Social Impact Housing + PropTech = Profits with Kent Ritter

Microphone 5 57

Podcast Transcription

Dave Dubeau [00:00:09] Everyone Dave Dubeau here with another episode of the property Profits Real Estate podcast today. This good looking guy is zooming in is Mr. Kent Ritter, and Kent is a former corporate guy management consultant that got into real estate investing in a big way. He’s doing some very, very cool things with multifamily investing, specifically focusing on social impact investing, which will get into what exactly that means in a minute. He runs an amazing podcast called Ritter on real estate. Ken, welcome.

Kent Ritter [00:00:42] Oh, thank you so much, Dave. So happy to be here today.

Dave Dubeau [00:00:45] So where are you zooming in from today? That’s a lovely backdrop. You got going on there and amazed. It’s as quiet as it is because I think you got a house full of kids.

Kent Ritter [00:00:54] Yeah. You know, I sure do. Well, I’m calling in from Indianapolis, so right here in the heart of the Midwest. And yeah, you know, I’ve got three little ones a five year old, a four year old and a two year old. So I have very strategically planned my podcasts for when they’re off at school and daycare because otherwise, yeah, I’m in the basement right now and all you hear the pitter patter and little feet running around all upstairs. So it’s got to be strategic about it.

Dave Dubeau [00:01:21] A very, very good. So why do we start? We want to talk about two things here because before we press record here, I was asking what you’d like to focus on, and two things really popped out for me. First of all, is social impact investing. I mean, we’ve heard of this. We got it’s kind of a buzz term right now. What does that mean to you?

Kent Ritter [00:01:42] Yeah, I mean, really good question. And right, it’s such a buzz word right now. I was actually reading I was reading in The Wall Street Journal how there’s so much money out there seeking like, quote unquote green or social impact investments that companies are just people, just starting companies and calling them something like that. And they’re just getting hundreds of millions of dollars thrown at them because these organizations now admissions to invest socially, right, which I think is, well, which is a good mission, right? But at the same time, some of the ways that it’s working out, I don’t think really is the best to have no social impact, right? But one thing. So kind of a side note, what it means to me is that in whatever you’re doing, you’re making it better than when you found it right. You’re improving, whether the world or your neighborhood or, you know, it can be big or small, but you’re improving something and making it better for the community, right? And I think that what I do and what a lot of us do, which is really what I focus on, is buying workforce housing. So apartments that are, you know, where people have an income, a family income of maybe between 40 and 60 thousand a year. These are people that are largely renters for life. They’re renters by necessity, not by choice, right? They’re probably lifetime renters. And we were purchasing our buildings and they’re usually 40 or 50 years old and fairly rundown. They got deferred maintenance, not the cleanest, not the best living situations. And so I really think that there is a positive social impact in what we do, which is buying those properties, infusing capital in those properties, fixing them up, making them clean, making them safer, you know, putting LED lights in for the parking lots, putting cameras on site so we can see what’s going on right? Setting up, you know, whether it’s policing programs or security programs, things like that, making them cleaner, safer and more modern, and giving these people a place that I think they can be proud to live in. And you know, I think that simple thing has an incredibly positive social impact. I think by changing an apartment community, you can start to change your neighborhood and we’re not coming in and hoping to kind of kick everybody out and bring a new class attended. I mean, when we look at things, we really look at the affordability and when we’re acquiring properties. So housing and urban development in the U.S., they define you being rent burdened if you pay more than 30 percent of your income to your rent. And so we look at that very closely and say, Okay, well, we want to stay well under that 30 percent. So when we’re looking to buy properties, we’re looking at that rent to income ratio and want to find something in kind of the high seven high teens or low 20s so that we know that we can come in. We can make our improvements as to improve the community, but we can also increase rents and some fees to add value to our investors because that’s why they’re investing. That allows us to make these improvements right. But keep it relatively affordable and well under that 30 percent market, if we can do that and it’s a win for everybody. And so, so really, I think that does have positive social impact, and I like to think about it that way, and I’m proud that we’re able to enhance these communities.

Dave Dubeau [00:04:51] So give me an example of one of the properties that you’ve turned over relatively recently. What did that look like before? What does it look like now and what percentage of the original renters? Because I’m just thinking off the top of my head, OK, well, that sounds good. But we. Not all these people in this crappy old apartment building paying probably below market rents. Right? And then you go in, you’re going to have to move them to get the property renovated. How many of them actually can afford to come back? How many of them do come back? I can see the benefit of them doing that. But if they’re accustomed to paying X amount per month and then all of a sudden, even though it’s still quite affordable, it’s significantly higher. How are they able to handle that kind of thing?

