On this episode of the Business and BBQ podcast, Tim is joined by Kevin Ortner, CEO of Renter’s Warehouse, the nation’s largest property management company. Renter’s Warehouse is unique in that they provide their clients and potential clients with a vast network of educational resources and individualized support as they consider getting into real estate through rental properties.
Kevin purchased his first rental property as a freshman in college, where he essentially got to live rent-free in one side of a duplex by renting out the other side. He caught the bug at that point, seeing the potential in rental investing, and he has been encouraging others to do the same ever since. It is interesting to note that most rental real estate investors own 1-5 properties and are able to make considerable enough profits long-term to make it all worth it. What makes their investment even better is not having to mess with property management.
By working with Renter’s Warehouse, investors get all of the benefits of owning rental properties without any of the drawbacks such as maintenance issues, tenant problems, and rent collection. Many people are hesitant to get into rental investing because of their perceptions that they need to put up a lot of money out of pocket or have had previous real estate investing experience, but investing in rental properties and partnering with a property management company like Renter’s Warehouse is simple enough for the average American to be profitable doing it. A property management company even takes the guess work out of choosing the right tenants who will not destroy your home.
Kevin goes on to talk about the leadership philosophies and culture that he tries to create at Renter’s Warehouse. Primarily, he tries to surround himself with good people who are emotionally intelligent and skilled and then make everyone feel like they can be transparent, authentic, and willing to learn from mistakes.
His new podcast, Rent Estate, is geared specifically towards rental real estate investing, and future episodes will feature interviews with Renter’s Warehouse employees from different areas of business who will provide their own perspectives on the benefits of this type of investment. This educational platform is intended to be another way to provide value in the form of free education to people who are involved in real estate investing or those who are considering buying rental properties for this purpose.
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You are listening to the business and barbecue podcast hosted by Tim Herriage. Tim Herriage is an active entrepreneur who built and sold six companies by the age of 40 and enjoys a sharing the ups and downs of business and entrepreneur life as for the barbecue, that’s just something he has a passion for from likes to share as well. Here’s your host, Tim Herriage,
All Right All Right. What’s cooking? Everybody? Welcome back to the business and barbecue podcast. I’m Tim Herriage and I’m so glad you’ve joined me today. Today I’m talking to my good friend Kevin Ortner. Kevin is the CEO of renters warehouse, the nation’s largest property management company. Kevin is a real estate investor who’s been investing in real estate for over 18 years. He bought his first rental property at the age of 18 and he now leads a company that manages over 22,000 houses and is developing technology and solutions to help you grow your rental investment business or to help you find a property in a different city. Before you move there, we’re going to talk about leadership. We’re going to talk about being the dumbest person in the room. We’ll talk about some entrepreneurship fundamentals. We’ll discuss some of the myths to owning single family rentals. We’ll discuss national trends.
We’ll talk about his book, the Rent Estate Revolution. We’ll talk about their focus on rent estate and his new podcast, the rent estate podcast. Stick around. I can’t wait to introduce you to Kevin. Start collecting more leads in minutes. Not only do I use hubspot’s free CRM, but I also use their free marketing tools. Start turning visitors into leads today. Sign up for free at hubspot.com/th with hubspot marketing free. You’ll have everything you need to convert more visitors into leads. Sign up for free today and it’s free forever. No contract or credit card required. It’s a risk free way to see what inbound marketing can do for you. Start turning visitors into leads today. Sign up for free at hubspot.com/th all right everybody. Welcome back to the business barbecue podcast. Tim Harris here with my good buddy Kevin Ortner, CEO Kevin, say hello to everyone.
How’s it going, Tim? Thanks for having me on. It’s going to be great.
I’m glad to have you on, man. Some of the audience obviously knows who you are. Some of them don’t. So why don’t you just take a couple of minutes, talk about yourself, what you do, where you work, your family life, your investment, you know, anything about.
Sure. That sounds good. So I’m Kevin Ortner, CEO of renters warehouse renters warehouse is America’s leading real estate investment services company. What that really means is for a little over 12 years, we’ve been building a really large property management platform across the United States. Today we manage about 22,000 properties for about 14,000 investors in 43 markets across the u s and recently this year. Added the ability to buy and sell tenanted single coming homes to our website who are investor marketplace. Uh, so now you can research new markets, new cities, new assets, purchase a property online through our investor marketplace with our trained advisors across the country. Bring that into our management system. We’ll take care of that at least in your property management for you. And if you want to add on to the portfolio, we can obviously help you grow. And also some people are looking to maybe dispose of some assets to 1031’s, whatever they’re going to do with that, we can help facilitate those as well.
Really the full service life cycle of real rental real estate is what we do here at renters warehouse and that’s been a pretty exciting journey to build that over the past. A little over a decade I guess. And personal front. I’ve been personally investing in real estate for 18 years, which is literally half of my life. I bought my first duplex as a freshman in college and a that’s what really got me started and passionate about it outside of work could be an entrepreneur or investing in real estate. I’ve got a wife and two daughters, one’s like gonna be a senior this year in high school. So we’re looking at colleges and getting her ready to be shipped off here in a year or so. And then I have a daughter in fourth grade as well coming in. So hang out with them when I can. And softball and swimming and sports and alike and so we’re busy, but every day is exciting.
So 18 years ago, how old were you? I was 18 or 18 and you bought a duplex? Wow. Yup.
