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Dave Dubeau [00:00:09] Hey, everybody. Dave here with another episode of the Property Profits Real Estate podcast. And if you’re in the multifamily space and you’ve done some small deals, maybe you’ve done some duplexes, triplexes for places, maybe you’ve worked up into larger deals, larger buildings, six units, 24 units, maybe even 40 units. And you’re looking to scale. Then today’s guest is someone you’re definitely going to want to listen very, very carefully to, because that’s exactly what he’s done very recently. So our guest today is Lee Yoder, and he has a very, very successful real estate entrepreneur. He’s got, well, just under 300 units in his portfolio and growing rapidly, especially now he’s getting into much bigger deals. He’s got a fantastic podcast that I’ve had the pleasure of being a guest on. He’s been interviewed by some of the big guys, including good old Joe Fairless and Michael Blank. So he’s been featured on some of the biggest podcasts in the space. So, Lee, welcome to the show. Yeah.
Lee Toder [00:01:09] Dave Very kind. Introduction. Thank you. I’m excited to be here again.
Dave Dubeau [00:01:12] All right, my friend. So last time we talked, because I’ve had the pleasure of having you on the show before, and I highly recommend you check out Lee’s previous episode because that’ll show you where he was at and where he’s at now. Now you’re getting into even bigger deals, so let’s take a deep dove into that, if you don’t mind, and compare and contrast what it was like doing smaller apartment building deals and what is like doing these much bigger deals. I’m assuming there’s a big benefit to it, but we’ll you’ll see what the, the pros and the cons are to it moving up in the space.
Lee Toder [00:01:43] Howie Jr Yeah, absolutely. Dave I love talk about that. It’s something we’ve wanted to progress that way. I mean, my first multifamily was a duplex. The next one was a 16 unit and we did a few small ones. And then it kind of jumped up to a 45 unit that a 47, and then we went to a 96 and then 95. So I’ve kind of seen and you know, hopefully we’ll do a 500 unit one day and then I can kind of say I’ve done the whole gamut or whatever, but there’s a lot of benefits. Dave And so I’d love to get into that. There are some negatives. I think the biggest one is like the competition and the price. So we kind of get into that a little bit. You know, after we owned the 45 unit was actually a 2829 unit to eight units. That was like even kind of small multifamily. The 47 unit was 47 one building, one property. So that was like, man, this is going to be great. And we saw some benefits of that. I mean, namely, people would talk about like, you know, you have one vacancy and it’s not a big deal on a 47 unit like it is in a duplex where you go to 50% vacant. So there’s a benefits there. I mean, often, you know, the maintenance guy might come out and maybe he can hit a couple of units at a time and things like that. But it’s not big enough to support onsite staff. And so that was the first thing we saw when we got the 96 unit. It had an office on site, we kept the office and we put somebody on site. Well, actually two people. So that property is big enough to have a full time leasing agent and a full time maintenance guy. And so, you know, not only so many is a benefit there. Like you have people that are efficient. They’re like you’re not sending somebody out. I mean, we were working for a property management company that kind of had the kind of the smaller multifamily model where it’s an 8% fee and then they charge the first month’s rent, but then they’re charging you every time they send somebody out to the property. So we stayed with this property management company on the 96, but now they don’t have to charge us sending somebody out because the people are there. It’s also good for showing like we have somebody there all the time. It’s not our property management one charging us, but two, hey, we can’t have somebody just going out there at all times. So we’ve got to block out times that we’re going to be able to show your property. Now with the leasing agent on site, I mean, yeah, they can’t they can’t be there all day, every day and on the weekends. But they’re all, you know, 40 hours a week. And so people can come, you know, at any time and they’re there and they can do that. They can also be there when materials show up. And if even we have outside contractors that need to get into a unit to turn in, we’ve always got people there. So the efficiency of it, it’s less cost. But I would say the biggest thing, Dave, is like those people, they own that property, especially in our business, like the leasing it, well sometimes the maintenance guys do, but like the girls that we’ve had in the leasing office, that’s like it’s like their baby. They take so much pride in it. They’re all in on it. They want it to do well. They want it to stay full. They get to know the residents. The one maintenance guy we had, everybody called him the mayor of Wayne Dale, because all these properties are on Wayne Dale. And he knew everybody. Everybody liked him. And he’s the guy that’s coming out and fixing your stuff. Yeah, he’s your guy. So we just saw so many benefits of that.
