A Podcast | Derek Morton

Pete Neubig: Welcome back everybody. I have Derek Morton here with me from Netgain Property Management, broker and owner of Netgain. Derek, thanks so much for being here.

Derek Morton: Hey, thanks for having me. I'm excited to be here.

Pete Neubig: All right. So just give us, you know, put your whatever. How many last 20 years in like five minutes. Like, give us the. How did you start the property management firm. How many doors do you have? You know what kind of units. All that good stuff.

Derek Morton: So it's you know, everyone has their cool origin story. I don't know if mine's very, very cool. We just kind of stumbled across it. I was in the title industry. That's what I was raised. My mom had been in it, and I'd started from a runner and became a licensed title officer and escrow officer and then went to marketing. And I just kind of felt like I had plateaued there with that company as great as it was. And I was just like, let's look at something else. So I had a real estate agent buddy of mine that for years tried to convince me to do a real estate brokerage. And I'm like, I hate transaction real estate. Why would I do that? and after about a year discussion, we kind of settled on what if we did property management. We were looking at the property management companies in the area that I'm in, in southern Utah. And we're just like, you know, I think we can do a few things a little bit better. So we kind of put things in motion. And a year later we were able to start Netgain. And, we've grown to 650 units. What was that?

Pete Neubig: What year was that when you started Netgain?

Derek Morton: 2016. So we're nine years in July 1st. So coming up on nine years, which is crazy. And,  we've grown to 650 units, and as of January 1st, we're now statewide. So, we joke around, there's a lot of the companies from northern Utah that are trying to, like, come down to southern Utah. And I'm like, I did the opposite. I started in southern Utah, and now I'm like, I'm making the leap up there to give them a good fight. And it's been a lot of fun. It's been a crazy adventure as it always is with property management. And,  I tell everyone I, you know, when I hire them, I said, I can't promise you that you're going to like it. I can't promise you you're going to like me. Can't promise you like, the only thing I can promise you is you're going to have better stories than all your friends. And without fail, about a weekend. They're all like, you undersold that aspect for me. Like, these stories are insane.

Pete Neubig: So you're doing title work and you knew you didn't want to do transactional real estate, which is kind of interesting. And so you did some homework and literally chose property management?

Derek Morton: Yeah, I, this is this is where I get in trouble. All my real estate friends hate me when I say this. I said I struggle dealing with real estate agents. Like, especially on the title side. And so everyone's, like, you would much rather deal with tenants than real estate agents. And I'm like, yeah, like hands down. Like I'm like, it's easier to deal with, like, it's crazy as it is. Like some of the stories and stuff that they have and things you have to deal with them. Like it's so much easier to deal with tenants than real estate agents.

Pete Neubig: What's the unit breakdown? Is it mainly single family? Is a multifamily, a combination of the two?

Derek Morton: I've got a mix, so I'm, like, 25%. Actually. Sorry. It's 30% single family. 30%, multifamily and then 25% student housing, then the other 15% is just kind of little mix of everything else, summer rentals and all of that. So we run the gambit. I just don't do HOAs and commercial and and vacation rentals.

Pete Neubig: Yeah, you do run the gamut. All right. So talk to me about, you were in southern Utah. You were happy in southern Utah, and then, you were kind of forced to go to northern Utah. So tell me about, like, what kind of prompted you and then what was the game plan like? What was the plan on growing into different markets?

Derek Morton: So yeah, they basically like I was telling you, they told me, hey, you know, it's no longer,  if you're going to go up to northern Utah, it's you have to.

Pete Neubig: These are clients?

Derek Morton: And,  yeah, these are clients. And so I'm like, okay. And so like, it was April last. Well, March of last year that that they had that conversation and I told him, okay, give me some time. And we were looking to expand into Washington County, which is 45 minutes south. And my original plan is like, hey, we're going to go to Washington County first. It'll be easier for us. And then later this year we'll make the leap to northern Utah. And that was kind of the plan. And as the year went on, like I just kind of had to figure out processes. And as we were talking, I part of that I hired a coach Jason Hull with DoorGrow. Huge props to them. And just sat down with my staff and figured out logistics. And it took a lot of time for me up north, being with vendors and walking the properties I was going to be taking on and figuring out and, you know, one of the best things that happened is I texted my brother because he was a tile setter, mini handyman or something up there, like, how am I going to do this? He kind of looked at me. He's like, well, if you pay my rent in this building, like I can help you with whatever. And I'm like, that's cheaper than higher than someone. So my brother helps me up there. And that's right now is we're for with the 30 units we've got between Utah and Salt Lake counties. I pay his rent and a building in downtown Salt Lake, and he does all our move in and move out inspections. And so that was one of the missing pieces. And then we've just spent time just fine vendors and developing relationships with people. And, we've been up there now, you know, five full months trying to go through some of the hurdles and learning and ready to kind of make another big jump up there. But, I mean, it was my wheelhouse is more like, how do we, you know, I can make it grow and develop relationships and marketing and make us look good. But the logistics behind it, that's all the girls in my office. And I was way out of my wheelhouse, and we just kind of put it all together and I've learned as we've gone, we had a few mistakes that we learned early on and and corrected them, but it's been going pretty smooth. So.