Shipped. So I was born and raised in Minneapolis, Minnesota and that’s where I live today and that’s where I work today and I need to get the heck out of the snow and the winters. And so I moved to Arizona to go to Arizona State University. That’s where I attended college. And when I got, I think it was really instilled from my father who was a police officer by trade, but did some home building on the side, had a mini storage on the side. So he has some entrepreneurial roots as well. And I always talked about owning things, not renting things and thought find a place to live would be great, rent out. Part of it to some friends that I had down there and turned out that I could live for free, had the mortgage paid, was living for free, made a little extra cashflow every month, some extra beer money. And I thought, Geez, this is fantastic. That was really my first intro to real estate investing and I got the bug and that. So it was really kind of by chance, but it worked out great.
So do you think, how common is that story like with your average customer, you guys manage 22,000 houses. How many customers is that? Yeah,
it’s like 14,000 investors.
So most investors think that, I mean, they think they only have one or two houses and that makes them, you know, insignificant. Right. But I mean, just look at the numbers, right? I mean if you’ve got 14,000 people with 22,000 houses, I would imagine a whole lot more have one then have three
for sure. Our average client has something like 1.2 houses, right? And so most of them have one. That’s really how we grew the businesses on the backs of mom and pop entrepreneurial landlords who have one or two homes. And you’re right, a lot of people think they’re really insinuates significant having one or two homes. And really that puts them in a very elite group of Americans who are investing in real estate. There’s a whole lot of them, but it’s not that big of a group at the end of the day. And if you look at the data that’s out there, it’s interesting. One of the single family rental charts includes units up to four buildings, right? So up to fourplexes, the government for financing purposes, you know, considers that a single family. So there’s like 22 and a half million single family rental units or rent across the country.
And 88% of those units are owned by people who own five or less. So the majority of this asset class is owned by people who own one to five doors. And what it really means is your special when you own one to five. But it’s interesting, I talked to someone the other day who owned, what do you tell me? I think he said I just own 11 or something like it was like 10 1112 whatever it was. I just, you know, I’m not big guy, just gonna love them. Like you realize that puts you in the top like 5% of real estate investors in the country, just 11. Right. It is very interesting that uh, this is a small group of people across the, across the country. Um, and if you own one or two, you’re very influential in the entire market of single family rentals for sure.
A couple of weeks ago I drove my kids buy a house that I grew up in that my parents bought and the, I think mid eighties, like $18,000 and today it’s worth about 180,000. And when I was trying to teach my kids is, you know, I mean the way I look at real estate investing, it’s like an inflation indexed annuity with an underlying asset base that appreciates. And, and I told them, I said, look, one day you’re going to be telling your friends that I bought a house for 100,000 and now it’s worth a million. I’m just telling you, I mean, you’ll, you’ll be driving your kids around, you’ll be like, oh, this house, could you believe you used to be able to buy it for $500,000 and now it’s eight and 50 I mean, and even in my 20 years of doing this, there’s neighborhoods that I drive around in right now that it’s like, Oh God, I used to buy houses for 40 grand over there.
And you know, so it’s funny, I tell people all the time, it’s for as little as 20 grand and you can markets in the u s that you can buy it. I mean, out of pocket, right? Because you can do me defining it, some of it, which is the power of real estate, but for as little as $20,000 you can buy a rent house. Even if you bought an as is how, or a house that was moving ready for $100,000 off mls and Jacksonville, right? I mean, you can buy a rent house and only be in it for 20 grand. And I just tell people, I’ll tell him, it’s like you’ve got to start somewhere and talk about, I’d really like to know more about like your average customer. And are they people that are living a good life? Are they working a full time job? Are they traveling the world so they don’t have time to manage their properties? You know, kind of what, what do you see these entrepreneurial type people? What some common things you see in them?
Yeah. You know, it’s interesting. When we first started renters warehouse, it was right around the big real estate down tiering, the great recession, 2009 10 11 et Cetera. And so a lot of our early clients were what we called accidental landlords or unintentional landlords. And they ended up with a house that for whatever reason they needed to sell it and they couldn’t sell it. They, you know, they’re facing short sale foreclosure, they’re gonna lose too much money for the itself. So we said, hey, don’t sell it. Don’t foreclose, don’t short sell. Let us teach you how to rent it. Hang on to that. And lived to find in a day kind of thing. We brought on thousands of clients like that. What was interesting is we turned a lot of those people who were reluctant landlords or didn’t buy it with the intention of keeping it as an investment.
We still haven’t seen it because they realize the power of real estate over the long term. Right, and you were just talking a little bit about it and that we preach a lot about that at runners where else as well that this is something not get rich quick. It’s get rich slow, but it’s almost a certain thing that it’s going to happen and you just got to be methodical about it. And then they started to see the power of the things that having rental real estate can do for you. So we have a lot of those clients today, but of course now years later after the real estate downturn, we have a lot of intentional investors coming in. And again, they have one or two homes from times one to start. And they’re ordinary average Americans, right? They oftentimes, it’s a married couple. They built work, they’ve got kids in sports, they’re busy because they don’t have the time to manage the property themselves.
Managing properties, not rocket science. You’ve done it or you still do it. I’m not sure if you, if you do any any more today, but it’s not rocket science. It’s time consuming and it can be a pain. And so our clients are people who just don’t want to have to deal with the hassle of it and they want to be able to grow their portfolios from one to five. And for that they need a partner and a team in place who would do that. But they’re there every day. Ordinary people are not, they don’t own a bunch of real estate and travel the world and spend their time in Europe and France, different fine wine. They’re grinding out trying to make a successful living and leave a legacy for their kids and do this thing that you and I do. So it’s really interesting that you know to, to talk about our client base and the fact that everyone can do this.