Dave Dubeau [00:04:27] Well, let me let me ask you a question about that, if you don’t mind. So in your opinion, how many units do you need to have in a deal for it to make sense to have these onsite staff? Where does that kind of come in?
Lee Toder [00:04:41] Yeah, I would say people wise, Dave, you know, 80, it might even do it. Like that’s enough people for one or two people to manage. But you got to think about can your budget handle it? And that is going to be, you know, location specific, right. So for us in the Midwest where, you know, a two bed unit might rent, you know, between 912 hundred or something like that, 100 units is probably where you want to be or close to a. You know, we’re 95, 96, so we’re right there. But frankly, Dave, like our leasing girl, she could handle probably up to 150. So we’d be even better if we had 100 and 3040 now because they you know, then we’re spreading her salary out over even more units. But 100. Okay. I think if you’re in a hot city, you know, on the coast, you know, where a two bed unit might rent for two grand. Well, then it takes a lot less units to pay somebody’s salary, and that person will probably demand a little bit higher salary. But I mean, not that much like where, you know, we might pay somebody.
Dave Dubeau [00:05:38] Money or cash flow might be a lot lower in those high.
Lee Toder [00:05:41] Oh, that’s true, too. That’s true. Yeah. You got you got to think about it. So I think a hundred is, is kind of a good number. I’ve heard some people say it might be lower, that might be 80. Some people I’ve even heard say 60. And I think maybe they’re just pulling in more income and that’s better. It also, you know, an A-class property is easier to manage typically than a C-class one that we’re putting a bunch into the property and doing a bunch of unit renovation and stuff like that. So that plays into it. But I think a 100 is a pretty nice round number. You go on either side of it.
Dave Dubeau [00:06:07] So 100, but around 100 units, you got a full time leasing agent, you got a full time maintenance person, you still got your property management company, correct? Managing thing. So walk me through that because in my cheap brain, I’m thinking, hey, why, why are we getting the leasing agent to do the property management? Or is that. Well, obviously, you got a reason that you’re not doing that. And also, just out of curiosity, around that size of a complex, how busy is your leasing agent? Like, how literally what the heck is that person doing 8 hours a day? Because I imagine they’re working full time. As you mentioned, you’re probably she could probably handle up to 140 units. But again, is there a way to make that more efficient? Because I’m just thinking, if I’m paying for a full time person that’s out there and they’re not really doing the full time work, couldn’t we try to get them to do some of that property? Manage save yourself a crap ton of money there.
Lee Toder [00:07:01] She yes. And she does. She works for the property management company, but the property pays her full salary. Same with maintenance guy. They’re both employed by the property managers company. We do over her. There is a regional manager and she manages maybe ten or 12 buildings, this being one of them. So she is our property manager. I mean, she does a lot more than leasing. Oh, okay. Absolutely. So, yeah, you’re absolutely right. If she was just doing leasing, yeah, he would we would be paying her too much for the amount of work that.
Dave Dubeau [00:07:28] Yeah. Because I was just wondering like on that size of a building, how much, how many units are turning over per month, give or take.
Lee Toder [00:07:34] Yeah. Maybe like three or four.
Dave Dubeau [00:07:36] Yeah. So again, like one a week kind of thing maybe. Yeah. Right. Yeah. Typically all at the beginning of the month kind of thing. Right. Yep. Okay. Very, very cool. Excellent. So between the onsite leasing agent who also does the property management, so I’m trying to get my head around that. She’s working for the property management company, so she double dipping. Are they paying her and your partner? Are you paying them and they’re paying her out? How does that work?
Lee Toder [00:07:59] Yeah, it’s like they’re charging us for her exact salary and then they pay her.