Kent Ritter [00:05:37] Yeah, it’s a good question. So to give you an example of a recent property, you know, we have a property that’s outside of Dayton, Ohio. One hundred and ten units and it was the. It was really still the most affordable in the market. I mean, blow the market by 150 to $200 from the closest competitor. Right. And along with that, though, I mean, there is a reason there was the lowest in the market. It wasn’t the best place to live in the market. But we saw an opportunity there to come in. And it’s very much a blue collar community, very, you know, primary employers would be retail, fast food and manufacturing. And we saw an opportunity to come in. And when we did our underwriting, I mean, we were only expecting $50 rent. So I mean, it’s something that’s manageable, right? But we were able to come in and we were able to improve the property, clean up the landscaping, improve the laundry facility, actually get new laundry machines, actually put air conditioning in the laundry room. There’s no air conditioning in the laundry room, which is like if you’ve been in Ohio in the middle of the summer, it’s hot and humid. I can’t imagine doing laundry in there. So our air conditioning, you know, add new laundry units. They were 20 plus years old. Gosh, what else did we do? We added some external amenities and then really just focused on improving the units. You know, some of the folks that lived there for 10, 20, 30 years had, you know, had never had their units renovated. And so, you know, we were able to come in and we were able to renovate those units, even doing some of them occupied,

Dave Dubeau [00:07:16] you know, soldiers are going to ask us.

Kent Ritter [00:07:18] Yeah, I mean, we’re being able to come in to do that now. Yeah, exactly. So, you know, there are certain things that are easy to do occupied with flooring. You can, like, have a move their stuff to one room and then you do that room, you move the other hand, you know, but they come in and just improve the property. Other things that we were able to do that was address issues with the sidewalks where there was multiple places that had just become tripping hazards and grind those down and make those compliant, fix the parking lot, which was sorely needed to be repaved. You know, we were we had two cameras to the property for added security. That record, you know, and so you can see what’s going on and just, you know, just generally kind of just improve the area and improve the landscaping and kind of give people, you know, a better, better feel for where they live. And some pride, I think, in where they live. And we were able to do all that well in increasing the rent about 50 dollars and still stay well under the rest of the competitors in the market. And so if you do things in the right way and you do things smartly, you can add value without having to bump rents significantly. One of the other things that we did was we added fiber optic internet to the property. So that’s something we’re doing in all of our properties. And that kind of blends into the tech thing that you mentioned. But running fiber optic internet to the property, which you may think like on a property like that, how are you ever going to run fiber off the internet? How do they afford that? Well, we’re able to do it at a scale where we can offer fairly cheaply way cheaper than they would be able to get with their own internet service provider. It’s a benefit because it’s not an additional financial burden to them. We’re actually reducing their overall financial burden, giving them a better product with fiber optic in an average and better speeds and more stable connection. And they don’t have to deal with the cable company. They move in and we form a switch and it’s on. It’s already wired. So, you know, we add value in the

Dave Dubeau [00:09:10] or you guys as well. Are you charging them for them?

Kent Ritter [00:09:13] Yeah. And so that’s the win is it’s a revenue source for us. It’s an additional revenue stream, but it’s something that people were already paying for. And so what we do is we do a market survey and we come in and we charge. And I think on that property because we knew we wanted to make it affordable and our numbers worked. I think we were $20 under the market for the cheapest internet that was available in the market. But we were also giving like 250 megabit up and down speed. So much faster. So better products, cheaper price try to make it a no brainer for people. And it’s a win because it actually lowers their financial burden but allows us to shift some of that revenue from the cable company over to us.

Dave Dubeau [00:09:53] Exactly. So I was just kind of wondering for these kind of properties in order to, you know, increase the value of the property. A lot of times that’s based on net operating income, but you’re bumping up the rent 50 bucks a month. That’s significant. But on 110 units, that’s pretty significant. But compared to what gentrifying that building might look like or something like that, it’s not as much there. But if you’re doing these kind of different things with adding additional revenue streams is that how you’re able to bump up the value of the property overall?

Kent Ritter [00:10:30] Yeah, that’s right. I mean, I really, I really believe in trying to add value, add amenities or revenue generating amenities and doing that in as many ways as we can. I think that I think the internet is a prime example of that. You know, you can only push rents so much, you know that we, can we? Knew if we pushed rents up too close to the competitors, you know, we would start to lose people so and we wanted to. We knew that we could come in and we could find a nice balance. We could leave it relatively affordable to the market. I think it is the most affordable in the market, but also have opportunities to add other items like the internet,

Dave Dubeau [00:11:09] for example, and lower expenses by making things more efficient as well.

