The only one that comes close to that is Sacramento. So, when you look at those numbers’ right numbers, don’t lie when nothing was built being built in Clark County between 2008 and 2014 Clark County which is the seat of Las Vegas was still the fastest growing County in the US in terms of population.
So, when you have a county where thousands of new people from Los Angeles coming every year because they can’t afford to live in LA. Right, but there’s no new construction of any kind single-family multifamily because it crashed and burned so hard eventually you’re going to create a supply-demand gap and it took six years for it to build and then after that starting 2015 or late 2015 Vegas is wrench started to accelerate 1% a year growth than 2% then 4 then 6 now we’re at 8%.
Sakar: Wow. Wow…
Neal: and so that’s what the hell is that? That’s my feedback that go into metros that have tail when now tier 2 metros that have good Tailwinds may not be names you’ve heard of, but I can’t do anything about that, but I can tell you these are metros with Tillman. Athens Georgia is a Metro with Tailwind Dalton.
Georgia is a Metro with Talman Cape Coral Fort Myers Lehigh Acres Provo, Utah, Logan, Utah, Ogden, Utah Coeur d’Alene, Idaho. Spokane’s outspoken, Idaho, Olympia, Washington. These are tier 2 metros that have Tailwind why because number 1 capital is now flowing from their respective primaries Olympia.
He’s gaining from Seattle’s growth.
Sakar: I see no,
Neal: Colorado Springs is gaining from dirt from Denver’s growth. Right? So, every one of these metros has a primary Metro Provo is benefiting from Salt Lake City becoming a tier 1 Metro from a tier 2 metal recently got upgraded by Fannie Mae and Freddie Mac to a tier 1 up Metro.
So now you can go 75% LTV on that Metro write those things are important. Those are huge because.
Neal: Be compressed. If you go from being able to do 65% that to 75 percent debt in a market immediately its cap rates are going to compress and guess what everything in a 50-mile radius is going to compress as well.
But the stuff in the 50-mile radius is not as expensive, right so you can basically benefit from that. So, in Provo, I wasn’t even able to buy because there was nothing to buy so I just built I built a hundred to unit together with my partners. And it’s been an incredible experience. So, my feedback is there are tier 2 metros all around the United States.
There are dozens of them. There are hundreds of them and for people that are afraid that this cycle will end there is no real estate cycle. There are 2200 real estate Cycles in the United States
Sakar: True and …
Neal: Some are late. You know New York is in the 10th inning of the cycle, you know, if you want to look at a nine-inning baseball game on New York’s in overtime, right?
Whereas whereas Vegas isn’t still in the fourth inning because it didn’t get started until 2016.
Sakar: Very true, very true. And my comment also on that Neal also is that multifamily being as insulated as it is, you know the delinquency and the default that protection that we always have I mean and early as you said rightfully is that.
The loans are so properly written under it. Now that the chances of a big 2008-2009 type of catastrophic we are probably not on the car. This is more of a slight correction. If any that happens than a big 2008 type of catastrophic there. So, moving on Neal the. Which during your asset management which are the key performance indicators you manage on a weekly or monthly basis are around your team
Neal: A lot more than most people do so, I think that traditionally Asset Management has been we do a 30-minute call with their property manager every single week. We sit down we have conversations with them. I’m finding that today. It is it’s not getting me to my It is just not happening because everything is priced to perfection even what I’ve been buying for the last two or three years is priced to Perfection, right?
I am not implying in any way that I have some magical off Market access and I’m buying 20 percent below market, right? Because that’s just the sales pitch right is, I’m paying market, right? Even when I’m out buying below Market most of the time the big Advantage, I have is I don’t have nine guys bidding against me.
Right, so I might be paying 3% under Market. I mean people who are saying I’m buying three percent on the marketing Market are probably credible. The one that says 10 or 20% before under Market probably doesn’t understand what he’s buying. So, when I’m buying, you know, it’s expensive stuff and it’s becoming very difficult to just do a 30-minute meeting.
As you know, I have an Army in the Philippines that are virtual assistants, you know, And I’m using my VA has to look at a whole bunch of metrics and key performance indicators that we weren’t looking at 18 months ago because we felt we didn’t have to but now we realize if you want to hit performa we have to so, for example, I challenge everyone that’s a syndicator that’s watching to put his hand on his heart and say.
I’m actually tracking my delinquency statistics in such a way that I know how many exact average numbers of days it takes for my property manager to remove a tenant. That is not being
Neal: No number right but here’s the key thing. Let’s say that it takes a month to evict people in your Metro.
You’re in an awesome Metro. It’s very landlord friendly takes a month. Right but aren’t you assuming that your property managers doing it in a month? They have you actually looked to see the last 27 people that they evicted. I’m just going to pick a number, right? Have you done it analysis on that to see from the day that that tenant went delinquent right on the fifth of the month?