Pete Neubig: So all of the back office work is still done in southern Utah. You just have your brother doing the, the inspections, so to speak. What about the showings? Do you have self showing or using agents?

Derek Morton: My brother can help out, after hours. But we use ShowMojo, and so we just use the self showings. We invest in just tons of technology. That's the only way we can make it happen. I mean, I have three full time employees, and we're running 650 units. And then I have a virtual assistant, that helps out with with some of the just remedial tasks. But, I mean, that's a pretty slim staff for the units that are running in the territory we cover. And it's the technology we invest in.

Pete Neubig: I'm just like three full time staff, one virtual team member for 600 plus units?

Derek Morton: Uh-Huh.

Pete Neubig: That's insanity man. That insanity.

Derek Morton: It is. I, I didn't realize, like, I'm just like, oh, yeah, we're doing this and I'm gonna make another hire here probably in the next couple of months. And we're just trying to figure out where we make that and what we have them do. But, I mean, the technology look, the way it's going with the rise of AI. and just some of the things that that that's simplifying for us. I mean, we use I mean, we could go through the tech stack if you wanted, but like, I, you know, but it's. Yeah, it's incredible like that.

Pete Neubig: I kind of do that. Yeah. Let's, let's talk a little bit about that. So, do you have field techs or kind of like, you know, like, like kind of like your brother. Do you have anybody in southern Utah on staff or do you, do you 1099 that out or do you use a third party?

Derek Morton: So we yeah. So the girls, the girls in my office, you know, we have Julia that'll do all the showings for us. And then I chip in and help with showings and move out inspections as needed and all that. But like when you look at our text, I use AppFolio, as our main hub.

Pete Neubig: Okay.

Derek Morton: And you look at the stuff they're doing with real Macs and the AI. and I don't use it to its full capacity. We're slowly but surely getting there. And it's amazing. and what that allows to do. And that's the main hub. And then when they, you know, at folio has had a reputation of not necessarily being able to play nice with others. and it's deserved. But then when they came out with the stack like that opened up all these other things, because the issue with a lot of technology is making sure everything communicates correctly. And, you know, and so that you're not having 10,000 screens and my information's here for this, and then I got to go here for this, and then I got to go here for this. So the first thing that we added once AppFolio had the stack was, Property Meld.

Pete Neubig: Okay.

Derek Morton: And so with Property Meld, like the data that we're able to get from that was game changing. I was trying to use the maintenance within that folio. and I like, honestly, I felt like I was giving f not even f plus service. Like, stuff was just like the follow up. We couldn't stuff. And I'm like, we are sucking. and with Property Meld, the way it's set up and then with their match rollout, that's a little AI that's been able to troubleshoot about 10% of our,  work orders and be able to have the tenant help solve them. And then even if they're not able to solve themselves, like the level of detail that we get, our,  vendors are able to solve the problem quicker. And so it saves time and money for the owners, with that troubleshooting. The my favorite thing is the data. So we know, we're an average, completion three days. Within the three years that we've been using it. our tenant satisfaction is four and a half, which is awesome with maintenance when you look and compare that on like sweet, like here's what it is. And then where, you know, some of the power comes from that is like when we have vendors like we'll have handyman like, hey, we'd love to, you know, do do more business with you. And I can't blame them. We run 200 work orders a month. Like, it's an insane number. And so we're running these work orders. I'm like, hey, you know, handyman A, you know, I'd love to send you more business. Like, let's look at the numbers. So I'm like, hey, you're ready to four zero, which is awesome. Like, if you're over a four and even if it's a little before I look and I'm like, oh, we sent you to that tenant, there was nothing that you were going to do. Like, she rated you at two and you're like, I'm like, that's the highest rating. So that's not on you. Like, that's right. You know, you got a two, you hit that one out of the ballpark, you know. But you're taking you're ready to four and you're taking seven days to complete it. This other vendors of four seven and taking two days to complete it. Who would you use. And they go, oh, oh. And so now when we're able to like all sudden vendor B,  is getting stuff done a little bit quicker because they know that's the ticket. You look with the communication and stuff with the owners that they have, and their owner hub and some of the things they're able to do there, like is is unbelievable.

Pete Neubig: And then who's running your coordination? Do you have one person in the office or is it. Each property manager has their own portfolio. How does that work.

