Business Un-usual: Operations Evolved [Video Series]

Editor’s note: The following is a transcription from Episode 1 of the Business Un-usual Series: Operations Evolved. In this episode, with the help of three experts in the property management space—Glenn Russell of Coastal Group Inc., Mitch Deminski of Solutions for Real Estate, and Troy Evans of Marketplace Homes—we talk about the changes COVID-19 has brought to their property management operations and their POV on what’s worked best to take it all in stride.

Fred Tracy: With the COVID-19 crisis continuing on, business has been anything but usual for property managers. And with many states now reopening their economies, the pandemic has already accelerated the way property managers of single family rentals think about their business and prompted a whole new set of questions.

What process tweaks have property managers made to their business operations? How have communications between owners, residents, and teams evolved? What will a post-COVID-19 world be like as renters increasingly work remotely and their perceptions of urban rental markets change? We dig into all of that in our Business Un-usual video series, where we talk to three single-family-focused property managers from across the U.S.—Glenn Russell from Coastal Group Inc., Mitch Deminski from Solutions for Real Estate, and Troy Evans of Marketplace Homes in Episode 1 of Business Un-usual: Operations Evolved. We dive right into how business operations have changed at record speeds, including what’s worked and what hasn’t in light of COVID-19. Question number one.

Where were you when you heard the news that this was a pandemic?

Mitch Deminski: I was right here in my basement. Little unique story for us about last September. So six or seven months ago, our property (actually our office) where we were managing out of (the building that we were in), the middle atrium of the four-story building collapsed.

And within an hour the fire department said, “You are closed for business,” condemned the building, and my company and all the other companies that were in that building…out of business. I broke into the building that night, grabbed the computers and checkbooks, and we are up and running by 10 o’clock the next day with new challenges. Here’s the big obstacles when it first happened: we weren’t able to get mail, our phone systems and what we thought we had to be kind of mobile were not in place. Those were the two really big challenges, but with… We’ve been working towards three years before that with getting my ability to work from anywhere, hopefully Florida or something like that for a few weeks a year.

So we had a lot of things in place, but with Google Docs and Buildium, my team was up and running, no problem.

And it’s interesting to watch all these other companies, not just property management, all these companies, say, “How do we work from home now?” It takes two months to get through the “clumpiness” at the beginning. But, yeah, it was a little nerve wracking because I was worried about my owners, too.

What were they going to think? But within 30 days I noticed my staff was, “Hey, we like this!” And I told them, I said, “The challenge is up to you. You show me that you can perform on our matrix and our KPIs, then I’ll consider working virtually from here on out.”

How has your definition of essential business operations changed during COVID-19?

Troy Evans: I think the term essential has really changed in my mind. I think during a regular day, it’s very easy to get caught up in, ‘I think this is essential to me in my personal situation.’ I think now it’s become a thing. Everybody has a pretty solid idea of what essential means across the board. For us adapting to what that meant typically came in the form of maintenance, and keeping up on that, and what was considered essential maintenance and what was considered not—and one of those, you may have to live with it for a week or so until things start opening back up. Understanding that ‘essential’ from an employee standpoint also wasn’t necessarily a good thing. It wasn’t something that everybody wanted to be. So it, from a business perspective, changed how some of our operations are handled, but I think internally as a team, and just for people, that the term essential wasn’t necessarily considered to be a beneficial title to everybody.

Glenn Russell: What we found is that we’re getting more tenant maintenance and service requests than ever before. So they’ve discovered the benefit of that system and it logs it, and that’s the way we want to get things, but it also means that any little thing, you know the bedroom door lock isn’t working or whatever—they’re sending these things through. So we evaluate what can be done safely. Is the property vacant? Can it be vacant when we do the work? What steps do we need to take? So we’ve really been…but it’s basically heating, air conditioning, roof leaks, plumbing.

What are some of the things you did (or didn’t do) in the past that have set you up to handle the situation?

Troy Evans: The nice thing about our company is we’re nationwide, but we’re out of one office here in Detroit. And the way we run everything is cloud-based, and local “trades”, and local regulators, and making sure that we’re aligned across the board, but still able to maintain that central software in communications and teams. So having that wide reach and cloud-base didn’t really affect a lot of our day to day. You’re already set up to be able to handle things on the phone and online and be able to send data that way, correspond with “trades” and things to that nature. That was really beneficial for us because we didn’t have to stop and pivot. A blessing during this, but at the same time, keeping up with those local regulations, and what those local laws mean, and who can do what, what can our people in Texas do that, that we can’t add in Michigan—and vice versa, keeping up with those things, trying to keep a steady answer across the board, while also having it be specific instead of broad ranging—that was a big challenge for us.

And I think it still is. As states start opening and changing regulations now, keeping up on what’s allowed and what’s not is definitely a challenge that we continue to fight every day.