Kent Ritter [00:11:12] And we also put a laundry contract in place so that, you know, we get revenue from the laundry. You know, previously they had their own units. They were old, outdated coin operated units, and we put a laundry contract in place. And therefore we have to get brand new units and you can operate off of like Bluetooth and cards, you know? And in that way, we get a revenue share.

Dave Dubeau [00:11:38] Also, there is a maintenance

Kent Ritter [00:11:39] slowdown to deal with it exactly and get new units for the residents.

Dave Dubeau [00:11:43] Wow. That’s another fantastic idea. Hold on to that thought. For a sec. We’ll be right back. Now, are you a real estate investor? Was 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 road map that I’ve used to raise millions for my deals and help 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 percent off your ticket when you use the Discount Code podcast. That’s right, discount code podcast at Investor Attraction Workshop dot com. See you at the next workshop. All right. Well, that makes a lot of sense now. Talk to me a little bit about some of the cool stuff you’re doing with technology in your properties these days, because that’s something you’re pretty excited about as well.

Kent Ritter [00:12:51] Yeah. So I’m happy we already hit on the high speed internet because that that’s kind of the backbone for everything else you want to do. You got to have a good internet connection. And so that adds value to the residence, but also allows us to kind of do what we want to do from the camera standpoint, these other things. One of the things that I think have just been a game changer for the multifamily industry is the ability to have a contactless leasing process, and this is something that we had started working on pre-COVID. But really, COVID forced everybody to figure out how to do things differently, right? And so we implemented a contactless leasing process and that was like the first use case we wanted to tackle with technology, and it starts with a smart lock. Right. The smart lock is like the literal and metaphorical front door for all of this right. You have to have the smart lock that you can control with you through Bluetooth. There’s other systems that control it. I prefer Bluetooth. But you have that smart lock in the new layer software over that that allows you to control those locks remotely. Right. So it adds management efficiencies. The manager can control access to the property without having to physically be there. It’s a benefit for the resident because the resident can now use their phone as a key, right? They don’t have to carry keys around if they don’t want to. They can also give you no access to one time access to friends and others. And it’s a huge benefit for property management because a lot of people don’t know this. But like one of the things property managers spent their most, the most of their time on is Ricky. When keys are lost, property manager, friend of mine carries a machine around in his truck because he has to do it so often. So we’re able to just eliminate the need to do that by being able to just quickly change the code on the lock down app. And so that saves a ton of time. And then from there

Dave Dubeau [00:14:38] is that for each door in the whole place or just for the front door?

Kent Ritter [00:14:42] No, no. Each door. Yeah, it’s door. Everybody gets a smart lock. Yeah. And they’re surprisingly inexpensive. You know, it’s one of those things where it can be $200 or it can be $100, depending on the grade that you go. But on a C class property like the one we described, we put a very basic schwag deadbolt in. It cost about $210. So not a huge upfront capital expense. And then you have the software fees that are ongoing. It’s, you know, a dollar a few dollars a door, but well worth it for the management efficiencies and the benefit for the residents. And then from there, we started layer on digital technology to add additional functionality. So we added a self-guided tour option which allows people to come and tour on their own time, on their own schedule without having to physically be with anyone not having to do it on the property manager schedule and not having to do it when the office is open. We can set it all up and it’s a really cool product. We set it up. So you know, you go on the website and you subscribe and you say you want to do it or you pick your time. And then before you show up at the property. In your time, you get a code to your phone that allows you to access the property. It’s a onetime access code to go into the property and then as you go into the property, it’s actually a curated tour on your phone that allows people to learn all about the property and there’s geolocation beacons on the property. So, for example, a fitness center, there’s a geolocation beacon. You walk up to the fitness center and it says, Hey, welcome to the fitness center. Here’s all the great info about the fitness center. You know you go to the pool. Hey, here’s all the great info about the pool, and it tracks you through the property. And then when you get to the unit and you get to the unit, then it tells you all about the unit and you can do that on your own. And then you can actually take that all the way through to be able to do a lease and electronically and sign with Doc. You sign right there and you can sign up and get a lease. And heck, you can really even move in without ever having to physically contact a person, because then we just give you the code if we really didn’t want to, you know, have any in-person contact. So it’s really cool.

Dave Dubeau [00:16:47] Palace’s game changer. Holy crap. That’s yeah,

Kent Ritter [00:16:51] it’s been amazing. It’s been huge management efficiencies, but also just, you know, tenants are prospects, people like. It’s kind of an awkward thing to be shown around in apartment, how someone can follow you around while you’re looking around,

Dave Dubeau [00:17:03] you know you can’t really talk freely. Exactly.