Derek Morton: So we like we really were were an open source kind of office. And so my office manager Shauna runs  the vast majority of the maintenance. but we all can jump in, like the stuff from north where I took that on. I'll facilitate a lot of that. Or I've let the girls know, like, hey, this is who we use up there. And they can they can run it. and that's and that's been huge. So they just oversee it and we're able to communicate and we have like, real live data. Like, if someone's scheduled with the with the tenant, we know that. And so if anyone has any questions over. Here we go. The tenants are able to upload pictures, and the owners or the vendors are able to upload pictures. And so it's made our life so much easier. and so that's how we facilitate, you know, 200 work orders.

Pete Neubig: You have a lot of challenges with owners approving, you know, you know, like, above the threshold or anything like that. How do you get around that? Because that's usually a big time suck and usually prevents tickets from getting done in a timely fashion.

Derek Morton: We I one of the biggest mistakes when I started is I would take any owner on because you want to grow, right?

Pete Neubig: Yep.

Derek Morton: And so I've become more choosy. And so when we looked at an owner like just as much as they're interviewing us, I'm interviewing them. Okay. And here's here's the expectations. Here's what it is. and a lot of them, like. Yeah. And these larger ones, you're going to be part of the conversation. but most of the time, because we have all these pictures and we have everything documented. It's tough to argue that, hey, it's time to do a new HVAC unit. And when it comes to that point, usually we've done a couple Band-Aids and stuff like this is the third time. Like it's time. And and so.

Pete Neubig: Oh.

Derek Morton: What was that?

Pete Neubig: Do you have any policies in place where it's like, you know, over X amount of dollars, we're going to go ahead and just go and get like a second, or even a third. quote or do you just take the one quote, hey, this is a guy we trust. This is what the business is.

Derek Morton: We run enough business that we know that people we use are going to be cheaper, or I shouldn't say cheaper, that they're going to give you the best bang for the buck.

Pete Neubig: Okay.

Derek Morton: And so and we can talk about that, we're like, hey, this is the 100th work order that we've sent this HVAC person in the last three months. They're awesome. And they're like, oh, okay. As opposed to sometimes you're like, hey, I got this other bit from this person. I just don't know them. And, you know, and it's taken the nine years to really just hone in on some of these vendors, and you're always turning over because you can have a handyman that'll be doing really, really good for a while. And then for whatever reason, just, yeah, just not as good. And so you have to figure it out. Like, so we're always like, we'll have our plan A, and then we tell people we, you know, when we're sometimes interviewing vendors like you're a plan B or our C, I know that's going to sound insulting to you, but that's like plan like that plan at one a really in our life because you just never know. Someone can't get out there. And so it's like, here you go. Here's your time to shine. and I like what you saw. That's. Yeah.

Pete Neubig: And I'll say you kind of glossed over it, but you said you use data because you're using Meld. You have the data on the type of vendor that you have. So you're actually giving data to the owner in this case saying, hey, we're using this guy. This is how many work orders he's done. This is his rating. So it allows them to have some information and be like, so you probably get more approvals quicker with the data behind you then than it's like if you didn't have any data.

Derek Morton: Yeah. And choosing the right owners, like that's the secret. That's what no one talks about when they start a property management company. Well, there's two things. One, I never realized that I was going to be on the front lines of all societal ills. I just didn't realize that, like anything that you see, like in society, we deal with on a day to day basis, never fully understood that. Tow, you can be as good as you want, but if you have crappy owners that you're working for, you are going to be a crappy property manager.

Pete Neubig: You're going to be in the middle of a lawsuit at some point.

Derek Morton: Yeah. Like you just. And so once I learned that and we've cleaned out some of our owners and some of those owners have cleaned us out because we just don't work, right.

Pete Neubig: Yep.

Derek Morton: As I've gotten more choosy, like the quality of properties we manage have gone up. the quality of the owners, that we're able to attract because of that has gone up. And it's really powerful when, you know, an owner is like, hey, I would like to use you. And you're like, that's cool, but I just don't know if it'll be a fit. Like, no, but you're like, you're rated so high and you do all these cool things. And I'm like, that's because I'm really picky on the owners, and these are the policies I have in place. This is what works. So I'm not willing to negotiate on this for us to be able to do what we need to do. Like this is what it requires. And then they.

Pete Neubig: Take me through that. When you're onboarding an owner, do you still do all the onboarding yourself or do you have BDMs now?

Derek Morton: I do it all myself.

Pete Neubig: Okay, so this allows you because, you know, obviously if you were a BDM and you got paid on commission on bringing more owners, you wouldn't be as steadfast as would you, who are you bringing on. But what are the questions like, how do you know if an owner is not going to be a good owner? What are some of the things that they say or do?