How has the efficiency of your operations been impacted during the pandemic?

Glenn Russell: Other than the fact that we’re working remotely and what we now have is we rotate three different staff members through the office. We have a staff person there for half a day, each day, just in case there’s incoming mail, deposits that need to be made, that kind of thing. Our efficiencies have not dropped off. I don’t know that I’m getting the same dollar-per-hour work out of one of the staff members because she is almost totally answering phones and clerical. But the other two staff workers are being very efficient, we’re releasing properties, we’re turning over maintenance on vacant properties. We’ve had several windstorms so we’re having to do a lot of maintenance, on-site repairs, and roofs and things. It’s working smoothly. Knock on wood.

Troy Evans: The way that we’re set up from a sales and operation standpoint is we’re in about 38 states right now, and we are able to help homeowners either sell, buy, or manage their homes, and anything in between—whether it’s rehabbing properties or day to day maintenance. So with that comes specialized teams that focus in marketing in specific areas, and you have teams that lease in specific areas, and day-to-day property managers that focus there and finance all those things across the board.

When it comes to COVID and how that affects us, we run into issues where some states our photographers can’t go out to homes, homes are having to wait before they can be marketed, while in other states that’s completely fine. Things like…like I mentioned, what’s considered central from a maintenance standpoint, what some tenants may consider that to be essential. Some markets when it comes to rental registration, they have inspectors that can go out, but others can’t. That’s the biggest challenge that we’re facing out from an operations standpoint—because as we are able to tackle it, if we can. The effect is definitely where and how are we going to be able to do that? And how are we going to continue to keep our sales and our homeowners happy during a time like this? Where maybe we can’t market their home, their home is sitting vacant and they have a mortgage on it. Not everybody wants to defer a mortgage payment. There’s all these little, minute things that end up coming down to the specific customer.

When you have 4,000 homes, that’s a lot of various changes that you have to keep up on, and making sure that things don’t slip through the cracks is a big deal for that. So we rolled out a new software to track responses and to internalize them and make sure things are being followed up on appropriately in a timely manner, making sure questions are being answered…things of that nature. But also trying to come up with a strategy for those homeowners to make sure that they walk away…not necessarily, it may not just be in a positive standpoint, but making sure it’s not a negative standpoint, definitely.

Mitch Deminski: What we’re doing is… so I still want to get together with my group and I make it a point to see them every day. I have my core, I want to say my day-to-day operations people. I got Ashley, my Resident Relations Manager, Jamie, my Operations Manager, and I have a Facilities Manager, my wife, Susie. She’s upstairs in our guest room, she does all of our books.

But the three people that are outside of our house, it’s either I’m doing a Skype call with them and Marco Polo is an app where we… it’s basically video text. I want to make sure that they’re seeing me and I’m seeing them throughout the day—and they also communicate between each other. I think that’s very important, but we have these meetings on Tuesdays and Thursdays, and I have a KPI report that we go through on Thursdays, but I also have a report called a  WAT WAT Report, W-A-T W-A-T (What About This, What About That)?

We were not having conversations about things, because when you’re away from people every day, there’s stuff that you think of that you’re like, ‘I need to put this on a report and ask or tell people about what happened on this certain thing.’ There’s so much communication going on in property management that you make notes to follow up on that stuff. So in my WAT WAT Report, I cover owners, tenants, vendors, onboarding of new owners, and ongoing projects that we have. And then I have each individual person, if there was a conversation that took place, what that person is actually following up on.

So I open a brand new sheet for the week and I look at what’s been happening over the last prior weeks, carry it over, “So whatever happened last week at 123 Main Street, where we have with that? Where are we with the water bill? Where are we with the tenant?” Whatever. It’s a great way to remind everybody—and everybody knows I’m going be asking about it—so they know to be prepared for it and pay attention to it: WAT WAT.

What are the specific processes that you have adjusted and how?

Mitch Deminski: My main concern is were we stick into our commandments that we have as a company and doing the things that we need to do, communicating with the owner, being responsive to tenants, contractors are still getting their information. When you’re in an office, and as you know, a lot of property managers are control freaks, you hear certain conversations going on and you’ll want to go in and ask, “What happened here?” And maybe micromanage a little bit. Never thought of myself as a micromanager, and really my staff is awesome, they know what to do, they’re very well trained. But I found out that I couldn’t hear those conversations anymore. I needed to be engaged as an owner, as a broker at certain points. So I need to hear those type of conversations. So I had to put things in place that would catch those types of things.

How has your leasing season been so far?

Mitch Deminski: So middle of January, I had 24, 25 properties and it felt like, “something’s coming”—I lived through 2008. And then COVID happened, and I looked yesterday in our meeting—we have seven properties that we’re marketing right now. I think it’s because the properties are empty. They’re easy to see, but yeah, seven that’s crazy.