Everyone can get into investing in their first home and ultimately their second home. You just a little bit of money aside and jump in. And I think what stops people from doing it so often is that it can be confusing or complicated or at least seem complex if you haven’t done it before. And there’s a lot of fear around it. I can’t be a real estate investor that’s for like Warren Buffett or for people who want office buildings or something like that. Right? And, and really that’s what we exist for is to help guide people through the process and to let them know that it doesn’t have to be hard and it can be easy. And the sooner you get started, the sooner that annuity starts working for you and producing extra income and ultimately a great financial freedom and retirement.
You know, it’s funny. Talk about the pain, right? So as most of us full time investors, which I tell people all the time, you know, there’s like what, 35 40,000 flippers in the nation and there’s like two, 3 million landlords, right? So, although the flippers are what will dominate your social media fee, it’s the actual landlords that are the real significant thing. And what too often my friends that are full time and investing, they’re trying to manage their own properties, which in my 20 years has been something I’ve done twice and I’ve quit it twice. And now I can tell you it was a glorious day. The day the last tenant moved out that had any idea who I was, I now go to these houses as an inspector. They don’t even know who I am. I’d say I worked for the property manager and then it’s just because I don’t want the pain.
I don’t want, uh, the nightmares. But also I believe it’s like if you own stock in Walmart and they bought a bunch of tide that they were going to sell for $3 a gallon and they have to sell it for $2 and 90 cents a gallon, they’re not calling you. You’re an invest, right? They’re going to manage that. They’re going to take care of it. They’re going to get rid of it. They’re going to minimize losses and move on. And I think the reason most of us own rental property is to make it an investment. So for me, it’s kind of, I avoid, I’m a big add person, Kevin, so I will avoid all the negatives. So all I get is the monthly report that says how much money I make and then I can ask some questions like, oh, well why did we have legal fees on that? Or why did we have your, you know, while I was there a work order on that. But I don’t know, it’s like I tell my friends all the time, like the best thing I ever did for my room of portfolio was to stop being involved. You know what I mean?
Right. Again, it’s not a, it’s not rocket science to manage homes. Once you grow larger portfolios becomes a little more complicated. You’ve got to stay on top of stuff and have a good team built, things like that. If you’re going to do it yourself and frankly have that small group or the group of people who own a small portfolio, a lot of them do. Do it themselves because they want to, you know, they’re entrepreneurial, they’re handy, they can take care of some of the issues and save yourself some money and I think that’s fantastic, but if you’re someone who really wants to grow that portfolio and take it past one or two home, you got to have the right team in place. I think are you going to lose your mind and pull your hair out, which you’ve experienced that for some reason, doing it once and quitting wasn’t enough for you, so you needed to go back and do it again.
Right. It was during the recession when money was and you just had to do whatever you had to do and probably I had decision, but it’s a decision we make.
Right, right. I just love this asset class so much because you can have, you can go about it so many different ways from how you invest in it. I don’t do a lot of flipping myself. I’m a longterm kind of old guy. That’s my career. It’s what I do all day long and I just don’t have the time to dedicate to flipping homes. I’ll do a couple here and there just for fun as a hobby kind of project thing. But absolutely love the power of rental real estate. Rent houses can do over the long term for anyone and the sooner you get started the better. And so that’s what we preach at renters where else? And we’re about giving away education for free. We’re not some of those folks out there that are trying to make our money off of our education or ideas and they, the data we have, we want to make money off people who were making money along the way, buying houses and having us manage them for them and teach people how to invest responsibly and in the right areas and what to look for and how to do it and just teach the fundamentals of this because it’s not taught anywhere.
The fact that this is like the only asset in America that ordinary American can leverage to buy, right? Like I love to tell the story about, you know, walking into your bank and say, hey Mr banker, I’d like to borrow $100,000 to buy apple stock. They’re going to laugh you out of the bank, maybe a security come in and pull you out because you’re crazy. You go back into the same banker, same afternoon and say I want to buy a hundred grand to buy this investment happens to be real estate. They’re going to give it to you on the spot nearly right. And the fact that you can leverage an investment and then have someone else, your tenant paying down your loan on your investment. Well to appreciating and getting tax benefits. I mean it’s the most amazing thing around.
Funny you said that every now and then you will flip a house for a project or a hobby. And I think you’re absolutely nuts. I hate flipping house. I write with a passion. I can’t stand it. I don’t like contractors. I’m gonna look into this. My wife is like painted a color on my wall like cause she’s trying to go change our new color scheme now. So she’s not telling me that like this is the color calm. I mean I hate it. They call money, you know, at three o’clock in the afternoon on a Friday when they were supposed to do the job on two. I hate flipping house. I’m very thankful. I feel very blessed to have the ability and the experience to make that kind of money because it’s good money. But Jennifer and I have an 18 month plan to where we will never sell another house again.
I mean we were trying to completely exit the flipping game because I mean I think we’ve had it for three or four, four houses to the portfolio this year and we’re kind of different. We’re really looking at class a properties and we’re looking for, you know, $250,000 houses in Dallas that even if they only rent for 1800 that’s fine. If we’ve got to put 30 40,000 into it, that’s fine cause we’re really looking at it now trying to manage our balance sheet and our a longterm p and l. But also, you know you talked about tax advantages. I used to sell houses when we need money. And the gentleman, I think you knew him that helped start B to our, that recruited me from London. Know, he told me one time, he said, just don’t ever sell another house again. Refinance it. And I was like, oh, that’s just more debt.