Dave Dubeau [00:08:03] Got it, got it, got it, got it. But then you’re paying the property management company. Something on top of this is asking for.
Lee Toder [00:08:10] A 4% fee.
Dave Dubeau [00:08:11] Okay, I got it. So what are what are they doing for their 4%? Wow, that’s another fantastic idea. Hold onto that thought for a sec. Will be right back. Now, are you a real estate investor who’s ran out of cash or credit to grow your portfolio? Are you looking to grow your portfolio using other people’s money and raising capital? Well, I want to show you how to raise six figures or more in six weeks or less at my upcoming Investor Attraction workshop. You can get your ticket and find out all about it at Investor Attraction Workshop dot com. We’re going to spend a full day taking a deep dove into this roadmap that I’ve used to raise millions from ideas and I’ve helped other people, just like you, cumulatively raise hundreds and hundreds of millions of dollars for their deals as well. So again, you can check that out at Investor Attraction Workshop dot com. And as a loyal listener to the podcast, you’ll get 50% off your ticket when you use the discount code podcast. That’s right. Discount Code podcast at Investor Attraction Workshop. See you at the next workshop.
Lee Toder [00:09:11] Good question. I mean, I think so. We pay we pay those two salaries. We also pay the marketing and administrative costs for the property. The 4% is I mean, part of that’s their profit first. Of course, that’s part of his how they make money, right? Because everything else is going away to other people, you know, and their expenses. So part of that’s their profit. And then part of it is more the I think the regionals and some of the higher back end stuff. So but then, yeah, part of that is that’s how they make their money.
Dave Dubeau [00:09:35] But what I’m hearing from your side is it’s just such a nice, simple solution, right? You’ve got everything. Everything is wrapped up into one. If that leasing agent doesn’t work out, they’re going to replace they’re going to put somebody else in there. They’re going to be taking care of that. So you don’t have so much of the of the headaches involved with that?
Lee Toder [00:09:54] Yeah, Dave, 100%. If you said, you know, I want to own as few units as possible and maximize my cash flow, then don’t do this model, buy smaller stuff and manage it yourself or go get you’ll get 195 in manage. It yourself and keep all that money. But what you just explain their day perfectly is like this motto is scalable. We can buy this property anywhere and we’re doing a lot of value out right now, but once we get that through that and etc., we’re not going to spend much time on this property because we’re paying someone a good amount to really do a lot of work. I mean, once we switch this model day, we suddenly realize, like I looked at my partner because he’s more the asset manager, I’m more find the deals, find the money. And we were like, Dude, they’re regional manager. Like, that’s what you do. You do that for other properties, be like, you’re a regional manager, you know? But now this company, yes, we’re bank, we’re like, they’re doing your job. So now it’s also like, well, we can do these, we can buy a lot more property than if.
Dave Dubeau [00:10:44] Because right now we just need to find more properties and get the capital to do them and we don’t have to worry about the management. So yeah, yeah. Well, okay, so that’s the beauty. That’s so that’s what I’m hearing is as one of the big benefits of scaling up and to getting into these size of properties is you can have the onsite management; you can take a lot of that off your plate. Obviously, you still have to keep tabs on things and manage the manage all that kind of stuff. But it’s a lot less than hiring your own team to do all of that kind of stuff, right? So yeah, that’s a big benefit. More economies of scale, less headaches because you’ve got this onsite maintenance and repair person, so you don’t have to do one Z to Z stuff all the time. What else have you seen as being the big benefits of getting in this deal? So obviously I’m guessing higher cash flow for you and your investors? Yeah, not necessarily percentage wise, but you know, better more units, you’re getting better gasoline, you’re getting more cash.
Lee Toder [00:11:37] Yeah. Do other things with this size. But then certain like the property manager company that we’re working with now for all of our properties, they only do the bigger properties and that’s how they’re set up. And so they know how to do that really well. And one thing they do that just blows away the property management company that we used on the smaller stuff is they’re marketing their market like again, we pay that expense, but what we’re getting for it is just blowing us away in the.
