Bonus Operations is a series hosted by apartment owner/operator and Best Ever Show host, Slocomb Reed. In each five- to ten-minute episode, Slocomb provides his top takes for executing your business plan and maintaining cash flow.
In this episode, Slocomb breaks down how he approaches each stage of his six-point leasing process, from listing tips to batching showings, and how he distributes responsibilities across his team.
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed, and this is a bonus operations episode. It's been a while since we ran one of these, but I want to walk you all through my leasing process, the one that I use for my own properties, my property management company here in Cincinnati, Ohio.
I have a couple of things that we're going to go over here... I have a six-point process to get from a rent-ready vacancy to a signed lease and a tenant moving in, and a couple of notes that I'll give you along the way.
A little bit of background on me - I have built a rental portfolio starting with my own house-hack, which we've closed in February of 2014, up into now managing north of 150 doors. I am also a residential real estate agent, and I am a general contractor for a lot of the renovations that happened within my management portfolio. Very busy, I wear a lot of hats, and the leasing process can be very time-consuming.
So from the onset, as soon as I was in a position to hire other people to help me in real estate, the leasing process was one of the first places that I wanted that help, particularly because you can hire a virtual assistant to do almost anything that can be done remotely, that doesn't require any specialized knowledge... And the vast majority of the leasing process actually can be done remotely; the vast majority of the work, at least, and I'm going to talk you through that as we go through this six-step process.
Let me say first, I was looking for efficiency. I wanted to be able to get a high-caliber, high-quality result from the process, requiring as little of my own time after I had hired and trained other people to work in this process with me. And you'll see that as we go through the six steps.
The first one is listing the vacancy. Just a couple of quick notes here... I always use professional photography, I always write my own marketing remarks, and my experience has been that the vast majority, north of 95% of our qualified prospects are coming from Zillow and Apartments.com. I now have a member of my team whose responsibility it is to respond to every enquiry as soon as it comes in. Depending on the listing, depending on how many listings we have at the time, everyone immediately gets a text message. The moment we get an "I'm interested in this property" type generic click from Zillow or Apartments.com, or from whatever website or platform, we're at least sending them a text message. If we don't have a lot of volume, we will follow up with a phone call, leave a voicemail, maybe send an email, if they've left us an email. But as soon as we get them on the phone, the first thing that we do, step number two is prequalify them. My assistant has a set of pre-qualification questions that she asks, to make sure that we are only taking the time and resources to meet a prospect and show them an apartment if they're qualified.
There will be another bonus operations episode specific to rental qualifications that are working for me here in Cincinnati, and I will say that you need to make sure that you're following the state, local and federal guidelines for the apartment showing process and the leasing process wherever you are.
We prequalify our prospects, make sure that they are at least saying yes and no to the right questions before we schedule a showing. Then my assistant has access to my calendar, or the calendar of the person she is scheduling for the showing, so that she can get it booked. We try to batch our showings for one or maybe two-bedroom apartments. We just need 30 minutes at a time, because the vast majority of our showings take fewer than 30 minutes, and that gives us a little bit of leeway time in between showings.
At the showing, my team has a one-page info sheet that we give the prospect that answers all of the frequently asked questions; we take some of our notes on that document as well - this is number three, by the way - showing the unit or the apartment. We give them the showing info sheet at the end, we take a picture of it for our own notes, but it answers all of the questions that they were likely going to follow up with afterwards, or that they were wanting to ask during the showing, including how you apply.
Taking a step back from the six steps here, I want to talk about something that my team now does, because we're at the point that we will always and forever have at least a handful of active listings for lease. I'm not the only person showing apartments in my company anymore, and I do have someone full-time, on the phones, responding to inquiries, as well as communicating with our tenants.
We have a weekly review meeting for each of our listings, at which we discussed the volume of inquiries coming in, how the market is responding... Whether those inquiries that we do connect with are below average qualified, about average qualified, or above average qualified, based on the rental qualifications for the space, and then how many of those we are able to get shown. We also collect the feedback that we have asked for at each showing, from our showing assistants or from me, so that we can figure out exactly how the market is reacting to each place that we have listed. Is there something actionable that we can change about the space? Is there no overhead lighting, so evening showings make the space feel small, and we need to get a lamp in every bedroom? Are there unactionable things we cannot change about a unit, such as the location, that are detractors for the majority of our prospective tenants who get showings? If there are, that gives us a good idea of where we need to be price-wise. If we're priced right and we just don't have the correct prospect or the correct applicant yet, or if we need to reduce that price.
We do tend to test the market at first especially, see if we can get a higher rent than we have historically, especially because we have this weekly meeting where we review all of our numbers, and we have an opportunity to pivot on a weekly basis; change our listing price, change other things about the listing, act on the feedback that we're getting, both from an individual prospect and from the market at large.
Next, after we have someone who has answered our pre screening questions and seen the apartment and they apply, one of my assistants sends the application via email through our property management platform. We currently use AppFolio, and plan to use AppFolio for the foreseeable future. My assistant collects all the information. Yes, we do call the references, we call them for a couple of reasons. One, we do want to know what they have to say about our prospect, but two, we also know, especially with the personal reference, that they are going to call our prospect and tell the prospect that we reached out to them, which is a demonstration to the applicant that we do what we say we are going to do, and that is definitely something we want to establish up front, with each of our applicants - that when we say we're going to do something, it will get done.
