WEBVTT 00:00:00.000 --> 00:00:02.640 Okay, let's unpack this. Welcome back to the 00:00:02.640 --> 00:00:06.280 Deep Dive. Today we are looking at something 00:00:06.280 --> 00:00:12.039 that is so pervasive, so fundamental to our existence, 00:00:12.419 --> 00:00:15.240 that it has effectively become invisible. Right. 00:00:15.339 --> 00:00:17.620 We live inside it, we work inside it, we shop 00:00:17.620 --> 00:00:21.250 inside it. But we almost never stop to consider 00:00:21.250 --> 00:00:24.489 the operating system that keeps it from collapsing 00:00:24.489 --> 00:00:26.850 into chaos. I'm talking about the built world. 00:00:27.050 --> 00:00:28.890 It's the invisible engine of our daily lives. 00:00:28.949 --> 00:00:31.510 That's a perfect way to put it. Exactly. We tend 00:00:31.510 --> 00:00:33.490 to think of buildings as just static objects, 00:00:33.670 --> 00:00:35.509 you know, walls, a roof, maybe a lobby with a 00:00:35.509 --> 00:00:38.689 nice plant. Sure. But when you really dig into 00:00:38.689 --> 00:00:41.090 the sources we have today, you realize a building 00:00:41.090 --> 00:00:44.200 is more like a living organism. And the brain 00:00:44.200 --> 00:00:47.320 keeping that organism alive. That is property 00:00:47.320 --> 00:00:49.060 management. And this is so important because 00:00:49.060 --> 00:00:51.000 I think a lot of people are already, you know, 00:00:51.020 --> 00:00:52.539 their eyes are glazing over. They're thinking 00:00:52.539 --> 00:00:55.259 about leaky faucets. Right. And before you reach 00:00:55.259 --> 00:00:56.859 for the skip button because you think we're going 00:00:56.859 --> 00:00:58.880 to spend an hour talking about unclogging toilets 00:00:58.880 --> 00:01:01.320 or collecting rent checks, stop. Please stop. 00:01:01.740 --> 00:01:03.560 Because if that is your mental model, you are 00:01:03.560 --> 00:01:06.980 missing the entire economic reality of the world 00:01:06.980 --> 00:01:09.700 that is literally all around you. Right. I want 00:01:09.700 --> 00:01:12.040 to start with the sheer scale of this. Real estate 00:01:12.040 --> 00:01:14.680 is the single largest asset class in the world. 00:01:14.819 --> 00:01:17.939 By a huge margin. We were talking about hundreds 00:01:17.939 --> 00:01:20.840 of trillions of dollars in value globally. And 00:01:20.840 --> 00:01:22.959 the people we are discussing today, property 00:01:22.959 --> 00:01:25.560 managers, they are the stewards of that value. 00:01:25.700 --> 00:01:27.579 They are the difference between a building being 00:01:27.579 --> 00:01:32.209 a cash cow and... A money pit. A complete disaster. 00:01:32.469 --> 00:01:34.370 And that's really the mission for this deep dive, 00:01:34.469 --> 00:01:36.390 isn't it? We need to peel back the layers. We 00:01:36.390 --> 00:01:39.049 do. We are going to move way, way beyond the 00:01:39.049 --> 00:01:41.109 stereotype of the super with the heavy key chain 00:01:41.109 --> 00:01:43.870 and maybe a bad attitude. We are looking at a 00:01:43.870 --> 00:01:45.730 profession that sits right at the intersection 00:01:45.730 --> 00:01:48.969 of high finance, complex law, structural engineering, 00:01:49.170 --> 00:01:51.569 and frankly, behavioral psychology. It's a sophisticated 00:01:51.569 --> 00:01:54.459 machine. Looking at the source material we have 00:01:54.459 --> 00:01:56.439 today, which is pretty comprehensive, it covers 00:01:56.439 --> 00:01:58.920 everything from global regulatory frameworks 00:01:58.920 --> 00:02:02.260 to the prop tech explosion. It's clear that this 00:02:02.260 --> 00:02:04.000 industry is going through a massive identity 00:02:04.000 --> 00:02:07.519 crisis. It is. It's shifting from maintenance, 00:02:07.840 --> 00:02:11.139 which is reactive, to management, which is proactive. 00:02:11.419 --> 00:02:13.560 And that distinction, that simple word change, 00:02:13.740 --> 00:02:16.280 it matters a whole lot. So let's start with the 00:02:16.280 --> 00:02:19.629 core concept. Absolute definition. In the simplest 00:02:19.629 --> 00:02:21.810 terms, what are we actually talking about here? 00:02:22.009 --> 00:02:24.150 OK, so at its base level, property management 00:02:24.150 --> 00:02:27.389 is the operation, control and oversight of real 00:02:27.389 --> 00:02:30.729 estate. Simple enough. Operation, control, oversight. 00:02:30.969 --> 00:02:33.490 That sounds pretty broad. It is. And that applies 00:02:33.490 --> 00:02:35.849 to everything from a single family home you rent 00:02:35.849 --> 00:02:38.689 out to a massive industrial warehouse, a shopping 00:02:38.689 --> 00:02:41.610 mall or even public infrastructure. Right. But 00:02:41.610 --> 00:02:43.810 the definition in our sources adds a critical 00:02:43.810 --> 00:02:47.560 nuance that for me changes everything. It is 00:02:47.560 --> 00:02:50.479 the accountability for the useful life of the 00:02:50.479 --> 00:02:53.099 asset. Useful life. I like that phrase. That 00:02:53.099 --> 00:02:55.199 creates a very different mental image than, say, 00:02:55.340 --> 00:02:57.960 rent collection. Exactly. This is lifecycle management. 00:02:58.259 --> 00:03:00.620 A property manager isn't just solving problems 00:03:00.620 --> 00:03:02.620 for today. They aren't just putting a bucket 00:03:02.620 --> 00:03:04.800 under the leak. They are making decisions to 00:03:04.800 --> 00:03:07.180 ensure the building is still standing, that it's 00:03:07.180 --> 00:03:09.500 functional, and most importantly, profitable 00:03:09.500 --> 00:03:14.409 20, 30, even 40 years from now. If I own a skyscraper, 00:03:14.490 --> 00:03:17.169 I'm not just hiring a manager to fill vacancies. 00:03:17.310 --> 00:03:20.009 I'm really hiring an asset manager. Precisely. 00:03:20.009 --> 00:03:21.990 And that's a distinction the industry itself 00:03:21.990 --> 00:03:25.050 is trying very hard to make. Asset management 00:03:25.050 --> 00:03:26.949 sounds like Wall Street, right? It sounds serious. 00:03:27.229 --> 00:03:30.069 It does. But that's what this is. The property 00:03:30.069 --> 00:03:32.909 manager is the operational backbone and they 00:03:32.909 --> 00:03:35.590 walk a very, very tightrope. On one side, they 00:03:35.590 --> 00:03:37.550 have the owner's financial interests, maximize 00:03:37.550 --> 00:03:40.270 profit, minimize costs. The bottom line. The 00:03:40.270 --> 00:03:41.969 bottom line. And on the other side, they have 00:03:41.969 --> 00:03:44.849 the tenant's satisfaction and, you know, their 00:03:44.849 --> 00:03:47.430 safety. And those two things are often in direct 00:03:47.430 --> 00:03:49.610 conflict. Constantly. I mean, think about it. 00:03:49.669 --> 00:03:51.969 The owner wants to spend zero dollars on a new 00:03:51.969 --> 00:03:54.689 roof. The tenant, understandably, wants a roof 00:03:54.689 --> 00:03:57.110 that doesn't leak. A pretty basic request. A 00:03:57.110 --> 00:04:00.949 very basic request. The manager is the fulcrum. 