And we as Americans, like I love Dave Ramsey. Don’t get me wrong. We’re taught, oh, let’s go get out of debt. Let’s go get out of debt. But like you said just a second ago, have someone else pay your debt off for you. That’s good debt. Right? And when you refine, there’s not even, you don’t pay taxes on that money. I mean, we’re about to pool high six figures out of a couple houses and that’s tax free money that I can then plow into more houses and create more cashflow. And you know, I’m not speculating, right? Somebody that I said I was speculating, you know, I know that there’ll be a little dip, right? I know there’ll be a flat part, there can be a big dip. But what I do also know is if you wait 10 years, which all of these loans are designed to be very high cash flowing properties to where I can wait 10 years.
I don’t know. I just, I lock your business model and I think more people need to understand where I was going with this is you talked about pain, everyone’s scared of the, about rental properties and a lot of property managers frankly make the industry look bad by going around and talking about tenants and toilets and on phone call in the middle of the night because someone clogged a toilet. First off, nobody calls when they call it calling a toilet in the middle of not, they just leave it for someone else to find in the morning. Trust me, I have poison in my house. I know all about it, but I don’t know. Dispel some of the myths about owning rental property, if you will.
Yeah, look, I think the biggest myth out there, or, or maybe there’s a couple like this, but it’s that your tenants are going to destroy your home and they move in and they destroy it and they move out and you’re responsible to fix it all. I mean, damage can happen in properties. We manage tens of thousands of homes. I’ve facilitated, facilitated transactions on over 50,000 properties in the rental space. Like stuff happen. It’s certainly the exception, not the rule. It’s very rare, um, of all the homes and tens of thousands of homes have managed to have damage exceed the amount of security deposit. It’s like way less than 1% of everything that goes on. It’s pretty rare. But I think those are, I think the issue with this business as we talk about the myths in talking about the success stories aren’t really all that excited because you didn’t make $50,000 in two months.
Like when you flip a house or you made an extra couple thousand this year in cashflow and your property appreciate a little bit. No, it feels like that’s not the fun story to tell. And again, I live in Minneapolis in the summer. We love having bonfires and barbecues and hanging outside and drinking beer with the neighbors and stuff and be around the bonfire. You’re always telling the horror stories and someone from neighbors, friends, mom’s brother-in-law’s sister owned a place and like have the tenant destroy it. Right? And who knows if that story’s even true or how much it’s changed because it’s told from the 17th person down the line kind of thing. But those are the fun stories to tell around the bonfire at night and talk about all the horrors of real estate. But it’s not the reality. So the fact that, you know, I think that’s the biggest myth cause I’m going to get these tenants, they’re going to come in and tear up my home.
Frankly, there’s a lot of really great quality people, be it young professionals, single people, roommate situations or families that don’t want to buy a home that probably could even afford to buy a home. But for whatever reason, they don’t want to, they just want to have a nice place to live and they want to rent a house. They can go in and just not respected and trust the hell out of it. They want to have a nice place to live and they want to pay the rent on time and they want to live in a nice neighborhood and go amongst the thing. And that’s, that’s the far, far majority of people are great tenants and a lot of times you could go buy their own home, but just for some reason don’t want to have to do that for, you know, they’ve got student loan debt or something that they can’t qualify for a mortgage for.
So if the fact that you’re gonna have a tenant move in, that’s never going to pay your rent, the stridor property, obviously it’s a risk, but you have to mitigate that through screening your tenants before they move in and selecting great tenants and selecting quality tenants of the front of moving them in is what makes property management easy for the rest of the time to trigger the right people in place with the right lease signed and got tell you get around that. So that’s probably the biggest one that I always hear about from people when I’m trying to convince them to buy real estate. And I just don’t want to have a tenant come to hurt my house. Okay. Let’s find a good tenant. Debbie moved to have a move in.
Well I was looking at my monthly report last week from my property manager and who’s been managing now for 10 years at least. Yeah. Has this 1910 years. And this house went vacant that we bought last year and it was, I was worried about it because the tenants, I saw pit bull on my appraisal inspection and it ended up not being there as anyway, I was worried about it probably for all the wrong reasons, but I called and I said, hey, why is this vacant? He goes, oh, well they provided their 60 day notice, they moved out, he goes, it’s already leased again for $100 more. And it was $1,800 the term costs. And I was like, Oh, you know, and he’s like, it’s that misconception. Right? And I think you were talking about young professionals. I’m of the age now where some kids that I coached really young in high school, graduated one young man just graduated.
He got a job starting at like 70 $80,000 a year and he had to move to a new town south of here and chose the rent. Right. And another family member of mine got a job in downtown, live with a friend for a couple of months, just recently went and got her own place so she could, what you said I wrote down is people just want a nice place to live. And I think that’s where if you’re not trying to rent a nice place, you’re kind of screening that person out, right? Like, and I’ve made that mistake in my past, right? Oh, I don’t wanna spend the money. I don’t have the money, or I want to lease it fast. Let’s put it below market rent. And I find it that a lot of those wounds are self-inflicted, especially if you end up having a good property manager that can kind of guide you in the process getting. So can you talk a little bit about what you guys are seeing kind of macro wise across the nation with vacancy trends, maintenance trends, any, you know, any, say someone doesn’t use renters warehouse, what advice could you give them on, you know, is they can see going up. Is it going down, are you seeing maintenance percentages of the, of the income going up, going down? Are you seeing nicer remodels get better rents like you know, a couple of minutes just kind of talking about what you’re seeing nationwide.
Yeah, look, I think first a follow up on your comment on, on my comment on the nice place to live. You don’t have to over improve a rental property. You don’t need to make it the Taj Mahal. It doesn’t need to, you know, they don’t all need to have granite counter tops and all these different things, but it’s to be nice and clean. And I tell our investors this all the time, you know, we’ll have people, sometimes they’ll say, hey, I’m going to get it cleaned up a little bit after. I know it’s rented, so I know I’ve got money come like, well why are you going to do that? People want to view this home as somewhere they’re going to come live. Like let’s have it presented as as good as possible. Or they try and cut a corner on our turns. Your point, maybe not paint the wall when it should be painted and you’re gonna get perception’s reality and you’re going to get kind of the tenants that you’re marketing to.