Derek Morton: So like I talk a lot about the property. And then I always ask like, hey, what, what do you think the rent's going to be? You know, what is your anticipation there? And if I'm like, hey, the market shows that this rent, we're, you know, in southern Utah, it's a little lower rent. So I'm going to throw out this number and you're going to be like, Holy cow. You know, we'll say, hey, the rent should you know, I've rented five other units similar in the last three months that are 1500 bucks a month. And they're like, I think it should be 1800. And you start to have that conversation about what reality is in those expectations. The way they respond to that tells a lot. If they're like, well, I need 1800 and I'm going to be like, that's too big of a stretch. You still may be able to get it. Someone else may be able to get it. But I ran it five. And then here's my experience. Usually if we go that far above because I've done it and somehow we've been able to make it work, that tenant is is cash poor and they're stretched so they have more difficulty being able to pay rent on time, which is what no one wants to deal with. Two, if they're paying above market rent and they know it, they have above market expectations, which is 100% fair. So their patience level, if something goes wrong on that property, is going to be a lot less than if you have someone that's right at or just below market rent. They're usually like, okay, no problem, you know? Especially if they know they're below market rent. Like, they don't want to tick you off because they don't want to lose it. Because I know, like, you know what I mean? But if someone's paying above, they're like, I'm paying above market rent. And so these are the expectations. And so every time I've done that, even if I was somehow able to get that rented, like it's been some of the worst experiences I've had. Whereas, I mean, if it's if I've rented five, it's say 1500. And they're like, can we meet at 1600? And I can be like, you know, that's reasonable. I can see where you're at and we can give it a try. And then this is going to the rest of the tech stats. So this is the beauty. So I use ShowMojo. The amount of data that they have. That's the one software I've ever onboarded that gave me more than what they told me they could do.

Pete Neubig: Interesting. Okay.

Derek Morton: Like it was awesome. So now, like. And it's just through my portfolio. But I've been on it with almost two years now and I can go quarter over quarter so I can go, hey, three bedroom, two and a half townhome, that's going to be 15, 15. You're going to be 34 days on the market. And they go, oh, like where did you get that? Oh look here's this graph. And look over and over okay. Rents are dropping. Here's this. And it makes me sound way more legit than I look and am like, I just I'm kind of a goofball. You realize I was just my personality. I was like, here's what it is. But those numbers like legitimize, like here. And everyone's like, oh yeah, I want that property. So I'll charge, you know, I'll charge 1800. And I'm like, no, I don't want to waste my time like I don't. That property is going to sit on the market for way too long, make me look bad. And by the time we drop, when you come reasonable, everyone's gonna be like, what's wrong with that property? Someone die? They're like, why doesn't anyone want to rent that property?

Pete Neubig: Right.

Derek Morton: So at the scale that we're running, I can't afford to waste my time. So we're going to be reasonable. We're going to have these conversations, and then we walk through our maintenance process and if they're going, hey, I want, you know, I need to improve everything. And I'm going to be like, we have a $500 that you basically give us a power attorney, anything below $500, we're going to get this done.  well, that doesn't work for me. Cool. That doesn't work for me. I run 200 work orders. Maintenance is one of the big issues that stop people from renewing. And if we're not getting this done in a timely manner, like they're not going to renew, and I'm going to have the negative review, which means no one's going to want to rent from me because you decided you needed to have say, you're going to trust me to do my job or not. And so with that 500 and I'm like, here's the communication you get. You're going to get communication from mailed. When a work order is submitted, you're going to get, when it's scheduled, you're going to get that. And then when we upload it, we're going to get that now to some things fall through the cracks on occasion. Yeah. Like we've had 6 or $700 bills that we should have gotten approval on that just spaced. And this is where part of my business plan is I have what's called my problem solving fund. And so if an owner calls them bad, I'm like, you're right. We screwed that up. You should have known. It still needed to be done. that mistake was on us. You should have had every right to approve it. Would you be willing to split that bill with me? So $750, you pay $350, I'll pay $350. And I have that in my monthly budget just to solve those problems.

Pete Neubig: Right.

Derek Morton: And when you go to an owner and you're like, hey, like they're like, oh, you're going to do that to me. We're most property managers are sitting there going to find like, that's your bill. And it is. But I failed my part.

Pete Neubig: Right.

Derek Morton: Like I needed to communicate that. So if I fail, like I should come to the table with something. Does it have to be the whole thing? Could it be like I will pay 250 because you, you know, we have approval up to 500. I just usually standard. Just go. I'm just go half because it just it just works. And so all these conversations is when I go here's my processes and it's either going to work or it's not. And I'm good either way. and that's, that's the beauty of being 650 units. I'm like, I would love to have you. Like, you seem like a great person, but it needs to work for me.