00:04:01.050 --> 00:04:03.150 They're in the middle. They have to convince 00:04:03.150 --> 00:04:05.750 the owner that spending the money now saves the 00:04:05.750 --> 00:04:08.669 asset's value later. They have to translate physical 00:04:08.669 --> 00:04:12.669 repair into return on investment. It's a multidisciplinary 00:04:12.669 --> 00:04:15.750 balancing act. And to really understand how hard 00:04:15.750 --> 00:04:18.689 that is, the sources break the job down into 00:04:18.689 --> 00:04:20.689 what they call the six pillars of responsibility. 00:04:22.120 --> 00:04:24.019 And when I saw this list, my first thought was, 00:04:24.079 --> 00:04:27.040 how does one person do all of this? Usually they 00:04:27.040 --> 00:04:29.360 don't. In large assets, it's absolutely a team. 00:04:29.459 --> 00:04:31.079 But let's walk through them because each pillar 00:04:31.079 --> 00:04:33.379 is essentially a career in and of itself. Okay, 00:04:33.379 --> 00:04:34.899 let's do it. Let's start with pillar number one. 00:04:34.939 --> 00:04:36.980 This is the one we all interact with. The human 00:04:36.980 --> 00:04:40.160 element. Tenant relations. This is the face of 00:04:40.160 --> 00:04:42.699 the franchise. The manager is the intermediary. 00:04:42.720 --> 00:04:44.980 They are the buffer. The human shield. Sometimes, 00:04:45.079 --> 00:04:47.420 yes. I think that's fair. They stand between 00:04:47.420 --> 00:04:50.350 the owner and the tenant. And the cycle is exhaustive. 00:04:50.350 --> 00:04:52.790 It starts with marketing and inquiries. But the 00:04:52.790 --> 00:04:55.649 really critical part, the first gate is the screening. 00:04:55.910 --> 00:04:58.110 Let's pause on screening for a second, because 00:04:58.110 --> 00:05:00.750 this isn't just do they have a job? This is a 00:05:00.750 --> 00:05:04.870 deep risk assessment. It's financial and behavioral 00:05:04.870 --> 00:05:07.589 risk assessment. Can they pay? That's the first 00:05:07.589 --> 00:05:09.959 question. Will they destroy the unit? That's 00:05:09.959 --> 00:05:13.220 the second. And maybe just as important, will 00:05:13.220 --> 00:05:15.819 they annoy the neighbors to the point that other 00:05:15.819 --> 00:05:19.319 good paying tenants leave? That's a huge one. 00:05:19.480 --> 00:05:23.060 One bad apple can spoil the whole building. Absolutely. 00:05:23.480 --> 00:05:25.980 You are trying to predict the future behavior 00:05:25.980 --> 00:05:29.060 of a complete stranger based on what a credit 00:05:29.060 --> 00:05:30.839 score and maybe a reference check from their 00:05:30.839 --> 00:05:32.319 last landlord who might just be trying to get 00:05:32.319 --> 00:05:34.300 rid of them. Yeah, that reference could be totally 00:05:34.300 --> 00:05:36.639 bogus. So if you get it wrong, you are stuck 00:05:36.639 --> 00:05:38.550 with them. And we'll get to evictions later, 00:05:38.629 --> 00:05:41.470 I'm sure. But preventing a bad tenant is infinitely 00:05:41.470 --> 00:05:44.790 cheaper and easier than removing one. 100 percent. 00:05:45.009 --> 00:05:47.649 And the tenant relations pillar continues through 00:05:47.649 --> 00:05:50.050 the entire lease. It includes handling complaints, 00:05:50.430 --> 00:05:52.610 negotiating renewals and then the move out inspection. 00:05:52.769 --> 00:05:54.709 Right. But there was a specific detail in the 00:05:54.709 --> 00:05:56.689 notes that I loved because it's so overlooked. 00:05:57.069 --> 00:06:01.069 It mentioned mailroom operations. Yes, I flagged 00:06:01.069 --> 00:06:03.990 that, too. It's so true. In my head, the mail 00:06:03.990 --> 00:06:08.360 just. It arrives. It appears. It's magic. In 00:06:08.360 --> 00:06:10.680 a single -family home, sure, the mail carrier 00:06:10.680 --> 00:06:14.220 puts it in the box. But imagine a 50 -story residential 00:06:14.220 --> 00:06:17.769 tower in downtown Chicago. Or a massive commercial 00:06:17.769 --> 00:06:20.430 office complex. You don't have one mailbox. You 00:06:20.430 --> 00:06:23.689 have thousands of packages arriving daily. Especially 00:06:23.689 --> 00:06:25.970 now. It's not just letters anymore. Not by a 00:06:25.970 --> 00:06:29.209 long shot. No. It's Amazon boxes. It's grocery 00:06:29.209 --> 00:06:31.870 deliveries from Instacart. It's perishable food 00:06:31.870 --> 00:06:34.250 from meal kits. It's confidential legal documents, 00:06:34.449 --> 00:06:37.170 medical supplies. The sheer volume is staggering. 00:06:37.350 --> 00:06:39.529 So if that system fails, if the mailroom is chaotic, 00:06:39.810 --> 00:06:42.009 the building essentially stops working for the 00:06:42.009 --> 00:06:44.649 people living there. It's a core utility now. 00:06:44.790 --> 00:06:47.129 It creates complete chaos. The management company 00:06:47.129 --> 00:06:49.629 is effectively running a private logistics hub 00:06:49.629 --> 00:06:52.189 or small post office right there in the lobby. 00:06:52.329 --> 00:06:54.910 They have to log custody of items, secure them, 00:06:55.009 --> 00:06:57.790 notify tenants, and handle the liability if something 00:06:57.790 --> 00:07:00.250 goes missing. Oh, the liability is huge. Imagine 00:07:00.250 --> 00:07:02.449 if a manager loses a tenant's critical medication 00:07:02.449 --> 00:07:05.370 or a signed multi -million dollar contract that 00:07:05.370 --> 00:07:08.129 was delivered. That is a massive, massive problem. 00:07:08.470 --> 00:07:12.360 So mailroom operations is a critical. often completely 00:07:12.360 --> 00:07:14.980 overlook subcomponent of that tenant relations 00:07:14.980 --> 00:07:18.920 pillar. It's not just being nice. It's hard logistic. 00:07:19.000 --> 00:07:20.819 Exactly. That's a great way to put it. Okay. 00:07:20.879 --> 00:07:23.480 That's fascinating. Moving on to pillar two, 00:07:23.660 --> 00:07:27.680 financial stewardship. This is where that asset 00:07:27.680 --> 00:07:30.720 management title really earns its keep. Right. 00:07:30.819 --> 00:07:33.980 So on the surface, this is rent collection, you 00:07:33.980 --> 00:07:36.480 know, enforcing payment terms, sending the scary 00:07:36.480 --> 00:07:38.500 looking letters when people are late. The part 00:07:38.500 --> 00:07:40.399 everyone thinks of. The part everyone thinks 00:07:40.399 --> 00:07:43.500 of. But deep down, it's about reporting and strategy. 00:07:43.720 --> 00:07:45.899 It's the difference between balancing a checkbook 00:07:45.899 --> 00:07:47.939 and running a profit and loss statement for a 00:07:47.939 --> 00:07:50.319 major corporation. That's it exactly. Think about 00:07:50.319 --> 00:07:52.399 who owns these big buildings. It's often not 00:07:52.399 --> 00:07:54.740 an individual. It's institutional investors, 00:07:55.060 --> 00:07:57.660 pension funds, REITs, insurance companies. Right. 