And if you have a home that’s not necessarily all the way clean or it’s not all the way painted or turned or rehabbed and ready to go for the next tenant, you’re going to attract someone who doesn’t mind living there and they’re going to treat it kinda how they found it, which is walls are pretty marked up anyway. So it really doesn’t matter. I’m going to mark them up. So ensuring that you just have it ready to go and it looks nice and clean and again, it doesn’t need to have all the, the best amenities in the high end appliances and finishes and this, that and the other. It’s just, it’s gotta be, it’s gotta be a nice clean place to live with. Nothing broken. And I think that’s the most important thing. And getting it ready before you start showing it and getting it, you know, putting your best foot forward.
The same thing as if you’re trying to sell the home, right? You’re not going to leave it, leave it marked up and things like that. If you trying to sell the home because someone’s gonna come live there and buy it, well someone’s going to come live there when they rent it to. So again, you don’t need to remodel the thing to rent it, but you need to, you know, it needs to be, it needs to be nice. And that’s a big mistake. I think individual investors will sometimes make to save a little bit of money. It’s going to cost them in longer term vacancy. They’re not going to rent it as fast. They’re probably not going to rent the person much and they’re not going to rent the two as high quality of the tenant, which is going to cause a lot of problems down the line for him.
So that I think is just really important. As far as trends across the country, I think the trends are pretty similar. We’re seeing vacancy down quite a bit, which is driving up rents. We’re seeing three to five, sometimes six, 7% annual rent increases depending on your market. So big piece of advice, if you’re coming up for renewal on a property you own, make sure you’re doing your research and understanding what you really can get for renewal for that. And then it should be at least 3% pretty much in every market. Some markets double that and that’s going to take care of the other issue you referenced, which is how much, what’s the maintenance cost and as a percentage of the ranch or the annual cashflow, and we’re seeing costs rise, right? It’s competitive job market. Labor costs are up, material costs are reps, so maintenance costs are increasing a little bit, but not really as fast as the rent.
So as long as you’re staying up with your rental increases, you’re making sure you’re renting it to good people for the right rent. The expenses still work really, really well on the properties. I think the biggest thing there is pegging red prices. So important because you want to minimize vacancy and so you don’t want to overprice it where all of a sudden you’re vacant for two or three months cause you are shooting too high in rent increase. You would’ve gotten for years now blown out the window, but you also don’t want to be too low. And I’ve been a victim of this in the past with my own properties. I tend to be a little more generous with my own properties than I do with my client’s property when it comes to being nice to tense or keep it an easy on myself and the fact of like, Hey, they’ve been a great tenant.
They’d been there three, four years, they’ve never had a maintenance request. They always pay on time. You know, I don’t want to scare them out so I’m not going to raise rent that much. Next thing you know, you’re, you’re two or 300 bucks below where you should be on a monthly basis and that’s a hard rent increase to make it your tenants. You kind of shoot yourself in the foot. So staying up with those rent increases every year when you can and what the market’s doing is super important. It really actually makes these investments workable longterm. Otherwise you find yourself upside down with tax increases we’re seeing in different markets and maintenance costs going up and all that.
I’m going to make a comment and then a really good comment. So I completely agree with you about the rent, the income increasing, we’ll most likely, oh, definitely over the long haul, offset increases in taxes or insurance or labor costs, material costs. That’s why I refer to it as an inflation index annuity, right? Because as costs go up, so do rents. So if you’re basing your longterm income off of a whatever your budget is like, it’s just such a good investment. But then I want to talk to you about your leadership, Kevin, because a lot of people come on these shows and a lot of people go on social media and they talk, they want to act, and you just kind of threw yourself on the sorts of look. Oh my own personal stuff. I make some mistakes and I think to me that’s what makes good leaders, right? I mean I do this podcast even not from a point of, hey, I’m perfect. You should listen to me. It’s all man, I make a lot of mistakes and why don’t you let me help you not make my mistakes. So could you just talk a little bit, I’m going to just completely shift gears. Can you talk about your leadership philosophy, the culture at renters warehouse, kind of where you’re taking the company?
Yeah, for sure. I think I get the nail on the head. I’m not sure if I know exactly what makes a good leader or not, but I think people want to see candidness. They want people to be candid and they want transparency. Megan. They want to see people be, I don’t know, vulnerable is the right word, right? That’s not the word I’m looking for it, but they want to see people who can
Awesome. Thank you. Authenticity. That’s what I was like, where they want people to be authentic. Right? And people who walk around pretending like they don’t have any flaws or any issues that they’ve never made a mistake before and they’re not authentic and you can’t get a following that way. And I think frankly we learn more. I’d love to not fail, right? But we learn more from our failures than we do from success and success with the case nearly as sweet without the challenge of getting there. Right? And so we embrace challenges at renters warehouse. And one of my favorites, one of my favorite things to tell people when we’re trying to make a decision, like what are we going to do next? Right? We’ve built this business from one property under management to 22,000 across the country. We would do at tens of millions of dollars here, revenues that hundreds of employees.
It’s harder to implement change in the business that used to be and things seem to take longer than they used to, which is always frustrating. But because we’re looking at decisions, I was totally like, the best part about a decision is we can always change your mind. So let’s make a decision to do it. But it turns out not to work. Let’s do something different and change our mind. And that’s the beautiful thing about a decision is you can always make a different one ultimately. Right? And so that’s just kinda how I am and I like to learn from our mistakes. But as far as leadership, the culture we have here is we work really hard to hire great people that are good at what they do on no matter what level they on in the organization, whether that’s my executive team, I’ve got a great operations guy or chief operations officer came from 17 years at target corporation running national stores.