Dave Dubeau [00:12:01] Way of what was the big but what’s the big difference that you’re seeing in the marketing? What are they doing differently than the smaller guys?
Lee Toder [00:12:07] They, you know, for them they have enough units that it makes sense to have subscriptions to the apartments dot com the rent cap dot com. I mean they’ve got people that are just on Facebook or just on Google. I mean, when they we came over there and they’re like, look, we did research on your Facebook, your Google, your reviews. That’s got to be scrubbed. We got to take care of that because, you know, we’re kind of newer owners of the property. So we got reviews from three or four years ago that had nothing to do with us. And they’re like, Right, we’ve got to we got to rebrand. We got I mean, and it’s all this stuff. We’re like, oh, my gosh. Like, never even thought about all that stuff. But that’s why we’re paying them the market, because I’m not I’m not a market. I don’t have a marketing department. Maybe we do someday. David We have, you know, 5000 units, but we’re nowhere close to that today. So all that stuff like now when you Google our apartment, it looks better, but also we just show up higher because they’re doing all this thing. I mean, they get on to apartments dot com and they reach out and they, you know, encourage the residents to give reviews. And, you know, then also we get reviews and now we’re rating higher. And so they just drive more traffic filling units. I mean, the number one thing you got to do to make money in multifamily is occupancy. You’ve got to stay full and sure; it helps to have higher rent. And they’re doing that, too. I don’t want to they are getting rents that we that our old property manager just they didn’t think it was possible and now they’re doing. But it all starts with this funnel, Dave. You’ve got to funnel people in. If you’re not getting people on your property, you’re never going to rent it. And they just they’ve got a bigger, better funnel. They’re just getting more people in because, you know, it’s the SEO stuff. It’s they are able to drive people’s eyes to our property that’s here.
Dave Dubeau [00:13:35] You’re definitely get your money’s worth there, my friends, that now it makes 110% sense for sure. Well, that’s awesome. Yeah. So we’ve talked about the good side. We you mentioned briefly at the beginning some of the pitfalls are that there’s a heck of a lot more competition in this field. So now when you get up into these hundred unit type buildings, now you’re starting to play with the big boys and girls and the yeah, the, the rates and the pension funds and all this kind of stuff. So talk to us a little bit about the downside and what you’ve done to deal with that.
Lee Toder [00:14:06] Yeah, it’s a great question and something I’ve been struggling with because yeah, once we got that 96 unit, that was December of last year, I was like, We’re never buying anything less than, you know, 90 units. Again, this is awesome. That’s what we do. And, you know, so that’s all the deals I started looking at. And Dave, I’m telling you, you know, we’re in southwest Ohio here and it’s not you know, we’re not a super-hot market or the Midwest. We’re, you know, like you expect. But so I’m not pretending like I’m competing with Reed’s. I mean, they’re probably 2 to 50, but we are competing with some bigger buyers, bigger, more sophisticated and often what that one thing that means, Dave, is they have a lower cost of capital. So their investors, their money expects a less or less of a return than our investors. And that just means they can pay more for the property then and I’ve seen your Dave like I’ll look at a 150 unit property and then I’ll look at an 80 unit property. And I’m telling you, Dave, everything else matches up as far as cashflow, you know. So hey, we’ve got to pay more for this one, obviously, because 150 pay less for this one because it’s because it’s 80. I’m telling you; the cash flow is way better for the 80 because that one. You’ve got to pay like 20 grand more per unit. And I’m telling you, it’s just because it’s 150 units. And I think there’s two things involved. One, like I said, it just it’s different competition. It’s not necessarily that more people buy 150 units. It’s just the people that do. They’re just looking at it differently. They’re trying to preserve capital a lot of times, if that makes sense. Like if you have a mill.
Dave Dubeau [00:15:27] They want to park it. They’re not too worried about the growth. They just don’t.
