EP232: How to Survive Market Cycles as a Multifamily Real Estate Investor - Charles Seaman

And what about, you know, on some of these initial ones, tell me a little bit about how you were doing property management.

You know, obviously, when you get to certain thresholds, and you can maybe explain to the audience where you feel like that is, but, you know, where having, you know, dedicated on site, you know, property management, I mean, tell me, I guess, a little bit about how you if there was any change, maybe there wasn't.

But tell me a little bit about how you did property management with I would say

there's really two things to consider.

So one is the on-site presence.

So if you have less than 70 or 75 units, I think getting on-site staff in most cases is probably going to be nearly impossible because you're just not going to have sufficient cash flow to really sustain it.

Now, even at 70 to 75 units, I would tell you it's not ideal because it puts a much bigger burden on the cash flow than you'd want it to.

But I would also say that it's much easier to run a property with onsite staff than without.

So when you get to about 100 units or so, it makes a lot more financial sense to have onsite staff because then you have sufficient cash flow to really support it.

At 70 or 75 or even 80 units, you really need to look at it on a case-by-case basis and see how much cash flow you have.

Yeah.

And the other option is you need to look at are you going to be using third-party property management or first-party? And first party for everybody who doesn't know is if you basically take management in-house, you become vertically integrated.

What I would say is I think, especially in the multifamily space, if you're looking to do that long term, that's an incredible competitive advantage.

That works well if you're buying in a fairly tight-knit region.

If you're buying in one-off properties in different areas, probably not going to work as well because you're not really going to have the scale to make it viable.

Most of our deals, especially the earlier ones, we used third-party property management.

And it was finding the companies we thought were the best fit.

Now, sometimes the companies we thought were the best fit, turns out they weren't.

You kind of learn those lessons as you go, and you have to replace, and you have to figure out where the solution is.

But like that subty deal, we had a pretty good property management experience.

And what worked really well is that we were in a smaller market, with a property that was too small to support onsite staff.

So we found a company that managed a few of the properties locally.

And none of those properties were big enough to have their own onsite staff, but collectively they were big enough to share onsite staff.

So even though our property was 48 units and I couldn't support a manager or a maintenance person, what happened is with that cluster of four properties they managed locally, they had 120, 130 units somewhere around that.

And now what happened is no one property has to bear the burden of an onsite manager, but all four of them could split it based on the amount of time and effort that the manager spends on each of those properties.