He knows how to implement operational processes, procedures, and standardization across the country and thousands of stores. He can probably do a great job doing it for us at our 25 corporate locations. We have some franchises left as well in our organization, which they’re doing fantastic stuff too, but he’s got it right. He’s done this before. I’m going to let him, I’m gonna. He’s way smarter than me when it comes operations. That’s why I hired him. Do your thing. You can’t micromanage someone who’s smarter than you and get good results. So I try and do what I can to be the dumbest person in the room and surround myself with great people. And that makes success really easy at that point, right? Because you’ve got really smart people and the same thing all the way down the organization. Our property managers, we hire people who dig, be on the phone all day long and solving problems and working with people and then having empathy and compassion and those types of things that you need as a property manager.
And even as a rent collector, you know your job is to collect rent. That’s a tough job. We have a rent collection department that that’s all they do all day long is collect rent. But they like it and they’re like having a conversation with people. They like to feel the success when they’re getting it all coming in. Uh, but they can also empathize with people and create the right payments plans and understand situations. And so you just point is you, you understand what the qualities are, not just the skills needed to hire a certain decision, but what kind of emotional BQ is needed, emotional intelligence for that position and hire based on culture fit, hire based on EPQ. We can teach the skills and I think in the world we live in today with changing with more and more instant satisfaction, instant gratification that people looking for instant response times of less personal worlds.
Being able to have people who can have, be, have empathetic conversations and understand from the heart what are property owners are going through and they’re having to pay for repairs and what our tenants are going through when they’re maybe short on rent or having an air conditioner that’s not working at 95 degrees outside. And trying to make things come together is really important. So that’s what we look for when we’re hiring people. And we have a, we have a culture here where our number one core value is serve and that’s serving our tenants, serving our property owners, serving our fellow employees and teammates and just work together as a team. This business, as you mentioned, that the pain, it’s just dealing with problems all day long. And so if you don’t have the right attitude and the philosophy and you’re not trying to make it fun along the way, it can be a real bear and a, so that’s what we try to do here.
So a point of clarification for anyone listening. When Kevin says dealing with problems all day long, what he means is the happy tenants aren’t the ones that call you. They don’t call you to say, Hey, thank you so much. The oven’s working great, right? The people that pay their rent on time and are having a good time in the house and with their neighbors down the street or not calling the property manager. So he’s not saying that houses are a problem. You say the only it’s really you have to talk to in this business are the ones that you know have an issue. Whether it’s not even just the problem to natural disasters, storms, floods, things happen to houses, air conditioners in Texas. I just want to make that point. I want to ask you, you said be the dumbest person in the room. Super love that.
Right. My property manager, actually, the reason I picked him in 2009 is he owns personally over 2000 single family and multifamily units. Seems like a lot smarter than me. So I want him in charge of managing my properties. Right. Cause I don’t have 2000 yet. I’m still young, I guess. Uh, and then you’re almost there. I wanted you to talk about a couple of years ago when I ran that Blackstone company, we had this new marketing guy that came in and he was just convinced that the next wave of landlords in the country would be people that rented their own house, but rental properties instead of investing in their 401ks. I want to know if you see any of that. And then I want to talk about kind of the type of owner that renters warehouse really enjoys working with. And then we, I want to take some time to talk about your podcast.
Okay. So the first one, we haven’t seen a huge influx of people saying, hey, I’m going to rent my primary residence and then buy rental properties. Now that said, we’re seeing it more and more, but I wouldn’t call it a wave. Yeah, right. But it’s interesting because we actually have some tenants who rent homes from us, from our, our landlords, and they are a client as well. They own a home somewhere else that they rent out who, renters warehouse. And so we literally have a tenant who is also an owner with it. And I thought that was really interesting when I saw that first maybe five or six years ago, and it was a younger guy, I want to say like early twenties kind of thing. I think he ended up just relocating for work and he said, I want to hang out. Do I want to start to create rental properties anyway, but I don’t know how long I’m going to be here in the city.
So I figured I’d just rent and these are for me to hang on a metal or if I’m renting today and then build a portfolio. And I’ve talked to some other folks who are doing that too, who are tenants with us because they were asking about our services and it was a little bit more intentional. You know, I’m not really interested in owning a place where I can maintain it and just to live there and do the stuff. But I see the power of this investment and I want to get into it. So I’m not against home ownership. I just don’t really want to own the home I live in. I want to have flexibility and not have to worry about replacing the roof and things of I or replacing them or investment. That’s one thing instead of best as my primary house, I just want to have it be simple.
So we’re seeing that a little bit. I think it’s really cool. It’s really interesting. My advice to young folks who are kind of looking at that perspective is by a duplex, triplex, fourplex, live in one unit, rent out. The other ones, similar to what I did when I started, because what’s interesting is again, you can buy up to a four year property on an FHA loan. So if you’re someone that’s just out of college and you find the right fourplex or duplex, you can put as little as 3% down on it cause it’s the owner occupied. As long as you live the one unit, then you bought your first rental property with 3% down and those other units are going to cover your mortgage for you. So you’re going to be living rent free, save that payment you would be making to buy your next property. I mean a fantastic way to get started. Real estate investing is a young age. Buy that multiunit property, put it on an FHA loan, live there for two, three, four years, and then move on to the next one. And I think there’s this huge opportunity in doing that, but you know, it’d be attendant from yourself, right. Rather than that rather than from somebody else. So that’s, that’s an interesting trend. I forgot what your second question was now though.