00:07:57.720 --> 00:07:59.339 They have boards and shareholders to answer to. 00:07:59.480 --> 00:08:01.399 Precisely. They need sophisticated financial 00:08:01.399 --> 00:08:03.879 reporting. They need budgets projected out for 00:08:03.879 --> 00:08:06.860 years. They need variance analysis. Variance 00:08:06.860 --> 00:08:09.519 analysis. Can you break that down? Sure. That's 00:08:09.519 --> 00:08:11.800 when the manager has to explain line by line 00:08:11.800 --> 00:08:14.829 on a spreadsheet. Why did we spend 10 % more 00:08:14.829 --> 00:08:17.050 on electricity this month than we budgeted? Or 00:08:17.050 --> 00:08:20.089 why are maintenance costs up 5 % quarter over 00:08:20.089 --> 00:08:22.949 quarter? The manager has to answer those questions 00:08:22.949 --> 00:08:26.610 with cold, hard data. It's not a guess. Wow. 00:08:27.149 --> 00:08:29.490 Okay. And then there's the compliance aspect 00:08:29.490 --> 00:08:32.809 of finance, specifically security deposits. You 00:08:32.809 --> 00:08:34.950 called it the third rail of property management, 00:08:35.149 --> 00:08:38.149 and it absolutely is. Explain that. Why is it 00:08:38.149 --> 00:08:40.480 so dangerous? Because it's not the owner's money. 00:08:40.600 --> 00:08:42.779 Right. And it's not the manager's money. It is 00:08:42.779 --> 00:08:46.179 the tenant's money held in trust. There are incredibly 00:08:46.179 --> 00:08:48.899 strict state and local regulations on how that 00:08:48.899 --> 00:08:51.360 money is held. Often it must be in a separate 00:08:51.360 --> 00:08:54.419 interest -bearing escrow account. You absolutely 00:08:54.419 --> 00:08:56.779 cannot commingle it with operating funds. So 00:08:56.779 --> 00:08:58.779 if the manager is a little short on cash and 00:08:58.779 --> 00:09:00.799 uses the security deposit to pay the electric 00:09:00.799 --> 00:09:03.000 bill, thinking, oh, I'll just put it back next 00:09:03.000 --> 00:09:05.720 week when rents come in. That is theft. That 00:09:05.720 --> 00:09:08.740 is piercing the corporate veil. In many places, 00:09:08.759 --> 00:09:10.620 you can lose your license and potentially go 00:09:10.620 --> 00:09:13.399 to jail. It happens more often than you'd think 00:09:13.399 --> 00:09:16.019 in smaller, more amateur operations where cash 00:09:16.019 --> 00:09:18.600 flow gets tight. So a professional manager knows 00:09:18.600 --> 00:09:23.399 you never, ever touch the deposit. You build 00:09:23.399 --> 00:09:26.279 a firewall around it. It's sacrosanct. Okay. 00:09:26.379 --> 00:09:28.799 Which segues us perfectly into pillar three, 00:09:28.940 --> 00:09:32.210 maintenance and repairs. The physical element 00:09:32.210 --> 00:09:34.350 of the building. Right. This is the leaky faucet 00:09:34.350 --> 00:09:36.470 pillar. But again, the sources draw a really 00:09:36.470 --> 00:09:40.070 important distinction between repairs and facilities 00:09:40.070 --> 00:09:41.950 management. I have to admit, I've always used 00:09:41.950 --> 00:09:43.889 those terms interchangeably. What is the technical 00:09:43.889 --> 00:09:45.649 difference? It's all about scope and strategy. 00:09:46.370 --> 00:09:48.830 Repairs are reactive. A pipe burst, you call 00:09:48.830 --> 00:09:51.149 a plumber to fix it. A window breaks, you call 00:09:51.149 --> 00:09:53.490 a glazier to replace it. That is maintenance. 00:09:53.690 --> 00:09:56.840 Got it. Problem solution. Exactly. Facilities 00:09:56.840 --> 00:09:59.419 management, or FM, is a specialized professional 00:09:59.419 --> 00:10:02.080 discipline. It focuses on the coordination of 00:10:02.080 --> 00:10:05.639 space, infrastructure, people, and the organization 00:10:05.639 --> 00:10:08.440 itself. It's much more holistic. Give me a practical 00:10:08.440 --> 00:10:11.759 example. Okay. A repair is fixing the air conditioner 00:10:11.759 --> 00:10:14.000 because it stopped blowing cold air in one office. 00:10:14.620 --> 00:10:17.039 Facilities management is analyzing the airflow 00:10:17.039 --> 00:10:19.519 and temperature zones of the entire building 00:10:19.519 --> 00:10:22.519 to ensure employee productivity is maximized 00:10:22.519 --> 00:10:25.940 and energy waste is minimized. It's asking, does 00:10:25.940 --> 00:10:28.200 this physical environment support the core mission 00:10:28.200 --> 00:10:30.740 of the people inside it? So FM is strategic. 00:10:31.500 --> 00:10:33.960 It's about optimizing the entire machine, not 00:10:33.960 --> 00:10:37.320 just fixing one broken gear. Yes. And then as 00:10:37.320 --> 00:10:39.919 a subdiscipline within that, you have... building 00:10:39.919 --> 00:10:42.100 services engineering. This is the hard science. 00:10:42.179 --> 00:10:44.220 We're talking about indoor air quality, carbon 00:10:44.220 --> 00:10:46.720 footprints, avoiding sick building syndrome. 00:10:46.799 --> 00:10:48.399 Sick building syndrome. Is that a real thing? 00:10:48.580 --> 00:10:50.600 Oh, it's a very real term. It's where the ventilation 00:10:50.600 --> 00:10:54.000 is so poor or the building materials off gas, 00:10:54.059 --> 00:10:56.799 so many chemicals that the building itself actually 00:10:56.799 --> 00:10:59.860 makes the occupants ill. We're talking chronic 00:10:59.860 --> 00:11:03.379 headaches, respiratory issues, fatigue. Wow. 00:11:03.519 --> 00:11:06.279 A property manager is legally responsible for 00:11:06.279 --> 00:11:08.679 ensuring habitability standards. So it's not 00:11:08.679 --> 00:11:11.179 just Is it comfortable? Is it actively poisoning 00:11:11.179 --> 00:11:13.820 people? Exactly. And if they fail at building 00:11:13.820 --> 00:11:16.120 services engineering, the building is legally 00:11:16.120 --> 00:11:18.840 unrentable. It's a liability minefield of the 00:11:18.840 --> 00:11:21.120 highest order. Which brings us perfectly to pillar 00:11:21.120 --> 00:11:24.500 four, legal and regulatory compliance. The minefield 00:11:24.500 --> 00:11:26.879 gets bigger. I was reading through the list of 00:11:26.879 --> 00:11:29.539 legal areas a manager needs to know, and it's 00:11:29.539 --> 00:11:33.399 just, it's staggering. Housing laws, fair housing 00:11:33.399 --> 00:11:36.740 rules, zoning ordinances, contract law. It's 00:11:36.740 --> 00:11:38.480 overwhelming. Let's just talk about fair housing 00:11:38.480 --> 00:11:41.139 for a second. In the U .S., you cannot discriminate 00:11:41.139 --> 00:11:45.460 based on race, color, religion, sex, familial 00:11:45.460 --> 00:11:48.379 status, national origin or disability. OK, that 00:11:48.379 --> 00:11:50.159 seems straightforward enough. It seems straightforward, 00:11:50.200 --> 00:11:53.360 but this gets very nuanced very fast. For instance, 00:11:53.500 --> 00:11:55.960 if your marketing advertisement for a one bedroom 00:11:55.960 --> 00:11:57.940 apartment says perfect for young professionals, 00:11:58.299 --> 00:12:01.000 you might have just violated the law. Really? 00:12:01.389 --> 00:12:04.049 Just by saying young professionals, how? It's 00:12:04.049 --> 00:12:06.509 a practice called steering. It implies that you 00:12:06.509 --> 00:12:08.350 don't want families with children or perhaps 00:12:08.350 --> 00:12:11.850 older retirees. A manager has to be incredibly 00:12:11.850 --> 00:12:14.309 versed in these regulations to avoid getting 00:12:14.309 --> 00:12:16.850 the owner sued into oblivion for an innocent 00:12:16.850 --> 00:12:19.330 -sounding ad. That's a tiny detail that could 00:12:19.330 --> 00:12:22.070 cost millions. Absolutely. And then there is 00:12:22.070 --> 00:12:25.389 the ugly side of this pillar. Evictions. The 00:12:25.389 --> 00:12:28.299 nuclear option. It's the last resort. The source 00:12:28.299 --> 00:12:31.059 material mentions representing owners in legal 00:12:31.059 --> 00:12:33.620 proceedings. So the property manager is effectively 00:12:33.620 --> 00:12:36.919 acting as a paralegal or even a lawyer half the 00:12:36.919 --> 00:12:39.580 time. In many jurisdictions, they are the ones 00:12:39.580 --> 00:12:42.019 who execute the process. They serve the legal 00:12:42.019 --> 00:12:44.460 notices. They file the paperwork with the court. 