Lee Toder [00:15:30] Want to lose. If you’ve got $2 billion, a 3% return on your money, you’re making a really, really good living, right? I mean, you can you probably can’t spend that much money, so that’s fine. So real estate is a fantastic investment for really wealthy people because you park it, you probably get a very steady return. You’re paying down that. It’s appreciating all these. We all know that. So that money, they’re just not going to buy a 70 unit, 80 unit in Cincinnati, but 152 to 50. Yes, they’ll do that. They want to move a certain amount of money. It doesn’t make sense for them to move even just $1,000,000, right down payments just on that. They want to move four or 5 million, which means in this area, they’re buying 150, 200 units. So the different competition. And then the other thing I would say is we just talked about all the benefits of owning well, the sophisticated investors. They know that. So they want those benefits, too. So they’re also like, yeah, we you know, when they say we wouldn’t buy anything less than hundred units, they mean it and they don’t. So that’s why they play in that same market, because they know we want on site. We want this these big professional property management companies that I just explained to Dave, that’s who they want to work with and they only want to work with them. So for those they know, it’s easier to run. You can run them better. And so they stay there and then they want to move a certain amount of money at a time and you go for the bigger door. So that’s why they’re there. And it’s just.
Dave Dubeau [00:16:42] So what are you going to do moving ahead to kind of deal with that area? Are you going to be open to the idea of maybe hitting that that sweet spot there of around the 80 units is a little bit too small for the big guys. However, it’s not quite big enough for the super professional property management that you’ve got spoiled with the house. So what’s, what’s what are you guys are going to do now?
Lee Toder [00:17:05] Couple of things. One, yes, 80 units, nine units. It’s still enough. I mean, we now that we’re working with this property management company, they’re more open, like they’re even they are taking on our 47 unit. Okay. And they have. So they have a 140 unit right across the street. So that’s why. So we’re sharing staff with that property. And so that’s the way to do that. So it’s like, okay, we still can work with them with the 40 unit stuff. Hopefully someday what I’d like to do it. I’d like to be the guy that owns okay, we own a unit here and then just down the road we own a 40 unit. So we’re going to run staff and they’re going to manage both of them, right? Like we’ll just have jobs on the property, but it’s right down the road. So they’re managing both. So yeah, that’s how we’re going to probably try to get. Graeme I’m not going to give up on 150 unit properties. That’s what I want to buy. But we’re definitely not crossing off the, the 60, 70, 80 unit properties yet, especially if we can buy them close to where we have another one in share staff or if we can get two of them share staff. That’s how I think we can kind of be creative now.
Dave Dubeau [00:18:00] That makes a lot of sense. Well, that’s great. Well, congratulations, Leigh, on making the leap, learning these lessons now, you see. But, but also understanding that competition is much more intense for these kind of properties makes it a little bit more difficult to get them. And then more importantly, coming up with a solution that’s going to work for you and your investor partners so that you’re not just crossing your fingers and hoping for these really big deals, but you’re going to be able to keep doing the medium sized ones in the meantime and to do to first. Yeah. Complain the staff that’s not smart actually if people want to find out more about you and connect with you, what should they do?
Lee Toder [00:18:36] Yeah. Check out our website threefold. REI dot com. That’s spelled out thrf0ldrei as in real estate investing.com I’m pretty active on LinkedIn and Facebook as well, so you can look up Leo to there, but we’ve got lots of good mature at our on our website and then you can connect with us through there.
Dave Dubeau [00:18:53] Well, we’ll have all of that in our show notes for sure. And again, Leigh, thanks very much for being on the show.
Lee Toder [00:18:58] Yeah, thanks for having me, Dave.
Dave Dubeau [00:18:59] My pleasure, Artie. Right. Take care. We’ll see you on the next episode. Well, hey there. Thanks for tuning in to the Property Profits podcast. If you like this episode, that’s great. Please go ahead and subscribe on iTunes. Give us a good review. That’d be awesome. I appreciate that. And if you’re looking to attract investors and raise capital for your deals, so we invite you to get a complimentary copy of my newest book right back. There it is the money partner formula. You can get a PDF version at investor attraction book dot com again. Investor attraction book. Dot com. Take care.