Break: [00:08:31.19]
Slocomb Reed: Before we move forward, we also don't chase any prospective tenants. When you inquire on our listing, we will reach out to you once. Now, when I say reach out, I mean send you a text, call you, leave you a voicemail, possibly email you. If we have a lower volume of inquiries, we'll do it twice. Once the day the inquiry comes in, and again the following day, just in case. But then we're done. We're not going to establish a relationship with a prospective tenant that we will chase them when we want something, because then we'll have to chase them throughout the tenant/landlord relationship; we'll have to chase them for rent, we'll have to chase them to get everything that we need, and that's not a relationship that we're looking to establish upfront.
Still on step four here with the application - as soon as my assistant completes the application, compiles all of the data, calls all of the references, she emails me a summary of the application. We have everything on record, but at first, at least, all I want to see is the summary. She emails me that summary, and it is specific to the points of qualification that we are tracking: the income, credit qualifications, does this person have any collections, did anything come up in their criminal eviction histories, do they own firearms, do they have pets, depending on the property, of course, with those... And then I email a response to the Application Summary and I either approve, decline, or ask for a follow-up specific to the summary and the qualifications of the applicant placed in the summary. This is really for Federal Fair Housing reasons as much as anything else, to create a paper trail with those emails of exactly why an applicant is qualified, and being able to trace that back to one of our specific rental qualifications that do not fall under any sort of Federal Fair Housing guidelines about any protected class of person or people.
Once we have someone approved, my assistant follows up with them to let them know. We send them the lease via Dotloop; you can use any electronic signature platform, at least in the states of Ohio and Kentucky where we manage. My assistant fills out my lease template, I review it to make sure all the information is correct, and then when she sees it signed by me and returned from me, that's when she sends it to the prospective tenant. They sign, we get them moved into our property management software, they put down the deposit, they pay the first month's rent, and then we schedule the move-in. At the move-in we have a welcome checklist.
Before I get ahead of myself, the lease and getting the lease signed is step five. Step six is the move-in, welcoming a new tenant into their new home. We show up with the keys of course to hand over to them and say "Welcome home." And we also have a welcome checklist. It talks about the things they need to do during their first week of tenancy if they haven't already, like get the pertinent utilities put into their name, send us their proof of renter's insurance... And then there are a couple of things in particular that we put in that welcome checklist that they will sign before we leave. We'll leave the physical copy with them, but we'll keep a digital copy. These things help us establish up front what the end of their tenancy needs to look like. The first is a notice. In both Ohio and Kentucky, if you're not in one of these states - of course, seek your own legal counsel; I'm not a real estate attorney... But also, check the laws in your own states. In Ohio and Kentucky, a 30-days notice is not actually 30 days most of the time. The 30 days notice is one rental billing cycle. Long story short, if your rent is due on the first of the month, then the calendar month is the rental billing cycle.
So if a tenant has a month to month lease, and the landlord or the tenant wants to terminate it, say on February 21, and gives notice on February 21 that the lease will be terminated, the earliest day it can be terminated is not march 21. It's March 31. You must have one full calendar month or one full rental billing cycle in that notice. I will stand with a tenant in their new apartment, explaining this until they understand, because I want them to know exactly how that's going to work if they are the ones telling us that they are terminating their lease. We have a signed document demonstrating that we have the conversation, and that they understood, and I also genuinely want to make sure that they understand exactly how that move-out is going to work out.
You'd be surprised, after a year, two, three, five years how many people forget that that's the way that works, and we have to bring up this welcome checklist to them and show them that they signed it and remind them of the conversation that we had.
The other is the conversation that we have about the condition that the apartment needs to be left in when they leave, namely the same condition that it is in upon move-in. Normal wear and tear accepted, of course. What normal wear and tear looks like is a little subjective and not the topic of this episode, which is already running kind of long... But I want to make sure that we establish upfront what the expectations will be when the tenant moves out, which of course, they eventually will. We hope that they stay with us for a long time and are happy the entire time that they're with us, but we do know that they are going to move out.
And then depending on the property that we're moving the tenant into, we either walk them through some key maintenance features of the apartment in the building, or we walk them through all of the move-in inspection items that we covered when preparing the apartment for them to move in.
And there you have it. Let me summarize the six points and some of the key things that I just discussed. The first point is the listing of the lease; always use professional photography. We prequalify all prospective tenants; we do not ask them to apply or pay an application fee before they get a showing, because we've learned in the Cincinnati area that's too much of a detractor for some quality prospective tenants. Number three, we show the apartment with an info sheet that we leave with them answering all of the frequently asked questions. Number four, the application, which can be processed remotely, and then the approval decision being made specifically on qualification criteria, that pass federal housing muster.
Number five, the lease can be signed electronically, reviewed by me, but filled out by an assistant and sent to the tenant by an assistant. They can be moved in remotely, pay their security deposit and first month's rent remotely. And number six, welcome new tenant to your new home. Here are some guidelines and expectations for your time living in our space.
Built this system for efficiency. The weekly review meeting, now that I'm not the one doing everything, showing everything, is pivotal to making sure that we as a company stay on top of what's happening with every single listing that we have. Occasionally, I ping a member of my team to get feedback faster than once per week, but that once weekly meeting lets us know exactly which direction the ship is headed in and gives us the opportunity to steer if necessary.
Best ever listeners, if you have gained value from this bonus operations show, please do subscribe to our show. Leave us a five-star review and share this episode with a friend who you know is either actively involved in apartment operations, or is curious to know whether or not the operators, the managers in their investments are operating similar to the way I am. Thank you, and have a best ever day.
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