00:12:44.959 --> 00:12:48.519 And it is an adversarial, emotional and highly, 00:12:48.679 --> 00:12:51.480 highly regulated process. You miss one deadline 00:12:51.480 --> 00:12:54.240 by a day or you fill out one form wrong and the 00:12:54.240 --> 00:12:56.159 judge can just throw the case out. And meanwhile. 00:12:56.440 --> 00:12:58.519 Meanwhile, the tenant is living there for free 00:12:58.519 --> 00:13:00.259 for another two or three months while you have 00:13:00.259 --> 00:13:02.759 to restart the entire process from scratch. That's 00:13:02.759 --> 00:13:05.039 a massive financial risk for the owner. It is. 00:13:05.159 --> 00:13:07.000 And that's one of the key reasons professional 00:13:07.000 --> 00:13:09.860 management is often worth the fee. They know 00:13:09.860 --> 00:13:12.279 the procedural law. They have the systems in 00:13:12.279 --> 00:13:14.100 place to get it done correctly the first time. 00:13:14.159 --> 00:13:16.480 Okay, that makes sense. Let's move to pillar 00:13:16.480 --> 00:13:19.159 five, marketing and leasing. Or as I like to 00:13:19.159 --> 00:13:21.860 call it, vacancy management. This seems more 00:13:21.860 --> 00:13:23.759 straightforward than the legal pillar. Yeah. 00:13:23.799 --> 00:13:26.240 Put it on Zillow, put a sign in the yard. It 00:13:26.240 --> 00:13:28.120 seems straightforward until you realize that 00:13:28.120 --> 00:13:31.759 every single day a unit sits empty, it is a wasting 00:13:31.759 --> 00:13:34.340 asset. It's like fruit rotting on a shelf. You 00:13:34.340 --> 00:13:37.460 can never, ever get that day of rent back. Good 00:13:37.460 --> 00:13:40.309 point. So the manager has to set the rental rate, 00:13:40.490 --> 00:13:43.289 and that is both an art and a science. Mostly 00:13:43.289 --> 00:13:45.330 science now, I'm guessing? Mostly science now, 00:13:45.429 --> 00:13:47.350 which we will definitely get to in the tech section. 00:13:47.610 --> 00:13:51.490 But the core concept is market pricing. If you 00:13:51.490 --> 00:13:54.350 price it just $100 too high, it could sit for 00:13:54.350 --> 00:13:57.049 two months. Right. While you've lost, say, $4 00:13:57.049 --> 00:13:59.289 ,000 in rent because you were trying to get an 00:13:59.289 --> 00:14:01.970 extra $100 a month, it would take you 40 months, 00:14:02.149 --> 00:14:04.470 almost four years, just to break even on that 00:14:04.470 --> 00:14:07.320 one mistake. The math rarely works out when you 00:14:07.320 --> 00:14:10.279 get greedy. Exactly. The manager has to understand 00:14:10.279 --> 00:14:14.340 absorption rates. How fast is the market eating 00:14:14.340 --> 00:14:18.220 up available supply? If there are 10 other similar 00:14:18.220 --> 00:14:20.279 apartments available on the block, you have to 00:14:20.279 --> 00:14:22.580 price aggressively to be the first one rented. 00:14:22.860 --> 00:14:26.320 And finally, pillar six. The glue holding it 00:14:26.320 --> 00:14:30.039 all together. Administrative duties. The paperwork. 00:14:30.460 --> 00:14:35.509 The endless, endless paperwork. Records. insurance 00:14:35.509 --> 00:14:39.110 coordination, vendor communication. Insurance 00:14:39.110 --> 00:14:41.649 is huge. That can't be understated. It's massive. 00:14:41.809 --> 00:14:45.730 Slip and falls, fires, floods. The manager is 00:14:45.730 --> 00:14:47.870 the one ensuring the policies are current, that 00:14:47.870 --> 00:14:50.669 the coverage is adequate, and that when an incident 00:14:50.669 --> 00:14:53.000 happens... It is documented correctly so that 00:14:53.000 --> 00:14:54.820 the insurance company actually pays out. Right. 00:14:55.139 --> 00:14:57.720 If you don't have a record of when the snow was 00:14:57.720 --> 00:14:59.980 shoveled and the ice was salted and someone slips 00:14:59.980 --> 00:15:02.559 on the front step and breaks their leg, the insurance 00:15:02.559 --> 00:15:05.039 company might deny the claim, leaving the owner 00:15:05.039 --> 00:15:08.460 on the hook. So, OK, we have this absolutely 00:15:08.460 --> 00:15:10.960 massive job description. I mean, it's six different 00:15:10.960 --> 00:15:14.019 careers rolled into one person or one team. The 00:15:14.019 --> 00:15:16.830 logical next question is. Why would anyone do 00:15:16.830 --> 00:15:19.470 this? Or rather, how do they get paid enough 00:15:19.470 --> 00:15:21.610 to make it worth the headache? The business models, 00:15:21.750 --> 00:15:23.429 and this is where the incentives get really, 00:15:23.490 --> 00:15:25.129 really fascinating. Yeah, I assumed it was just, 00:15:25.169 --> 00:15:28.549 I'll pay you a fee. Simple. But the sources lay 00:15:28.549 --> 00:15:30.429 out five completely different structures. Yeah. 00:15:30.509 --> 00:15:32.370 And the incentives and the psychology, they change 00:15:32.370 --> 00:15:34.730 completely with each one. They do. Let's look 00:15:34.730 --> 00:15:37.470 at Model A, the traditional model, the one most 00:15:37.470 --> 00:15:40.220 people know, percentage of rent. How does the 00:15:40.220 --> 00:15:42.019 math work on that one? This is the standard for 00:15:42.019 --> 00:15:45.080 residential, for sure. The manager takes a cut 00:15:45.080 --> 00:15:47.639 of the collected rental income. The source puts 00:15:47.639 --> 00:15:51.240 it typically between 8 % and 12%. Okay, so on 00:15:51.240 --> 00:15:54.580 a $2 ,000 apartment, the manager gets, say, $200 00:15:54.580 --> 00:15:57.679 a month. Correct. When the rent is paid. What 00:15:57.679 --> 00:15:59.759 I like about this, and what the sources point 00:15:59.759 --> 00:16:02.399 out, is the alignment of incentives. It's skin 00:16:02.399 --> 00:16:05.039 in the game. If the unit is empty, the rent is 00:16:05.039 --> 00:16:07.440 zero. The manager gets 10 % of zero. Which is 00:16:07.440 --> 00:16:10.799 zero. So they are highly, highly motivated to 00:16:10.799 --> 00:16:13.399 find a tenant. And if the tenant doesn't pay, 00:16:13.679 --> 00:16:16.460 the manager doesn't get paid, their income is 00:16:16.460 --> 00:16:19.059 directly tied to the owner's income. It's a great 00:16:19.059 --> 00:16:21.860 model for occupancy. But here's the counterargument 00:16:21.860 --> 00:16:24.779 I thought of. What about repairs? If the manager 00:16:24.779 --> 00:16:27.639 gets paid based on revenue, but managing a complex 00:16:27.639 --> 00:16:30.740 repair takes a lot of time and generates no extra 00:16:30.740 --> 00:16:33.289 revenue for them. You found the fundamental flaw. 00:16:33.529 --> 00:16:36.570 In a strict percentage model, the manager