve poured my heart and soul to it. You can view 30, 50 houses that are the most recent houses at today’s price-to-rent ratios. The property management section, you can download our management agreement, read our philosophies. We’ve got market reports on economic drivers in Little Rock and Memphis and all roads on that.

that website lead to me. I am Liz, L-I-Z at midsouthhomebuyers.com. There’s a lot of, you can sign up for our newsletter, you can sign up for the wait list, you can reach out. We reserve an entire hour for any investor that wants to speak to us so we can learn their goals, what they’re looking for, and we just love it. So I encourage anyone to reach out.

Michelle Kesil (23:54)
Well, listen, I appreciate your time, your story and perspective. We need more people in this space who are out here doing things in this right way. So thank you again for being here.

Terry Kerr And Liz Nowlin (24:04)
Thank you, Michelle. We enjoyed it. It was a pleasure.

Michelle Kesil (24:07)
Great. And for those of you that are tuning in, if you got value from this, make sure you’re subscribed. We have more conversations coming with operators just like Terry and Liz who are out here building real businesses. And we’ll see you all on the next episode.