Pete Neubig: Yeah. What about, where do you fall on home warranties?

Derek Morton: Oh.

Pete Neubig: So let me...

Derek Morton: You said no loaded questions stuff. So the problem with home warranties is as a property management company, you lose control.

Pete Neubig: 100%.

Derek Morton: Because at that point in time you are...

Pete Neubig: For homeowners. And if an AC is out, it might take them three weeks to fill to fix it. And, you know, I mean, I'm don't know what Utah property code is, but in Texas I got about seven days to fix that thing.

Derek Morton: Mhm. And so like it's just that's the hardest part with home warranties. They're worth their money. Like they really are. But as a property manager I personally hate them because they never get it fixed in time. And I have to give a rent credit to make the tenant happy. And then the owners are usually kind of fresh. I have a warranty. Yeah, they took three weeks. And half the time they don't communicate with us or the owner and it just gets done and they don't communicate with the tenant. So they just randomly show up. And it's always when someone's getting out of the shower. Like, I don't know why it is you laugh because you know it's true.

Pete Neubig: I was just like...

Derek Morton: Always getting out of the shower.

Pete Neubig: The AC broke on Friday at 5:00 in the evening. And when they do come, somebody's in the shower and they miss them, right? And then when they finally do get there and they review it, 80% of the time is not covered.

Derek Morton: That's the other thing. That's the other thing. So yeah. You know, it's like a 1975 dishwasher that's like, oh, we have this part is on backorder. Yeah. Because we don't want to pay for a whole new dishwasher, but we're going to pay 400 bucks for this part to ship and be handmade by the cavemen that originally built it.

Pete Neubig: It's only made by the...

Derek Morton: The US and, you know, only 500 bucks for infrastructure. This is 100% correct. Oh, and rant on home warranties.

Pete Neubig: All right. So obviously, the rent amount and maintenance is probably two of the biggest challenges when you're selecting an owner. I'm guessing the third challenge is, if they want approval on the applicant. So let's kind of make switch over to the resident side. So I'm guessing you kind of give them your process on, we're not going to allow you to have final day of an applicant. This is how we run things, blah, blah, blah. curious. this is kind of out of left field, but how do you guys run your application? Do you do first come, first serve, or do you do, best,  you know, best application.

Derek Morton: it's first come, first serve. You know, the first qualified applicant. that's who we take. Yeah. and so that's, you know, that's it's the easiest way. Here's what it is. They were the first qualified applicants. They made her a criteria move on. I'm a big now. And then if the ones that come after them, we can be like, hey, we have these other units like, you know, available. Would any of these work for you? And, you know.

Pete Neubig: Yeah, I'm a big fan of first come first serve as well. And I've had debates on first come first serve versus best application. And I'm not going to go down that rabbit hole, but, I just I just don't want anything to do with fair housing. I don't want I don't want the government on me in any way possible. So first come, first serve is, was was good for me. now let's talk.

Derek Morton: How do you like here's the thing. Like, here's I've, I've have people that are like, hey, best applicant. Best applicant for who? I've had just as much trouble with someone with an 800 credit score that's made 120,000 a year, as I have with someone coming directly out of homelessness. In fact, sometimes, like when you look at it like the lower end of requirements, there have been better tenants and longer like longer service tenants and minimize turnover. And they still take care of the property. And you know where some of those higher ones like. So I laugh like what's the best one. Like I don't like that's why I have these basic requirements. I can't choose what's best for that house, you know, and what's best for that owner. You know, occasionally I'm like, this is not going to end well because they first come, first serve. And I'm like this, this tenant with this owner, I can feel it. And but.

Pete Neubig: Well you said earlier we deal with all societal issues, right? I mean, the application is a big part of it. You know, let's just say you you take best applicant and that person happens. The person you don't take happens to have some kind of ailment that we didn't even know. But next thing you know, you have a fair housing claim because, you know, they have some kind of disability or something. And next thing you know, you're like, you got to defend yourself. So I like the first come, first serve date stamp. Time stamp. Here's the here's you know, here's the qualifications. Boom! Your stamp. You go in and,  the next person. I don't even run the application on the second person. And, you know, I run the first one. And if it wants it, if it's not approved, run the second one. Because the biggest challenge is, you know, people, you know, they're applying to two, three, four places. Each application might cost 50 to 70 5 to $125. Gets kind of expensive for them.  so you want to make sure that you, you know, some people say, well, it's a profit center. Like, if that's your profit center, man, you run your business wrong. It's kind of like, I think otherwise.

Derek Morton: God bless you for saying that. Preach. Preach that louder to the people in the back. Yeah, if you're like, if you're relying upon your 40, 50 bucks, you know, application fees, yours are a little higher. I'm only 50 bucks. But if that's if that's your margin, you are running your business wrong and you have much greater issues like greed.