Well, just like what type of owners are, I hate working with no adults. Who’s your ideal client? What’s your Avatar? What’s the renters warehouse Avatar.
Yeah. Our ideal client is someone who wants to create longterm wealth and financial freedom through real estate. And what I mean by that, because that’s a very broad topic. If someone who wants to not just buy one home and have us manage it forever, we love them too. But we’re building our business for the person who wants to buy their first home and then in a couple of years buy their second home and then their third or fourth and fifth to grow a true real estate portfolio that’s going to provide them an amazing retirement, financial security for the family, go the legacy, whatever it might be, whatever the reasons are for that. So that person who really sees this as a longterm investment wants to grow it, wants to learn about it and do it in an educated way. There’s a lot of investment companies out there, property management companies, real estate firms that are happy to have you just stay dumb, right?
Which means here’s a great investment. I don’t need to really teach a lot about the market or the place or what it is or why. Just trust me, buy this one. We’ll take care of the rest. You know? And that’s okay, I think. But I think if you’re going to invest in this and build a portfolio longer, you don’t need to be, you don’t even know everything about it, but you should understand the fundamentals, how it works, how you can make it work better for you, how to grow your portfolio, what markets to invest in, that kind of stuff. And that’s what I mean by education runners, where else we’re doing webinars, podcasts, all these things to really push this information out to our current clients and prospective clients to say, hey, here’s, here’s the basics. Here’s the fundamentals. Learn this stuff. You’re going to love it.
Gonna make you passionate about it and want to grow portfolios. So that’s the ideal client. I think that Taylor’s with to someone who’s looking at it from a more of a business perspective rather than something that’s just dealing with on the side and they’re gonna let us do our thing, meaning manage the properties the way we built our business to manage properties, not try and get us to get outside of our processes. We’ve made that mistake. We bring on investors who, Hey, I’m going to give you a lot of houses. It’s not, you need to do it my way. Okay, great. And then when you screw screwed up, because it’s not inside the processes and our business can be built and how we’ve found success management properties. So that person who wants to grow that portfolio holdup longterm build financial freedom and just Kinda, not necessarily be hands off, you know, be involved, learn about it, but also trust that we’ve been doing this a long time. We’re going to take your care of their property. You know, those are the clients we’d love to work with when we build our business for it.
So you just mentioned that the young person that you spoke to that was relocating, decided to hang onto the house instead of sell it and move somewhere else and rented a debts kind of in line with the rent state commercials. I’ve heard on the radio and according to the blog at renters warehouse, you have a new podcast, the rent’s a state podcast coming out. Tell us about it.
So rent the state is our take on real estate, right? And we want it to differentiate ourselves from kind of what you and I opened up talking about, which is home flippers, wholesalers, rehabbers. Far Too often when people hear about or think about or talk about real estate investing, they’re going to go buy a wholesale deal for 40 cents on the dollars, which was sweat equity into it, rehab it and sell it for a bunch of money. Or it’s the flipping shows and HDTV or whatever it might be. And that was real estate investing. We talked about why both of us really don’t do a lot of that anymore. And, and we believe in this longterm investment strategy. And we wanted a phrase for it. And so we’ve gotta rent this state, right? Rental houses, buying properties to rent, and then plan real estate. So we trademarked the term rent estate.
It’s what we do as longterm wealth creation through real estate. We wrote the book on it, right? The state revolution. And then that’s basically the how to guide what we just talked about, educating people on how to get started in this, why you should get started, all of the benefits and all the levers you can pull from leveraging other people’s money and tax benefits and appreciation and creating this annuity with an underlying asset value. All that stuff is in the book. That’s what we’ve been talking about for years and that’s what we’re passionate about, right? Longterm real estate investing and creating wealth through that to rent the state. So we just started the rent, the state podcast a couple of weeks ago. We just dropped in episode two and the point of the show is to talk to successful real estate investors. Whether that successful investor has two homes or they have a hundred homes or a thousand homes to gain their perspective, their tips and tricks on how to invest in real estate, what’s worked for them, what areas you’ve worked for them.
But what I’m even more excited about is having guests on the show from inside renters warehouse where we can give tips and tricks to people who are doing it themselves or just getting started in in rental real estate stuff from the front lines, from the trenches, and I built the podcast studio here in the office so that I can go in and grab one of my head rent collectors when I’ve got time on a Tuesday. Hey, let’s go, let’s go kind of podcast on rent collection. Talk about the best recollection principles and how to, how do we do that or a tenant screening process or grab one of my maintenance coordinators and talk about vendors and maintenance, pricing and all those different kinds of things that we just want to deliver great quality education for people who are doing this stuff on people who are doing this stuff every day or people who are looking to get into it or just start growing their busy
and so I’m guessing they can find anyone listening that likes podcasts, which if they’re listening to this, they’re most likely like podcasts. We think in a, is it iTunes, Google play? We’re all, can we find
you can find it wherever you find your favorite podcasts. I believe we’re, we got to cover where you go. The top six spots, so iTunes, Google play, Youtube. We’ve got the video podcast up there. Just go to [inaudible] dot com search for the podcast. We find it there as well, but that we hope we’re going to deliver some awesome tips and tricks from, again, people who are investing in real estate and have made a success out of it or people who are working in this business every day in the trenches and provide some good education there as well.
And Ritz estate is two words. Correct.