is 00:16:36.570 --> 00:16:39.509 incentivized to maximize income, but they aren't 00:16:39.509 --> 00:16:41.549 necessarily incentivized to handle the heavy 00:16:41.549 --> 00:16:44.009 lifting of complex maintenance projects. Unless 00:16:44.009 --> 00:16:46.289 they can charge for it separately. Exactly. And 00:16:46.289 --> 00:16:48.690 that's where you get the markups. Often managers 00:16:48.690 --> 00:16:52.169 will charge, say, a 10 % supervision fee on large 00:16:52.169 --> 00:16:55.190 repairs, which you have to admit creates a bit 00:16:55.190 --> 00:16:58.779 of a perverse incentive. How so? Well... They 00:16:58.779 --> 00:17:00.460 might actually want expensive repairs because 00:17:00.460 --> 00:17:02.399 they get a cut of the plumber's or the roofer's 00:17:02.399 --> 00:17:04.940 bill. It's tricky. You have to really watch the 00:17:04.940 --> 00:17:07.460 fine print in the management agreement. Now, 00:17:07.460 --> 00:17:10.039 what about high -end properties? If I have a 00:17:10.039 --> 00:17:13.619 luxury penthouse renting for $20 ,000 a month, 00:17:13.819 --> 00:17:17.799 paying a manager $2 ,000 seems steep. It's the 00:17:17.799 --> 00:17:19.680 same amount of work as a $2 ,000 unit probably. 00:17:19.980 --> 00:17:23.440 And that is exactly why Model B exists, the flat 00:17:23.440 --> 00:17:26.039 fee or fixed fee model. Just a set monthly price, 00:17:26.180 --> 00:17:30.009 no percentages. Exactly. Maybe it's $150 a month 00:17:30.009 --> 00:17:32.509 or $500 a month, regardless of the rental income. 00:17:33.009 --> 00:17:36.430 This is for the luxury market or for large scale 00:17:36.430 --> 00:17:38.930 investors who need predictable costs for their 00:17:38.930 --> 00:17:41.349 financial models. They don't want their management 00:17:41.349 --> 00:17:43.930 fee fluctuating. The source also mentioned this 00:17:43.930 --> 00:17:46.720 is popular for a different kind of owner. Vacant 00:17:46.720 --> 00:17:49.579 home management. Right. For vacation homes. Think 00:17:49.579 --> 00:17:51.880 of the ski chalet in Aspen that you don't rent 00:17:51.880 --> 00:17:55.119 out or the beach house in Florida. You still 00:17:55.119 --> 00:17:57.500 need someone to go in once a week, flush the 00:17:57.500 --> 00:17:59.819 toilets, check the roof, make sure the pipes 00:17:59.819 --> 00:18:01.759 haven't burst in a freeze. You're not paying 00:18:01.759 --> 00:18:03.759 for rental management. You're paying for peace 00:18:03.759 --> 00:18:06.160 of mind. That's all it is. It's a flat fee for 00:18:06.160 --> 00:18:08.740 peace of mind inspections. Okay. Now, Model C 00:18:08.740 --> 00:18:12.140 is listed in the sources as the trend. This is 00:18:12.140 --> 00:18:14.819 the one that's growing. The hybrid model. This 00:18:14.819 --> 00:18:17.140 is a really smart model for the management companies. 00:18:17.359 --> 00:18:20.200 It creates a floor for their revenue. It's typically 00:18:20.200 --> 00:18:23.960 a lower percentage of rent, say 6%, plus a flat 00:18:23.960 --> 00:18:26.440 administrative fee, say $50 a month. Why the 00:18:26.440 --> 00:18:29.400 shift? Why is this becoming so popular? It protects 00:18:29.400 --> 00:18:32.259 the management company from market shocks. Think 00:18:32.259 --> 00:18:34.819 about 2008 or even during the height of the COVID 00:18:34.819 --> 00:18:38.299 pandemic. Rents dropped or people stopped paying 00:18:38.299 --> 00:18:41.519 altogether. If your company is 100 % reliant 00:18:41.519 --> 00:18:44.710 on a percentage of rent, Your business might 00:18:44.710 --> 00:18:47.349 go bankrupt through no fault of your own. But 00:18:47.349 --> 00:18:49.730 the flat fee is guaranteed. The flat fee covers 00:18:49.730 --> 00:18:52.250 the lights, the software costs, and the staff 00:18:52.250 --> 00:18:55.589 salaries. It stabilizes the industry and ensures 00:18:55.589 --> 00:18:57.849 they can keep operating even when the market 00:18:57.849 --> 00:18:59.750 gets rocky. Okay, that makes a lot of sense. 00:18:59.910 --> 00:19:02.109 Now, Model D is the one that sounded the most 00:19:02.109 --> 00:19:04.890 like Wall Street to me. Guaranteed rent. Master 00:19:04.890 --> 00:19:08.710 leasing. Or, more bluntly, arbitrage. Explain 00:19:08.710 --> 00:19:10.549 the mechanics of this one. It's really interesting. 00:19:10.750 --> 00:19:12.910 The management company comes to you, the owner. 00:19:13.029 --> 00:19:14.970 They say, look, I will sign a lease with you. 00:19:15.009 --> 00:19:18.009 I will pay you $1 ,500 a month for this apartment, 00:19:18.230 --> 00:19:20.950 guaranteed, every month. Whether it's empty or 00:19:20.950 --> 00:19:23.049 full, the check will be in the mail on the first. 00:19:23.289 --> 00:19:25.930 As an owner, I love that. It's zero risk, predictable 00:19:25.930 --> 00:19:29.150 income. Zero risk, but you are absolutely paying 00:19:29.150 --> 00:19:31.690 for that security because the true market rent 00:19:31.690 --> 00:19:35.650 for that unit is probably $2 ,000. The company 00:19:35.650 --> 00:19:37.930 takes the lease from you, then turns around and 00:19:37.930 --> 00:19:40.569 sublets it for the full market price. They keep 00:19:40.569 --> 00:19:43.250 the $500 spread. That's their profit. So they 00:19:43.250 --> 00:19:45.910 are betting on their ability to beat the market, 00:19:46.049 --> 00:19:48.250 to keep it occupied at a higher rate. Correct. 00:19:48.269 --> 00:19:50.529 They are taking on all of the vacancy risk. If 00:19:50.529 --> 00:19:51.950 they can't fill it, they still have to pay you. 00:19:52.329 --> 00:19:55.509 and they lose money. This is very, very common 00:19:55.509 --> 00:19:58.230 in corporate housing and in the short term rental 00:19:58.230 --> 00:20:00.470 world, like with Airbnb management companies. 00:20:01.089 --> 00:20:04.589 Fascinating. Finally, Model E. This one is a 00:20:04.589 --> 00:20:06.869 whole different beast. The commercial specific 00:20:06.869 --> 00:20:10.190 percentage lease. Yeah, this is unique to retail. 00:20:10.349 --> 00:20:12.730 Think shopping malls, lifestyle centers. It's 00:20:12.730 --> 00:20:14.089 not just rent. It's more like a partnership, 00:20:14.210 --> 00:20:17.029 right? It is. It's a true partnership. The tenant, 00:20:17.210 --> 00:20:20.309 say a clothing store, pays a base rent. It's 00:20:20.309 --> 00:20:22.670 usually a bit lower than the market rate. But 00:20:22.670 --> 00:20:24.910 then if their gross sales go above a certain 00:20:24.910 --> 00:20:27.569 number, a figure called the breakpoint, the landlord 00:20:27.569 --> 00:20:30.009 gets a percentage of every single dollar sold 00:20:30.009 --> 00:20:32.430 after that. So the landlord is actually looking 00:20:32.430 --> 00:20:34.890 at the store's revenue. They're in their books. 