Pete Neubig: But let's talk a little bit about what are some of the things that that you guys do over there.  Netgear to, to, to  make your properties a little bit, you know, incentivize, I guess,  to get your properties rented before the competition.

Derek Morton: So we did one of the things that's helped in, We made kind of a drastic move during Covid. we looked and, with so many people and investors selling their unit because that.

Pete Neubig: Start that over for me, if you don't mind. That thought process because you got garbled.

Derek Morton: No problem. So during Covid, we made kind of a counterintuitive move. Because, kind of the reality of what people were dealing with and the realities of the situation and one thing that I've learned and I tried to run my business is we deal with reality. Now.

Pete Neubig: Sorry I lost you. Are you there?

Derek Morton: Yep. I'm here.

Pete Neubig: I think I'm still recording. Yep. All right. Start that one more time. The third time's a charm.

Derek Morton: All right. Third. Yeah. We'll see. We'll see. I hate technology sometimes.

Pete Neubig: After three times, I am going to blame you. I'm teasing.

Derek Morton: And that's fair. And I will own it, and I will take responsibility for it. And I and I'll say that I warned you and you didn't believe me. So, one of the one of the big things that we did, is during Covid. like, there was a lot of things going on outside of just Covid and just a million things going on in housing. And one of the best advice,  pieces of advice I ever got is to live in reality. Not what you think should be. Now you can push towards what you would love to see things be, but you're always going to be better off dealing with reality and adjusting to the reality at hand. Right. So during Covid, like everywhere else in the country, we saw rents go up way more than income. With that, we also saw a lot of investors selling their investment properties. And so tenants that had planned on being able to stay there that just signed a lease two months ago, now all of a sudden having to find a new place to live because the investor is like, Holy crap, I can get this much out of it. I might as well just sell and cash out. And nothing wrong with that. that's their property and all that. But this is the reality we had to deal with. And so I had to make a couple decisions that I was looking at because first and foremost, we were to protect the owner's investment. Like, that's what we're hired to do.

Pete Neubig: That's right.

Derek Morton: And so looking at the reality. And looking at what we were dealing with, I'm like, people can't make three times to rent. It's going up too fast. And so we talked it over with my staff at the time and we decided to be crazy. And step one is we dropped our rent income requirements from three x to two x. And that's still our standard.

Pete Neubig: Really.

Derek Morton: And then we looked at the same to still protect our owner's investment. We dropped from three x to two x and then increased our deposit instead of a standard whatever the rent is. So say rent's 1500. The deposit was 1500. Unless you needed to require double deposit. We changed our deposit from one x to 1.5 x. So we could still protect the owner from that higher from a little bit higher risk. And they're protected. But then all sudden like crap that's a large deposit to come up with. And so we were looking at the same time as I was putting this puzzle piece together, going and discover security deposit alternatives. So there's two deposit alternatives. The companies that I use and I love. And they they both serve different purposes. and so the first ones I go, they are integrated with that folio, which is awesome. So that works. They pay 10 to 50% of the deposit a year and that's their fee.  obligation verifies to make sure they have the deposit amount in their account. So if we're requiring it 1500, it's 2250 for the deposit. they verify that they have that money in the account, and so they would pay 225 bucks a year. and then when I move out, we do all the, the disposition and all the charges and stuff, and then obligor pulls that money from their account and gets it to us, like within 24 hours. And so now the owner or the tenant, instead of having to come up with $2250. And then we have all these debates and stuff that move out. So say we've only used $1,000 of it and they've stayed for a year. So they've paid now $1250. They got to keep their money and they got to keep, like where they could use whatever it is that's not on my money that I'm having to hold in the trust account. They can use that, however, and you know, and now they've only paid $1250,  in total as opposed to the $2250. The other one that I use is Liskeard. And that's a and that's an insurance product. So just like they pay a monthly insurance premium. So in this case I think it's like $55 a month that they would pay. So same thing. So if they stay a year they have protection up to $2250 for $1,500 rent. And at 55 bucks they're paying $660 or something like that. I can't do math in my head very well, but they're protected. So at that point, even if they had...

Pete Neubig: They don't have to. They don't have to come up with a month. One, they're paying it over 12 months. So it's a lot easier to come up with.

Derek Morton: Yep. And and most of the way these are set up and stuff. So they've now only paid 600 bucks. They've stayed there for a year. Now it's non-refundable which is some struggle with. But they've only paid 600 bucks and they had protection up to $2250. So even if there's $2,000 worth of damage, I make that claim. The tenants only out 600 bucks. And so it's allowed us to find that balance and adjust to the reality of the situation that we're living in. Because even now, rents are still way higher than what incomes can afford. But yet, as an industry, we still go, hey, we need this three x.