Well, that’s great, Kevin. I’m going to listen to the first episode of that today and I look forward to hearing your episodes in the future. Let’s take a quick break and we’d come back. I have to talk to you about barbecue and bonfires. Today’s show is brought to you by audible. Audible is offering our listeners a free audio book with a 30 day trial membership. Just go to audible trial.com/t h and browse the unmatched selection of audio programs. Download a free title and start listening. It’s that easy. Go to audible trial.com/ [inaudible] today. Get started with your free trial and claim your one free audio book and now Kevin, we have to talk about barbecue because for me, barbecue is this. It has become a metaphor. It’s a kind of taking time to do the things that you really enjoy. I hear even in a Facebook group that we run a business and barbecue Facebook group.
Somebody said this week, someone that is a very experienced investor said, I’ve got a brisket in my freezer. I’m just trying to find the time to thought out and cook it. And I thought, well, that’s the whole point of what we do, right? What’s the user? The entrepreneur. If you can’t, if you really are trying to find the time, it’s like make the time, right? Don’t find time. So barbecue is just a passion for me. I love the barbecue. I drove when Anthony Cassese and that works for you was in Austin one time about a year and a half ago. I drove him like an hour away from the conference to take him to a salt lake barbecue. But it’s a cultural, it suits my soul. I enjoy it. And I used not to take time for it. So now I do and it’s become something I’m like obsessed with. So two questions and then we’re going to wrap up with your contact information and stuff. Uh, question one is do you like barbecue? And if so, tell me about it and then, but question two, if not barbecue, like what is the barbecue in your life, right? What is the passion that Kevin has? And you can’t say anything cheesy like, oh, we’re helping my employees, right? It’s gotta be like,
so I do like barbecue. I live in Minneapolis and frankly there’s not a lot of great barbecue. There’ll be some folks in, in Minneapolis like, aw man, that new barbecue, place it open. It’s awesome. I’ve been fortunate in my life and I’ve been a lot of travel and I’ve been to the South Texas and Memphis and places where barbecue’s legit and some had good barbecue. And I’m like, God, I mean it’s okay, I’ll go there. But it’s nothing like that. And so we don’t do tons of barbecue here in Minneapolis, but when I travel, when I’m in Texas, what I mean down in the South Memphis and other places that are known for it. I love to go out and get it. I love the brisket. I love pork and on the side though are amazing at the barbecue joints. Right? All the sides. You can get a big Mac and cheese fan.
So I love barbecue. Just don’t get enough of it. Here in Minneapolis, you probably understand second for me, I kind of getting away from it all my barbecue metaphor, it’s two things. One in the summer here again, when it’s not frozen I just love getting, getting out on the lake with my family. So we’ve got a water ski boat. I’m a big water skier. I don’t do it as much as I used to, but I take the kids, we pull the kids and watching the kids learn how to do that stuff. There’s just a lot of fun and being out on the lake and join our summer here cause it’s really important that we get out and enjoy the summer in Minnesota because it doesn’t last very long. So that did for me. And then you know, in the winter it’s traveling. I love taking the family and exploring new places and having, having the kids experience new stuff and let me experiencing things and barbecue and all that kind of.
That’s awesome man. Well I appreciate you taking the time today. If you could delve out some phone numbers, websites, how do people contact readers, warehouse and what all is available. I know you said you’ve got an investor marketplace, you get free resources. Tell us everything that you do and how you can help us.
Yeah, for sure. So renters, warehouse.com would be the main place to go check out. And then on there we’ve got our research center where you can research market trends and data in any market across the country. So if you’re interested in saying, hey, I wonder how I want to buy in Dallas and I wonder how things are going there, what things are, how projections are looking, we’ve got 20 year Christ’s history charts there so you can make some assumptions of what you know, price appreciation is going to do over time, employment, the information, migration patterns, all sorts of stuff to really dive in. And then the fun thing about the research center is you can start playing around and understand how different markets yield differently based on kind of w what housing price appreciation might be doing right place that have high housing price appreciation might have a little bit of a lower yield.
It’s a give and take. Somewhere as a less housing price depreciation you might make more cashflow. So going around and playing on the investment marketplace, our research center, I think it is really a powerful tool for people just getting into real estate investing or who want to learn more about real estate investing. Or if you just want to research the next market, you won’t buy it because you’re not going to buy in your backyard. And check that out. You can check out the tenanted homes, the houses, the foresail with tenants already placed on the marketplace. Soon we’ll be actually integrating mls into that. So you’d be able to view not only homes with tenants in place, but you’d be able to search all properties, the mls by yield, cashflow, ROI, whatever your financial metrics are you want to be looking for that’s coming out soon. That’ll be exciting. So check that out. Obviously you can get a list of our property management services, their at leasing, property management, all the markets we’re in. So renters, where else.com. It’s a good home for that. Do you want to contact me by me? Linkedin is the best way in social media. I use the most, a little bit of Facebook, but by my linkedin, Kevin Ortner and [inaudible]. You can check out our book rentestaterevolution.com or on Amazon.
Well, that’s a lot. Uh, and so if you’re listening and you’re thinking about relocating and instead of selling your house, it’s just one of those things. I think just too many people. You’ve got a bunch of equity from the last couple of years. Keep it contact renters warehouse and even research where you’re moving and see if you can find another property you can live in and then turn into a rental or at least a educate yourself about the rental market where you’re moving. So Kevin, thank you very much. We are done. We’re out of time when you’re in Dallas. Next time please call me and I’ll take you to eat some real [inaudible].
Fantastic. I can’t wait. Thanks for having me on Tim
hot man. Until next time everybody keep cooking.
Thanks for listening to the business and barbecue podcast. Make sure you check out our other episodes and stop by TimHerriage.com to say hi. We want to hear from you. Until next time, keep cooking.
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