00:20:35.289 --> 00:20:37.650 They audit the sales tapes. The philosophy is 00:20:37.650 --> 00:20:41.450 the landlord provides the ecosystem, the foot 00:20:41.450 --> 00:20:45.029 traffic, the clean floors, the security guards, 00:20:45.230 --> 00:20:47.990 the beautiful fountain in the middle of the mall. 00:20:48.190 --> 00:20:50.589 The experience. The whole experience. If that 00:20:50.589 --> 00:20:53.109 ecosystem helps the store sell more t -shirts, 00:20:53.309 --> 00:20:56.450 the landlord should share in that upside. It 00:20:56.450 --> 00:20:59.569 aligns incentives perfectly. If the mall becomes 00:20:59.569 --> 00:21:02.029 a ghost town, the landlord's rent drops to the 00:21:02.029 --> 00:21:05.000 low base amount. If the mall is booming, Everyone 00:21:05.000 --> 00:21:07.740 wins. It's a fascinating dynamic that doesn't 00:21:07.740 --> 00:21:09.839 really exist in residential housing. We'll come 00:21:09.839 --> 00:21:11.720 back to that idea in the outro because I think 00:21:11.720 --> 00:21:13.640 that's a really interesting thread to pull on. 00:21:14.059 --> 00:21:16.759 But for now, I want to pivot to the tools because 00:21:16.759 --> 00:21:18.920 you can't manage thousands of units with a yellow 00:21:18.920 --> 00:21:20.819 legal pad and a flip phone anymore. The prop 00:21:20.819 --> 00:21:23.640 tech revolution, property technology. The numbers 00:21:23.640 --> 00:21:25.900 are just huge. The property management software 00:21:25.900 --> 00:21:28.099 market alone was around five and a half billion 00:21:28.099 --> 00:21:31.299 in 2023 and is projected to nearly double to 00:21:31.299 --> 00:21:34.299 almost 10 billion by 2030. That's a massive amount 00:21:34.299 --> 00:21:36.160 of investment. So what are we buying with $10 00:21:36.160 --> 00:21:39.960 billion? Efficiency and data. First, you have 00:21:39.960 --> 00:21:42.960 the core systems, the PMS, property management 00:21:42.960 --> 00:21:45.819 systems. You've got these giants in the industry 00:21:45.819 --> 00:21:49.019 like Yardi, Appfolio, RealPage. These are the 00:21:49.019 --> 00:21:51.740 cloud -based operating systems. They handle the 00:21:51.740 --> 00:21:54.220 financial ledger, the leasing workflow, the maintenance 00:21:54.220 --> 00:21:56.500 tickets. It's the digital backbone. But that's 00:21:56.500 --> 00:21:59.200 just, you know, digitization of old processes. 00:21:59.220 --> 00:22:01.720 The really cool stuff is the emerging tech. AI 00:22:01.720 --> 00:22:04.569 and IoT. artificial intelligence, and the Internet 00:22:04.569 --> 00:22:07.029 of Things. Let's talk about IoT first, the sensors. 00:22:07.230 --> 00:22:09.890 This is the game changer. This is the fundamental 00:22:09.890 --> 00:22:13.210 shift from reactive to predictive maintenance. 00:22:13.529 --> 00:22:16.009 Give me a real -world scenario. Okay, old world. 00:22:16.250 --> 00:22:19.390 The water heater in apartment 4B rusts out at 00:22:19.390 --> 00:22:21.849 2 a .m. on a Sunday morning. The tenant wakes 00:22:21.849 --> 00:22:24.430 up to a flooded apartment. They make a frantic, 00:22:24.430 --> 00:22:26.970 angry emergency call to the manager. The worst 00:22:26.970 --> 00:22:29.559 call to get. The absolute worst. You have to 00:22:29.559 --> 00:22:31.680 call an emergency plumber at emergency rates, 00:22:31.759 --> 00:22:34.500 which are like $500 an hour. The tenant is furious. 00:22:34.599 --> 00:22:36.839 The floorboards are ruined. An insurance claim 00:22:36.839 --> 00:22:39.220 has to be filed. It's a nightmare for everyone. 00:22:39.380 --> 00:22:41.619 An expensive nightmare. A very expensive nightmare. 00:22:42.339 --> 00:22:46.059 Now the new world. A $50 moisture sensor and 00:22:46.059 --> 00:22:48.240 a smart vibration sensor are attached to that 00:22:48.240 --> 00:22:51.029 same water heater. The sensor detects a microscopic 00:22:51.029 --> 00:22:53.950 leak or a change in the machine's vibration frequency 00:22:53.950 --> 00:22:56.970 that indicates a part is about to fail. It sends 00:22:56.970 --> 00:22:59.069 an automatic alert to the manager's dashboard 00:22:59.069 --> 00:23:02.670 on a Tuesday at 2 p .m. Heater 4B is acting up. 00:23:02.789 --> 00:23:06.289 Performance has dropped 8%. Exactly. The manager 00:23:06.289 --> 00:23:08.710 sends a regular plumber at normal non -emergency 00:23:08.710 --> 00:23:11.230 rates. They go in, they swap out the failing 00:23:11.230 --> 00:23:13.609 part for a hundred bucks. The tenant never even 00:23:13.609 --> 00:23:15.829 knows there was a problem. No flood, no angry 00:23:15.829 --> 00:23:18.450 call, no insurance claim. That is a massive, 00:23:18.509 --> 00:23:20.670 massive value add. It completely changes the 00:23:20.670 --> 00:23:23.450 nature of the job from putting out fires to preventing 00:23:23.450 --> 00:23:25.609 fires. And then you layer on top of that AI. 00:23:25.990 --> 00:23:27.930 So this is where it gets into algorithmic pricing. 00:23:28.109 --> 00:23:30.309 Yes. This is controversial in some circles, but 00:23:30.309 --> 00:23:33.750 incredibly powerful. AI systems analyze real 00:23:33.750 --> 00:23:36.569 time. market demand. The system knows that three 00:23:36.569 --> 00:23:38.390 different people looked at this specific unit 00:23:38.390 --> 00:23:40.890 online in the last hour and that a competitor 00:23:40.890 --> 00:23:42.690 building down the street just raised their price 00:23:42.690 --> 00:23:45.769 by $50. It adjusts your rent instantly to maximize 00:23:45.769 --> 00:23:48.690 revenue. It's dynamic pricing, just like for 00:23:48.690 --> 00:23:52.309 airlines or hotels. Exactly. It removes the gut 00:23:52.309 --> 00:23:55.930 feeling of the manager and replaces it with cold, 00:23:56.109 --> 00:24:00.490 hard, real -time data. It can mean tens of thousands 00:24:00.490 --> 00:24:02.690 of dollars in extra revenue for a building owner 00:24:02.690 --> 00:24:05.470 over a year. Okay, so we have incredibly high 00:24:05.470 --> 00:24:08.349 stakes. We have these complex, multidisciplinary 00:24:08.349 --> 00:24:10.890 duties, huge amounts of money flowing through 00:24:10.890 --> 00:24:13.809 the system, and advanced technology. You would 00:24:13.809 --> 00:24:16.710 assume that to do this job, you would need, I 00:24:16.710 --> 00:24:19.269 don't know, a PhD, or at the very least, a very 00:24:19.269 --> 00:24:21.849 specific, hard -to -get government license. You 00:24:21.849 --> 00:24:23.750 would absolutely assume that. It seems logical. 00:24:24.089 --> 00:24:26.609 But then we enter Section 4 of our sources, the 00:24:26.609 --> 00:24:29.309 Wild West of regulation. This was, without a 00:24:29.309 --> 00:24:30.829 doubt, the most shocking part of the research 00:24:30.829 --> 00:24:33.440 for me. The rules are completely and totally 00:24:33.440 --> 00:24:36.130 incoherent. Globally. It's a patchwork quilt 00:24:36.130 --> 00:24:37.869 with huge holes in it. Let's start with the U 00:24:37.869 --> 00:24:39.970 .S. From the outside, it seems fairly locked 00:24:39.970 --> 00:24:42.309 down. Generally, yes. In most of the major states, 00:24:42.430 --> 00:24:44.890 New York, California, Florida, Colorado, property 00:24:44.890 --> 00:24:47.190 management is considered a real estate activity. 