Troy Evans: It has oddly improved. And I don’t know what to chalk it up to. I’m going to be 100% honest. Our average days on market from December through February was about 15 days—that’s actually gone down to around 12. I think maybe it’s demand. It’s one of those fear of missing out maybe on this property because they don’t know what the future holds. Obviously that does come with some of its concerns: Are you jumping into something? Is it a quick decision? Obviously, we do our best to mitigate that as much as possible, but again, we don’t know what the future holds (just like anybody else)—which is the purpose of these video interviews. Because we want to make sure that on one side our homeowners’ homes are getting filled quickly, and that’s returned all the way. On the other side, we want to make sure that they continue to stay filled. There’s that middle ground: you don’t want to fill it too fast; you don’t want to fill it too slow. And seeing a two-day drop over the past few months is a fairly significant change from 15 to, or three-day drop, from 15 to 12 days on average.

What adjustments and tools have helped you through this leasing season— especially considering social distancing?

Troy Evans: It’s a very additional business, relatively, for a majority of property management companies. We’ve utilized a service called Tenant Turner for a very long time. They allow self showings, things like that, and that’s become beneficial because we know it—we’ve done it for years. And utilizing that there, self showings, things like that, you’re jumping that hurdle from that social distancing aspect.

All of our homes that we market have to be vacant, it’s been like that for years. So that also jumps that hurdle from tenants showing homes, we pre market properties, things like that. I think that’s really been beneficial, and as tenants start adopting that idea that, “I don’t necessarily have to walk through with somebody,” and as other property managers start having the idea that, “I don’t need to be there to show every single home,” I think that that may also be what’s driving that decrease in showing time.

How have any state or federal regulations affected your business?

Glenn Russell: Many layers of that, of course, the general federal guidelines were out there, then we have all the military guidelines layered on top of that. Just trying to navigate that cleanly, now, fortunately NARPM and our state association of realtors has been sending out summaries of the guidelines and helping us guide/work our way through it. It’s been interesting.

And of course the whole late fees thing, we had to turn off the automated late fee functionality, and even then some of them would sneak through, and what I realized (and this is for anybody else using them) the payment allocation system was saying, “This guy has a bunch of late fees out there. I’m going to allocate to the late fees.”

So what I had to do was turn off the auto-late-fee function for payment allocations and remove the late fee/owner late fees so that they wouldn’t be allocated. Because what I was doing was taking the transaction detail report every day as rents were coming in and looking to see if any late fees had snuck through to get those late fees off the ledger. And we were able to do that using those functions.

How are you handling required maintenance in units and common areas of properties during COVID-19?

Troy Evans: We did have a 12-unit building in Chicago that we do have to make sure we’re getting people out there. There’s no common area, but there’s definitely walkways and trash cans outside, and things like that, that just need to be sanitized and taken care of. But again, it’s a situation of are the “trades” available to go out and do that right now? Or are they getting their time taken up with essential businesses and going out there to clean them?

Your restaurants that are still doing carry out, your McDonalds, your doctor’s offices, all of those things—that’s where a lot of their time is being utilized as well. Getting the professional deep clean, hospitals are hiring these people up as quickly as you can try to get them to get some extra help in there. It’s definitely a weird time to be able to do those types of things. We’re doing our best, finding “trades” that go out there whenever they can. Luckily for us, it’s not a common hurdle that we have to jump through.

How have revenue goals changed because of COVID-19?

Troy Evans: Revenue goal hasn’t really changed. We’ve definitely seen an uptick in sales—it’s just who that person is. You have a time right now where—what property managers and what we’re seeing is—people who are trying to sell their home, they’re not moving, they need somebody else to jump in so that they can get some money taken back in (which is great). There’s a definitely a need there. On the other side, our investor side has really jumped, and that’s our main base, is investors, since we’re across state lines. Given one operational piece, though, for that, there’s been a significant uptick in investors looking for another property management company. And, unfortunately, sometimes it’s due to other property management companies not being able to stay afloat during this time now, which is really unfortunate.

We have seen those calls start really reeling in, visits to our website, things like All Property Management having a difference in leads and things of that nature. So our revenue goal hasn’t changed, it is who that client that we’re going to be focusing on for the next few months (and what that looks like) and how we’re going to position that. That’s what’s changed a little bit, not only for that—but for the better. These are people who are converting higher, these are people who are in need, and it’s a group that is definitely going to help drive revenue, not only through this year, but through the next 2 to 3 years as they stay on.

Fred Tracy: We hope you enjoyed watching and getting insights from all 3 of our featured guests. Stay tuned for the next episode of Business Un-usual: Communications Accelerated where we talk about how communications and technology have stretched the boundaries of how we work and do business. How have you modified your business operations during COVID-19? Comment below and share what has worked best for you. Until next time!