Kent Ritter [00:17:07] We found it’s a much more pleasant experience for people when they get to do it on their own and they can do it, you know, after work, they don’t have to take their lunch break and do it. They can come until eight o’clock at night and they can tour an apartment. And yeah, the feedback has been great from people.

Dave Dubeau [00:17:22] Now I imagine that was already some sort of a process is already set up that you didn’t into or did you kind of come up with a lot of the moving pieces yourself?

Kent Ritter [00:17:31] Well, no, we took our best of breed model, which means we found the best one in each category and kind of layered them on together, right? Versus there are companies out there that will do everything for sign the law to say all the software. But we wanted to look at, OK, well, we want the best look. We want the best access control. We want the best self-guided tours. So on, you know, the best virtual lease, those things. So. So we layered those pieces on top of each other to create that system.

Dave Dubeau [00:18:02] Very cool. So I’m just wondering, like for the self-guided tour, who comes up with the scripts, who does all that kind of stuff like that’s quite a bit of work actually to do that. Well, I would imagine.

Kent Ritter [00:18:15] It’s like any technology, the devil’s in the details, right? There’s one thing to just buy it and implement it, right? There’s another thing to really optimize it. And so it is extremely important. So who does it? So really, I’d say, who’s your best leasing agent, right? Who sells the property the best? That’s the person that you want helping create the script because that script becomes, you know, your best leasing agent, you know, like with their best attitude on their best day, right? Like doing their best pitch. That’s exactly what it should become. And so you work with the people that know the property and are good at selling the prop you had. Okay, well, what are the selling points, right? What do people really gravitate to? And you highlight those things? But yeah, you definitely are working with the folks that know the property best.

Dave Dubeau [00:19:03] So as a leasing agent still required, as leasing agents, still, but I mean potentially could make their life easier and on the other hand, definitely could put them out of a job. So, yeah,

Kent Ritter [00:19:17] yeah, I think that there’s a little of both what likely if this program is at scale, but I look at it differently. I look at it as work. The more that we can leverage technology to take away the mundane, every day, low like low complexity tasks, right? And the more that we can focus on our highest and best use right, the more we can focus on what I would say on a community more. You can focus engaging with the people in your community, the more time you can spend with the people that live there. But you know you’re not worried about scheduling and you’re not doing all this, you’re not reaching locks, right? You can. You can focus more on building that community as a property manager focused more on engaging with residents and I think have a more like. Human like human centric approach I make. Instead of doing all this. Nuts and bolts stuff, you can focus on really creating deep relationships, and that’s extremely important on a property. I mean, people will. People will stay places because they just they like the manager. They like management, you know, and if you can create a positive experience and you can go above and beyond and you’ve got to have the time to do that because property managers are pulled in a thousand different directions every day. I mean, leasing is one of their jobs, right? They have 100 hundred others. So the more that we can limit those with technology and allow people to spend time in front of the residence creating a positive experience, then I think the more successful we’re going to be. So that’s going to help. I don’t look at it as necessarily we’re trying to replace staff like we don’t underwrite. We don’t underwrite a reduction in payroll and things when we put in the capital to do those two parks and things that I mean, maybe that happens organically over time. We just realize, you know, kind of through attrition. But really, what I’m hoping is that there will be just more focus on that rather than experience.

Dave Dubeau [00:21:12] No, that makes sense. I tell you, I can’t. Time flies when you’re having fun. This has been fascinating stuff.

Kent Ritter [00:21:19] What? You glad I could come on? Yeah.

Dave Dubeau [00:21:21] Social impact investing and how you implemented technology to just really dial things. And that’s absolutely fantastic. If people want to find out more about Kent Ritter and what you’re up to, what should they do?

Kent Ritter [00:21:35] Yeah, thanks, Dave. So the easiest way to do is go to Kent Ritter AECOM. That’s my home base. You can learn more about me. You can access my podcast, my blog. I’ve got some beginner investor resources on the site. So very useful, especially if you’re just getting started out, you know, and you can also just go directly to anywhere you listen to podcasts and listen to my podcast. It’s called Ritter on real estate. And the tagline is Passively invested like a pro. And that’s exactly what I try to do is try to help people who are, you know, looking to make investments, make the right decisions.

Dave Dubeau [00:22:08] Excellent. Ken, thank you so much. There’s been a lot of fun.

Kent Ritter [00:22:12] Yeah, thanks, David, appreciate having me.

Dave Dubeau [00:22:14] My pleasure. All right, everybody, take care and we’ll see you on the next episode. Bye. Well, hey there. Thanks for tuning into the property Profits podcast if you’d 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, we invite you to get a complimentary copy of my newest book right back there. There it is the money partner formula. You got a PDF version, an investor attraction book dot com again. Investor attraction, book dot com. Take care.

Listen to The Podcast