I didn’t pay you posted the notice. He’s delinquent now, right? What was the day when he left and what was the number of days that was different when I have found to my absolute shock? Is that unless you are really on top of the property manager with a delinquency based report or statistic? The average property manager is actually taking at least 50% more time than it should take
Sakar: That’s powerful
Neal: And percent is huge massive..
Sakar: I mean add insult to the injury. They’re also Neal is that is just not the delinquency. It’s more also about you know, when you’re going to turn over when you going to like paint and rewrite the unit so you can start making the money. So, you got the delinquency. You got the truck, you know, turnover makeready costs and all your Leasing and marketing so really when you.
Shifting that unit into bringing into as I call as in Tom ready is still a lot more and I mean we experienced that in our portfolio that you know, we could be like advertising our units for couple of months before you get it rented. So, you’re absolutely right that those so what other metrics like delinquency would be one Neal sure.
Neal: Let me give you the second one. You actually mentioned it a second ago, right? So. You need to start tracking. That from the number the day that the unit became empty how many days actually took it for it to get rent ready and was that word rent ready real or fake? Sometimes? I find that what they mean by rent ready is they haven’t even cleaned it up.
They’ve just finished basically doing the upgrades, you know changing the floor or whatever it is. Do you have a parameter? There? Do you have anybody to have a virtual assistant basically with a Tracker saying you know when a unit becomes empty on the 5th of the month it on average is taking them 13 days.
To turn that unit if they’re not upgrading it and it’s taking them 19 days if they are upgrading, I’m making these numbers up. Yeah sure so firstly understand that because that is enormous amount of profit that is getting flushed down. I see too many people just focused on. Oh, what is my economic occupancy?
What is my physical occupancy my physical 95 my economics 92, I’m fine? No, you’re not fine. All of these hidden costs are what are really killing you you analyze not going to add up until you’re looking at these metrics, right? So, so here’s metric. Number one what you know, which for this which is how many days does it take for him to turn the unit right?
And then you need a metric for from the day that he starts showing the unit for the first time how many days on average does it take him to lease it up? What is the total number of days that it takes for him to lease it up? Because once you’re tracking these numbers, you’re going to know if you have a good property manager or not until then you can guess right, you’re just hoping for the best you don’t actually know because you don’t really know what he’s doing.
He might be saying to you. I’m at 92 or 93 percent occupancy. Here’s another question, right? I’m going to do some math here. So, this one’s a little dense. Give it 250 in a property.
Neal: Okay on average. Let’s assume your tenant lives there for two years. Right doesn’t that mean that 125 units half of 250 are going to be empty each year right true.
So, if I divide that by months that roughly means that 10 and 1/2 units are going to become empty every month true, right? Mmm. So, if ten and a half units become empty and you have four weeks in a month. Doesn’t that mean that just to stay at the exact same occupancy that you already are not to grow just to stay the same you have to rehab and turn two and a half units a week.
Ten and a half units for weeks two and a half how many people are actually tracking to make sure that every week of the year at least two and a half units or turn for 215 or property because if they’re not no matter how much demand you have you could have people standing outside your door begging to let you let them in. You still are going to lose occupancy
Neal: I because turns dictate the speed at which you lease and because not enough people are looking at speed of turns or we call a minimum acceptable Benchmark of turns and and you know, here’s what will happen when you start actually tracking this number you’re going to hit two and a half.
Then you going to have two and a half and then you’re going to hit one and then two and a half and then one and then two and a half. So, what will happen is your, your property manager will try to convince you that they’re doing two and a half, but actually what they’re doing is they’re doing two and a half some weeks and they’re doing
Sakar: Not consistent
Neal: But do maintain your occupancy, you need to turn 10 and 1/2 units a month, which means you have to do two and a half every week and that’s what people are not tracking
Sakar: True and also it gets so difficult that you have to have systems and procedures in place that okay what you’re rehabbing?
What colors what carpet? I mean you. You got to have all that laid down so that it just becomes like as soon as the turn happens, you’re like doing it like clockwork. You know,
Neal: That that’s something that you have to do so car because you were managing your properties in my properties. I have a property manager.
So, I focus on Building Systems to checkpoint everything that they’re saying on a call of the property manager says no problem. We’re going to rehab to be three units a week. My job is not to go in and check to see if he has systems to do so my job is to check to see he did rehab the through units and
Sakar: That’s exactly what a right and that’s exactly what I was getting at Neal.
Is that making sure those systems are in place. So that things are happening. Basically, now one last question Neal speaking of va’s you are a big fan of using your VA has to do various. Task, could you maybe delve into details as to which parts of your business you are giving to va’s and how you’re leveraging va’s to do different activities for your business my all parts.