Pete Neubig: Right.

Derek Morton: Without adjusting...

Pete Neubig: Have you seen. Have you seen evictions go up? I mean, obviously not because you're still you're still doing the two weeks, but...

Derek Morton: The evictions that we've seen are when I've made exceptions to my policy.

Pete Neubig: No good deed goes unpunished.

Derek Morton: When you're like, I knew this place rented. I know the situation. I'm taking a risk. And you come back and just get punched in the face like those those we've had. I'm in the process of actually, I'm going to do a study from when we started. I'm working with a with a university professor because I'm curious, because like, I know anecdotally it still feels good, but I'm also like, have our deposits like the amount that we're claiming gone up on these compared to before, like, so I'm trying to still just figure it out because like when I was small, I didn't care about data, I hated data, but now that I'm larger, I'm like, I've got good data, like, this is powerful stuff, right? I don't live my life by data, but it like it can really help inform and stuff. So what's fascinating. And that's where you know, some of these conversations in the industry like are important to have is we look and go, homelessness is on the rise, rents are up. you look at the rise of medical debt. It means credit scores are going down. What was that?

Pete Neubig: Home purchases are down.

Derek Morton: Home purchases are down. Like credit scores are going down. You have all these things. And so, you know, one of the things about this. Well any industry. Right. We hate government regulation. And that's one of the things is like hey like come on. Like give us a shot. Right. So what to one of the ways to avoid that? There's always going to be people that want more regulation. But most people, by and large, if we're able to solve these problems on our own within the industry and show that we're doing it, most people are going to keep their hands off. The beauty of Utah is like, it's pretty hands off. You know, we've got regulations, but it's really kind of anti regulation. And so if I don't want to see rent control like you see in some other places in the country and some of these other just crazy regulations that you have across the country. Like, I need to figure out how to solve some of these problems within my, you know, within my business, because that's the one thing I can control. That's part of like, why I still want to grow is like, look, there's these issues and let's it's kind of a scientific experiment for me. Like how do we look to solve these? These are things that we can do as an industry. And I'm small enough that I can still be adaptable but large enough that I can. Like I can tell if it's working or not. And that's what's really fascinating with where I'm at right now. and to be part of those conversations and look and just be like, you know, and I'm wired to where I'm like, I don't really care what the industry does. Like, this is what I think is best. So I'm just going to do it, you know? And then other times I've had to come back and be like, that's why the industry did that, because I was an idiot. Like, right, I'll own it. There's some stuff that I've done that I'm like, oh, that makes so much more sense now. Yeah. like, but like just to have that and to be able to continue to kind of push and see that. And that's what and that's what's fascinating. Like, I, I mean, I know you're pretty familiar with resident benefit packages. being with and, and it's something I don't have as part of my portfolio right now, and have my tenants do because I just struggle with it as is, is part of it. I think if they call it something different, I would, I would probably do it. But, you know, there's really not much benefit to the package now. It's a great benefit to the landlord, you know, because we're able to make a little bit more money. and the resident benefit package outside of the credit reporting like is, is kind of just help to help the tenant protect the owner's property. Right. And so like my dream product is user rent is a benefit package that really actually benefits the residents. So you look credit reporting is essential, and it's stupid that credit reporting is not standard, just like a mortgage and car loans and all that stuff. Right. and so but then you look and you look at the rise of mental health. You look at the rise of just lack of savings. And so you if you're able to throw in, say, hey,  an accident, an injury policy that can pay up to say, six grand, you know, so if they have an accident or stuff and out of work for a little bit because some of these people, I mean, if they're out of work for a week, like, yeah, they're going to be on the streets.

Pete Neubig: Yeah. Yeah. Getting evicted. Yeah.

Derek Morton: So if you're able to get, hey, six grand and and here's this, I mean, that's 2 to 3 months worth of rent in most places. Like that gives you time. And then the last is if you're able to, to come up with some mental health access, like that's massive. And that's a true kind of resident benefit package. And it shows that us as an industry are living in reality. Right? wWich is sometimes what we need to do. We're like, oh, these tenants are getting so much worse. And you're like, why? Well, look at their life. Like, look at the stuff they're dealing with.

Pete Neubig: Yeah. Financial stress.