00:24:47.470 --> 00:24:49.609 Which means what, exactly? Yeah. It means to 00:24:49.609 --> 00:24:52.470 legally collect rent or negotiate leases for 00:24:52.470 --> 00:24:55.809 other people, you must hold a state -issued real 00:24:55.809 --> 00:24:58.990 estate broker's license. The very same license 00:24:58.990 --> 00:25:01.309 as the person who sells multi -million dollar 00:25:01.309 --> 00:25:04.059 houses. Which is not easy to get. It means you 00:25:04.059 --> 00:25:06.640 have to take dozens of hours of classes, pass 00:25:06.640 --> 00:25:09.420 a difficult state exam, and usually work under 00:25:09.420 --> 00:25:12.559 an established broker for a few years as an apprentice. 00:25:12.799 --> 00:25:15.900 Yes. It's a significant barrier to entry designed 00:25:15.900 --> 00:25:18.519 to ensure a baseline of competency and consumer 00:25:18.519 --> 00:25:20.700 protection. But then you look at states like 00:25:20.700 --> 00:25:23.240 Idaho, Maine, or Vermont. What happens there? 00:25:23.380 --> 00:25:26.119 According to the source, there's no license required. 00:25:26.569 --> 00:25:28.670 Nothing. You can wake up tomorrow morning, put 00:25:28.670 --> 00:25:30.589 in a business card that says property manager 00:25:30.589 --> 00:25:33.109 and start collecting rent checks and holding 00:25:33.109 --> 00:25:35.210 security deposits for your neighbors. That is 00:25:35.210 --> 00:25:37.789 genuinely terrifying. It creates a huge, huge 00:25:37.789 --> 00:25:40.950 variation in quality and professionalism. And 00:25:40.950 --> 00:25:42.329 then you have states that are in the middle, 00:25:42.410 --> 00:25:44.930 like Montana or Oregon, that have a specific 00:25:44.930 --> 00:25:47.789 separate property management license that's not 00:25:47.789 --> 00:25:50.250 a full broker's license, but is still a regulated 00:25:50.250 --> 00:25:53.009 credential. And the sources pointed out a very 00:25:53.009 --> 00:25:56.259 specific nuance in California law. The one about 00:25:56.259 --> 00:25:59.220 the resident manager. Yes, the number 16. It's 00:25:59.220 --> 00:26:01.819 famous in the industry. Explain it. If an apartment 00:26:01.819 --> 00:26:05.160 building has 16 or more units, California law 00:26:05.160 --> 00:26:08.880 requires a responsible person, a manager, a janitor, 00:26:08.900 --> 00:26:12.059 someone to live on site. So as the owner, you 00:26:12.059 --> 00:26:14.799 have to give up a revenue generating unit to 00:26:14.799 --> 00:26:17.589 house a manager. Effectively, yes. Or at least 00:26:17.589 --> 00:26:19.710 have them live there, often at reduced or no 00:26:19.710 --> 00:26:22.509 rent. It completely changes the economics of 00:26:22.509 --> 00:26:24.930 a 15 unit building versus a 16 unit building. 00:26:25.029 --> 00:26:26.890 And you literally see developers building 15 00:26:26.890 --> 00:26:29.250 unit complexes just to avoid triggering this 00:26:29.250 --> 00:26:31.930 specific rule. Wow. Now let's cross the Atlantic, 00:26:32.109 --> 00:26:34.690 the United Kingdom. The contrast is absolutely 00:26:34.690 --> 00:26:37.730 stark. In the UK, a global financial hub, there 00:26:37.730 --> 00:26:40.210 is no statutory regulation for property management 00:26:40.210 --> 00:26:43.589 companies. London, one of the most complex and 00:26:43.589 --> 00:26:46.299 expensive real estate markets on Earth. Unregulated. 00:26:46.440 --> 00:26:48.880 Now, there is a safety net. If you handle what 00:26:48.880 --> 00:26:51.579 are called assured short -hold tenancies, you 00:26:51.579 --> 00:26:53.839 must join a government -approved tenancy deposit 00:26:53.839 --> 00:26:56.579 scheme to protect the tenant's cash so the deposit 00:26:56.579 --> 00:26:59.579 is safe. But the act of management itself? The 00:26:59.579 --> 00:27:02.559 act of management hiring contractors, inspecting 00:27:02.559 --> 00:27:04.880 units, charging fees, setting service charges 00:27:04.880 --> 00:27:08.640 requires no government license at all. Why? What's 00:27:08.640 --> 00:27:11.019 the history behind that? It's largely historical. 00:27:11.339 --> 00:27:13.660 The concept of estate management was something 00:27:13.660 --> 00:27:16.079 the landed gentry just did. It was part of owning 00:27:16.079 --> 00:27:18.660 land. It wasn't seen as a separate commercial 00:27:18.660 --> 00:27:21.339 trade requiring state oversight in the same way 00:27:21.339 --> 00:27:24.299 as, say, being a lawyer or a doctor. But it leads 00:27:24.299 --> 00:27:27.319 to massive, massive inconsistency in service 00:27:27.319 --> 00:27:30.279 quality. And what about down under? Australia 00:27:30.279 --> 00:27:32.839 and New Zealand? It's a mixed bag, which is also 00:27:32.839 --> 00:27:35.519 strange. Australia is very strict. It's regulated 00:27:35.519 --> 00:27:38.720 as a real estate activity in every state. But 00:27:38.720 --> 00:27:41.140 New Zealand has this bizarre split system. What's 00:27:41.140 --> 00:27:43.220 the split? If you're a commercial leasing agent 00:27:43.220 --> 00:27:45.480 managing a shopping mall or an office tower, 00:27:45.700 --> 00:27:47.720 you need a license and you need to have your 00:27:47.720 --> 00:27:50.000 trust accounts audited every year. Okay, sounds 00:27:50.000 --> 00:27:52.839 reasonable. But if you manage residential property, 00:27:53.140 --> 00:27:56.420 it is currently an unlicensed and unregulated 00:27:56.420 --> 00:27:59.839 industry. That makes absolutely no sense. Managing 00:27:59.839 --> 00:28:02.420 a shopping mall requires a license, but managing 00:28:02.420 --> 00:28:04.880 the home where a family sleeps doesn't. In New 00:28:04.880 --> 00:28:07.759 Zealand, currently, that is the case. And it's 00:28:07.759 --> 00:28:09.799 a major point of political debate there, as you 00:28:09.799 --> 00:28:11.579 can imagine. There are constant calls for reform. 00:28:11.799 --> 00:28:13.640 We see this packed work everywhere else, too. 00:28:13.700 --> 00:28:16.779 All over. Germany only introduced mandatory licensing 00:28:16.779 --> 00:28:19.720 very recently in 2018. Ireland has had it since 00:28:19.720 --> 00:28:22.680 2012. Kenya has the estate agents registration 00:28:22.680 --> 00:28:25.720 board. It's different everywhere you look. So 00:28:25.720 --> 00:28:29.559 the key takeaway here for the listener. You absolutely 00:28:29.559 --> 00:28:32.440 have to check your local laws. Do not assume 00:28:32.440 --> 00:28:35.039 the person managing your biggest assets has been 00:28:35.039 --> 00:28:37.920 vetted by any government body. Absolutely. In 00:28:37.920 --> 00:28:40.519 some places, they are highly qualified, licensed 00:28:40.519 --> 00:28:43.359 professionals. In others, they are just some 00:28:43.359 --> 00:28:46.180 guy. So in the absence of consistent government 00:28:46.180 --> 00:28:50.019 regulation, how do we as consumers or owners 00:28:50.019 --> 00:28:53.460 know who is good? Who can we trust? And that 00:28:53.460 --> 00:28:55.769 takes us to Section 5. Professional standards. 