Neal: So, you know, we we have virtual assistants doing every single part of our business because our inherent philosophy is that there’s nothing magical about being an American. Right, there are smart people everywhere in the world troop and while a majority of the people that are working as virtual assistants on sites around the world Upwork online pH jobs.
Whatever those sites are majority are unfortunately mediocre. Or at best if you are willing to spend the recruiting time, which is an enormous amount of time that we spend to separate the wheat from the shaft. So, our rate is for every 250 profiles that be read on Upwork. We hire one employee. Wow 250 to one nine.
People are like, he’s crazy. Nobody should need to do this. But let me supplement that by saying but that one employee works for me for two years. I pay them six bucks an hour and that one employee. I would put up against a mid-level US employee any day of the week. Right because their computer science graduates, they worked on Upwork for five years.
They’ve worked with 50 employers what person in the u.s. Can you hire them to work with 50 employers that they have a 100% job approval rating on up work those kinds of people are very hard to find and then when you find them, they’re already employed? So, you have to chase them for a while. So, when we send requests to 250 people to interview every day, we only get 16 of them to actually agree.
I have 250 but if you do this all year round, you’re going to get all 250 because sooner or later their job will come to an end. So, we are we never stop recruiting. So, you know, when are we recruiting every day of the year?
Sakar: That’s awesome. That’s awesome. And so, you just a related follow-up on that Neal then within your business. Like how is your structure like meaning? What’s your office staff like and your VA staff like house that you hide?
Neal: So, our org chart is divided into groups. So, we have one team that’s doing opportunity zone. So that’s new construction. Right? So, and that team is all in the u.s. They have their own virtual assistants, but it’s primarily a US based team.
Then we have an operations team. We have a VP of operations. We have an operations manager and then the ops manager and everybody below them are all week. So, everyone’s a virtual assistant. We don’t believe in part timers. So, all of our vs work 50-hour weeks and they all work from 8 a.m. To 5 p.m.
Pacific and some of them also work on Saturdays. So that Ops group does all of the value are things that we don’t do that any that no others that we do that no other syndicator does we they generate twenty-five thousand ten and leads a month. They do reputation calling they do. They do delinquency calls; they check accounting for all of our properties.
They make sure that the weekly meetings with property managers are being held they help us right updates for investors. We don’t do quarterly updates for investors we do monthly and we do photos and videos. They help us gather those they help us do social media marketing so we can do Outreach to investors. And of course, there’s a there’s a group of them that are helping us find properties.
Sakar: I see, I see,
Neal: so there I mean as far as I know there’s no. Part of our company that isn’t extremely heavily influenced by use a virtual assistants now,
Sakar: That’s awesome. That’s awesome. I mean we use va’s ourselves as well. But I know you are such a force using in so extensively that’s why I asked. And within your multifamily you which is the education arm as well. I assume it’s the same as a lot of activities are also done by va’s like especially the education webinars and all the graphics and things like that. I would imagine
Neal: All of that. I mean if you look at multifamily you.com that’s multifamily followed by the letter you.com. You are immediately going to be struck by. Oh my God, these guys do a hundred webinars here. So, in the last seven days we’ve done for webinars. And those four webinars had about 2,000 people enrolled why 2,000 people were enrolled in those webinars everything from the graphics to the descriptions to the promotion to the sending out of the emails to the recruiting of those people to making sure that their mics are working and they were ready for the events the dryer runs for the webinars.
All of it was handled by webinar what bye-bye are va’s and and was supervised by US based staff. But our model this year has changed where we have stopped thinking us staff has to supervise Filipino staff. We’ve now switched model where our managers are in the Philippines. So, we’ve started promoting managers and director level people in the Philippines. So even the people that are supervising are from the Philippines.
Sakar: I completely agree with you like someone who’s talented and equally equipped can do lots of things. It’s been a pleasure Neal. I greatly appreciate your insights. I would love to dig into some separate topics as well as perhaps. I had a future edition of her podcast. Please share with everyone how they can reach you.
Neal: Well, I’m very available. So firstly, those hundred webinars a year that we do these are all in all sorts of different multifamily and single-family topics there at multifamily you.com. That’s multifamily followed by the letter you.com my most popular demographic course, which is a mind-blowing course is that udemy.com that’s udemy / real focus and anyone can send me an email at Neal that’s any Al that’s the Irish spelling any L at. Multifamily you.com that goes directly to me. I read all of my email. You’re welcome to connect with me. Those are of you that are interested in passive investment. You know, you’re welcome to come talk with me one on one and I’ll tell you a little bit more about how we use demographics before purchase and how we use systems and virtual assistants after Purchase to boost our returns
Sakar: Awesome. Awesome. Thank you Neal and it’s been a pleasure you added such a great value in on the Practical aspects of it.
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