Derek Morton: And so if you're able to figure some of this stuff out like it's, it's huge and I've become a big believer, with some of the population that we've worked with, and dealt with and just, I mean, with so many people and I think you can relate, like most of the time, if you're able to get people the resources they need when they need it, whether that's a friend, whether it's a phone call, whether it's financial, whether it's access to mental health or, you know, some other medical stuff like that can be life changing for so many people. You know, like I look and I'm like, there's five points in my life that I'm like. I, I'm glad that friend intervened, or I'm glad I was able to get that financial assistance to help keep me going. or else I would be no different than, you know, those people that have fought homelessness and addiction and all that. Like, there's just these moments and we we fail to recognize that when we're interacting with our tenants that, you know, if someone gets evicted, I mean, and I still evict, like, we have to like we have to enforce the lease, right? Like, I mean, that's difficult to come back from. And so the more we can do on the front end and try to figure out how to prevent and work with them, it could go a long way to protect the owner's investment, and them, as you know, and as a society as a whole. Because stability and housing is one of the greatest indicators. you know, and things, so many things. and childhood welfare. and even with adults.

Pete Neubig: Man, I feel like we this is a whole other conversation that we can literally just open up and start having, but we are up against it. So I am going to hit a commercial break real quick, and then I'm going to put you on a lightning round. We'll be right back after this everybody.

Derek Morton: Sounds great. Perfect.

Pete Neubig: All right. Welcome back. All right Derek we're going to put you on the lightning round. You actually answered a bunch of questions in the lightning round during our interview. So this is going to be an abbreviated one. All right. You ready? Here we go. What is one piece of advice you would give someone?

Derek Morton: I'm ready.

Pete Neubig: All right, you ready? All right. What is one piece of advice you would give someone starting out in the PM business?

Derek Morton: Choose the right owners.

Pete Neubig: All right. I love it.

Derek Morton: Hands down. Choose the right owners.

Pete Neubig: What was your first job?

Derek Morton: I laid carpet in high school. That's why I realized manual labor is not for me.

Pete Neubig: Does pineapple belong on pizza?

Derek Morton: I'm 50/50. If it's Canadian bacon and pepperoni, i can handle it. If it's anything else outside of that, it doesn't belong.

Pete Neubig: As long as it has Canadian bacon, pineapple, sausage. And then you can take the pineapple off.

Derek Morton: There you go. There you go.

Pete Neubig:  What is something that most people don't know about you?

Derek Morton: I am a world champion dodge juggler. That's a story for another day. We'll leave him hanging on that one.

Pete Neubig: World champion. Did you say dodge juggler?

Derek Morton: Dodge juggle. So there was, me and my son discovered it, and I used to run the state's largest dodgeball tournament. And so I went to recruit, try to find more dodgeball teams. And we went to this dodgeball tournament in Vegas. And it turned out like the way they were hosting it was part of what's called Moxie Games. And the guy that ran it like it has all these weird events that they would do and that he would farm this out then to ESPN for "Ocho Day" days. And so one of them was Dodge Juggle. So there's two aspects of this. One, like they would have these world championship jugglers like just be pelted by these professional dodgeball players while they're juggling. And it was amazing. Then the other part was the mix. So you had to protect the juggler. And so unlike dodgeball, where you're trying to avoid being touched, you're trying to protect the juggler. And, so I had my team. We had my kids and their friends. So I was four kids and a fat guy. and then there was a team that I can't even remember. They're called that one every year. And there were a bunch of coders for the for the US government. So it was kind of funny. And  the guy that they had protecting the juggler got pelted in the face and had to go out. So they recruited me for the for the finals. And my kids didn't know. So they see me out there and my kids are calling me a traitor. And this is all like it was on live TV, or it wasn't live TV, but it ended up on TV as my kids are like yelling at me. And then I have a picture of me holding the trophy. So I came in as the is the ringer. I had my,  Walt Frazier moment and,  and won a title that I don't have the trophy because the people that actually worked hard to win it kept it. But I have a picture of me with the chat, and I'm still a world champion Dodge juggler.

Pete Neubig: Well, the movie dodgeball has nothing on this. This this is, dodgeball part two. The dodgeball juggler.

Derek Morton: Dude, it's awesome. It's insane to see in person.

Pete Neubig: Oh, man. All right. Cats or dogs? What do you prefer?

Derek Morton: Lost you on that one.

Pete Neubig: Oh, cats or dogs? Which one do you prefer?

Derek Morton: I've had both. I currently have two cats that hate me.

Pete Neubig: So you love cats, but they don't love you?

Derek Morton: Yeah, that's. That's kind of where we're at. It's not a mutual love.

Pete Neubig: Derek, if somebody wanted to reach out to you and just pick your brain on something, what's the best way to get you there?

Derek Morton: Best way is just look at our website. netgainpm.com. NETGAIN-P-M for property management.com

Pete Neubig: And if you are listening to this and you're not a NARPM member, go to narpm.org Or give them a call at (800) 782-3452. And if you are looking to hire remote team members, give us a try, vpmsolutions.com. And you can email me directly at pete@vpmsolutions.com. Thanks, Derek.

Derek Morton: Hey, thanks for having me, Pete. I enjoyed it.