00:28:56.029 --> 00:28:58.150 The industry, seeing this regulatory vacuum, 00:28:58.430 --> 00:29:00.950 decided to self -police. The alphabet soup of 00:29:00.950 --> 00:29:03.990 accreditations. The associations, exactly. Since 00:29:03.990 --> 00:29:05.670 the government won't vouch for people in many 00:29:05.670 --> 00:29:08.009 places, these non -profit trade associations 00:29:08.009 --> 00:29:11.089 do. You have IRM, the Institute of Real Estate 00:29:11.089 --> 00:29:13.309 Management. It's a big one. And they offer the 00:29:13.309 --> 00:29:16.450 CPM designation. They offered the CPM the certified 00:29:16.450 --> 00:29:18.809 property manager. And this is really the gold 00:29:18.809 --> 00:29:20.549 standard, especially in commercial real estate. 00:29:21.069 --> 00:29:24.589 To get a CPM, you need years of experience. You 00:29:24.589 --> 00:29:27.869 have to pass a series of rigorous exams on finance, 00:29:27.930 --> 00:29:30.990 ethics, maintenance, law. And you have to submit 00:29:30.990 --> 00:29:33.650 a portfolio of your work for review. So it's 00:29:33.650 --> 00:29:35.369 not something you get over a weekend. Not at 00:29:35.369 --> 00:29:37.490 all. It's like getting a master's degree in the 00:29:37.490 --> 00:29:40.369 field. If you see CPM after a manager's name, 00:29:40.509 --> 00:29:43.309 they know their stuff. Okay, what about specifically 00:29:43.309 --> 00:29:46.500 for residential? You have NRRPM, that's the National 00:29:46.500 --> 00:29:48.380 Association of Residential Property Managers. 00:29:48.559 --> 00:29:51.420 They have two key designations, the RMP, which 00:29:51.420 --> 00:29:53.539 is the Residential Management Professional, and 00:29:53.539 --> 00:29:56.039 then the higher level MPM, the Master Property 00:29:56.039 --> 00:29:58.799 Manager. And for commercial buildings and facilities. 00:29:59.059 --> 00:30:01.460 That's where BOMA comes in, the Building Owners 00:30:01.460 --> 00:30:03.640 and Managers Association. They offer designations 00:30:03.640 --> 00:30:06.740 like the RPA or Real Property Administrator, 00:30:06.839 --> 00:30:09.240 which is very focused on the operational side 00:30:09.240 --> 00:30:12.000 of things. Why should a normal person, a renter, 00:30:12.079 --> 00:30:15.460 or a small -time landlord care about these acronyms. 00:30:15.539 --> 00:30:18.339 Because it signals intent and professionalism. 00:30:18.599 --> 00:30:21.440 If you are hiring a manager in an unregulated 00:30:21.440 --> 00:30:24.539 market like the UK or New Zealand, or even in 00:30:24.539 --> 00:30:26.960 a licensed but inconsistent state like Idaho, 00:30:27.220 --> 00:30:29.880 you should look for these accreditations. It 00:30:29.880 --> 00:30:31.700 shows that they have voluntarily held themselves 00:30:31.700 --> 00:30:34.140 to a higher ethical and educational standard. 00:30:34.400 --> 00:30:36.900 It's a trust signal. It's the difference between 00:30:36.900 --> 00:30:39.740 hiring a doctor and hiring a guy with a first 00:30:39.740 --> 00:30:42.859 aid kit. One has proven their competency to a 00:30:42.859 --> 00:30:45.440 board of their peers. That is the perfect analogy. 00:30:45.819 --> 00:30:48.059 So we have covered a massive amount of ground 00:30:48.059 --> 00:30:50.259 here today. We've gone from the high -level philosophy 00:30:50.259 --> 00:30:52.920 of lifecycle management and asset stewardship. 00:30:53.160 --> 00:30:55.180 We did. We dissected the six pillars managing 00:30:55.180 --> 00:30:58.400 people, money, buildings, laws, vacancies, and 00:30:58.400 --> 00:31:00.279 all the paperwork. We look at the psychology 00:31:00.279 --> 00:31:02.880 of the business models, how percentage fees versus 00:31:02.880 --> 00:31:05.519 flat fees change behavior. Then the proctech 00:31:05.519 --> 00:31:08.259 revelation, which is changing everything. And 00:31:08.259 --> 00:31:11.039 finally, this chaotic, almost nonsensical map 00:31:11.039 --> 00:31:14.059 of global laws and regulations. It really highlights 00:31:14.059 --> 00:31:17.140 that this isn't a passive job. It's active, high 00:31:17.140 --> 00:31:20.220 stakes, professional management. So whether you 00:31:20.220 --> 00:31:23.000 are a tenant trying to get your sink fixed, an 00:31:23.000 --> 00:31:25.700 aspiring landlord buying your first duplex, or 00:31:25.700 --> 00:31:27.920 an investor looking at a REIT, understanding 00:31:27.920 --> 00:31:30.660 this operating system is absolutely crucial. 00:31:31.220 --> 00:31:34.960 If the OS crashes, the building fails. And your 00:31:34.960 --> 00:31:37.019 quality of life or your investment portfolio 00:31:37.019 --> 00:31:40.359 goes right down with it. Before we wrap up, I 00:31:40.359 --> 00:31:41.940 want to leave the listeners with a final thought, 00:31:42.019 --> 00:31:44.440 something we touched on earlier. The retail percentage 00:31:44.440 --> 00:31:46.940 lease. The partnership model from the shopping 00:31:46.940 --> 00:31:49.980 malls. Right. In malls, the landlord makes more 00:31:49.980 --> 00:31:52.960 money when the tenant's business succeeds. In 00:31:52.960 --> 00:31:54.759 residential, the landlord makes the same amount 00:31:54.759 --> 00:31:57.240 of money whether the tenant is happy, thriving, 00:31:57.299 --> 00:31:59.960 or miserable as long as they pay the rent on 00:31:59.960 --> 00:32:02.420 the first. It's a purely transactional relationship 00:32:02.420 --> 00:32:04.599 in residential housing. There's no shared upside. 00:32:04.960 --> 00:32:07.619 So here's the provocative question. What would 00:32:07.619 --> 00:32:10.299 happen if we applied that retail philosophy to 00:32:10.299 --> 00:32:14.160 housing? What if a landlord's profit was somehow 00:32:14.160 --> 00:32:16.779 tied to the tenant's personal success or satisfaction? 00:32:17.440 --> 00:32:20.380 How would that even work? You mean like if the 00:32:20.380 --> 00:32:22.579 tenant's credit score goes up, the landlord gets 00:32:22.579 --> 00:32:25.180 a bonus, or if the tenant stays for five years, 00:32:25.400 --> 00:32:28.099 their rent automatically decreases as a loyalty 00:32:28.099 --> 00:32:30.700 reward? Or what if the landlord, who is often 00:32:30.700 --> 00:32:33.539 a well -connected business person, actively helped 00:32:33.539 --> 00:32:36.299 network the tenant to get a better job, and they 00:32:36.299 --> 00:32:38.500 shared in a tiny fraction of the salary bump 00:32:38.500 --> 00:32:41.859 for the first year? It sounds crazy, I know. 00:32:41.980 --> 00:32:44.359 It sounds completely radical, but it would fundamentally 00:32:44.359 --> 00:32:48.720 shift the dynamic from adversaries who are always 00:32:48.720 --> 00:32:51.559 negotiating against each other to partners who 00:32:51.559 --> 00:32:53.480 are aligned on the same goal. It would change 00:32:53.480 --> 00:32:56.000 that tenant relations pillar from human shield 00:32:56.000 --> 00:32:59.279 to success coach. That is a fascinating future 00:32:59.279 --> 00:33:02.160 to imagine, a completely different world. Something 00:33:02.160 --> 00:33:04.299 to mull over as you walk through the built world 00:33:04.299 --> 00:33:06.579 today. Look at the buildings and think about 00:33:06.579 --> 00:33:10.359 that invisible engine running inside them. That's 00:33:10.359 --> 00:33:12.160 it for this deep dive into property management. 00:33:12.279 --> 00:33:12.980 We'll see you next time.