Todd Ortscheid | Podcast

Pete Neubig: Welcome everybody to the NARPM Radio podcast. I'm your host, Pete Neubig, and we have a different type of show today. So normally I have a bio I do a hot topic and then we interview somebody and they talk a little bit about like what's going on in the industry. Well today, I got my good buddy Todd Ortscheid or Todd O as we affectionately call him. So Todd is an airline pilot. He's also the broker and CEO of Revolution Property Management, formerly GTL. When I was doing this bio for you, Todd, I almost put GTL and I'm like, wait, is he Revolution? Whose GTL. So I made the correction here. He's the owner of PM Assist, which is maximizing profits for PM firms, which, by the way, Todd, uh, this is probably going to air after broker owner, but while I'm at broker owner, I'll be speaking. And believe it or not, I'm going to be pointing people to PM Assist. So that's part of my talk. So I'm a big fan of what you're doing there at PM Assist. He successfully started and exited a maintenance company. So, he doesn't put that on his bio. But I do know that from knowing him. So he actually started a maintenance company, made it successful, built it up and decided to exit for a profit. And one of the new things that Todd that you're doing that I love is your long form blogs through your email newsletter. And if you are not receiving it, it is a must read. And Todd will tell you how to join that newsletter or get on his list. I gobble it up. I use it for my hot topics. I love what what you're doing there. So really good stuff. He's a thought leader and he has been one of the most sought after speakers in the PM industry. And he's also a thought leader online. And sometimes he likes to smack the beehive, so to speak, on social media, mainly Facebook. He's a great follow. But more importantly, he's my buddy. He's a friend. We do not see eye to eye on many things. We're going to debate a few of them, but we're going to leave the Kamala-Trump thing behind us. We're not going to debate any kind of politics. We're just going to debate some property management stuff. He definitely has the advantage. I have not been a property manager for a few years but, I've been involved in it, and I started another PM firm. Todd didn't know if you know that, but I started another PM firm here. I'm the broker and a minority shareholder in that. So, Todd, thank you so much for being here.

Todd Ortscheid: No, thanks for having me, man. This is great. I always love a good debate, so this should be a lot of fun.

Pete Neubig: This will be fun. So quick story about Todd, though. Before we get on here. So I was introduced to Todd many years ago at a NARPM conference, and he and I were, I think at the time, I felt like we were the only two people on Propertyware. And everybody was on AppFolio before Rentvine came out and  and all those other things. And Todd had cracked the code on importing forms and using API inside of Propertyware and when he was talking to me, it was like he was talking to, like, I don't know, like a raccoon or something. I couldn't understand a word he was saying, but it sounded really important. And so, he gave me his contact information, and that's how I became friends. I reached out to him, and you kind of guided me through that. And then I just finally got the concept and all of my forms went to Propertyware, and we started automating so much more. So I appreciate that. And he's a person that continues to give back to the industry and I really appreciate that. So thank you so much, buddy.

Todd Ortscheid: Yeah, of course I still remember when we met there up in that suite at an after party. So I can remember that clear as day, even though it's probably been like I don't know what eight, nine years I'm guessing is what it was. It's been forever, man. It seems like yesterday.

Pete Neubig: Yeah. Well, neither of us are on Propertyware anymore. Are you still on Propertyware, actually?

Todd Ortscheid: We are in the process of moving over to Rentvine, but we are still in Propertyware. We're actively right now. Yeah.

Pete Neubig: I mean, I'm not because I'm not in the industry anymore. So, we actually, for the new company, we're using Rentvine.

Todd Ortscheid: Nice. Yeah. A lot of my consulting clients are on rent. Rentvine. So, I mean, I'm in it all the time. It's great software.

Pete Neubig: All right, so Todd and I are friends, but we definitely don't see eye to eye on everything. And so in this episode of the NARPM podcast, Todd and I are going to debate on a few things. We're going to talk about growth versus churn. We talk about application processing, marketing, customization and maybe even BusinessCoaching. So, we'll be right back after these messages. And Todd, get your gold gloves. I know I gave you a pair, so get your gold gloves. We're going to box this thing out. We'll be right back everybody.

Pete Neubig: Alright. Round one. Ding! I gotta tell you, I'm nervous, man. I've never went to debate school. And based on Todd's Facebook post, he, like, was an all time national debate honor student. So, did you ever debate in high school?

Todd Ortscheid: I did not, actually. I don't even think I went to a small private school. I don't even think we had a debate club. But I just debated with my father all the time. So that's that's really where I get it, I guess.

Pete Neubig: I read some of your posts and I'm like, is this guy a property manager and an airline pilot or is he an attorney?

Todd Ortscheid: But, you know, I used to spend all my time when I was a union rep at the airlines with attorneys around the clock. So, I mean, that's probably where I get that from.

Pete Neubig: All right. So let's get into topic one. You just wrote a post about why reducing churn and managing churn is more important than growth. And so, as I believe that managing churn is important, I believe having growth consistently and focusing on growth first is more important. So let's talk about why you think churn is something that is more important than growth.

Todd Ortscheid: Well, I mean, the first thing I'd point out on it is churn sets a ceiling for what your company can grow to right off the bat. I mean, for any given rate of churn, there's a very simple math formula you can do to figure out this is going to cap you at a certain door count. You know, if you, for example, have a churn rate of 20% and you're adding 12 doors a month, you know, I believe the math works out to somewhere around 700, and some doors is the max you can ever reach, because at some point your churn is going to outpace your growth. So you've got to manage that. Otherwise you're just going to never be able to break through this glass ceiling. The other thing on it is it's a lot of wasted money. I mean, I know property managers who have been stuck at a certain door count forever just because they keep churning doors. So, I mean, I can think of a certain company that they've been at 900 doors for as long as I've known the owner of that business. They're adding 30 doors a month. They add a door a day, but they never get any bigger. And the reason is their churn rate is so high and they got to fix the churn. So, you know, if you're not addressing that, then all the growth in the world is just money that you're throwing down the toilet because it's just every door you add is a door out the back end.

Pete Neubig: So I kind of agree with you on the math thing, right? So, you know, the old saying is if you're not growing, you're dying. We know that the based on profit coach, the average churn rate is about 20% per year. So if you have 100 doors and you don't grow, you're out of business in five years. Is the math right? I mean, sure, surely you won't be out of business, but you're going to have a lot less doors. So I'm a big believer in two things. One, I believe revenue solves a lot of challenges. And if you are only focused on churn, which to me means I'm only looking at making the best processes, right. And so, Steve and I, he was the growth guy. I was the churn guy at Empire. He used to tease me. He's like, if it was your company, Pete, we'd have ten doors, but they would be running perfect. And I'm like, yeah, we wouldn't have. Like, to me, I actually wanted to take the phone out of my office. Todd I'm like, I don't why do I need to call? They don't need to call me. I shouldn't have a phone here. Right? But I would tease him. Like if it was Steve's company, we'd have 10,000 doors and it'd be like, like herding cats and everybody's hair would be on fire. It'd be like total chaos. And we ran in the middle of that. But I'll tell you the main reason why I think growth is so important is when you have to make cuts, you can't cut your way to profitability if you don't have a lot of revenue. And when you have a lot of revenue, i.e. growth, you can cut your way to profitability. And and secondly is, when you're growing your business. I lost my train of thought here. Hold on a second. So the first one is revenue, solves problems. The second one is, with growth, you can increase your team. You have more people, right? Which ultimately will help solve the challenge once you have that churn rate. And then, the third thing I'll say is, if you focus only on churn, then typically what that means is I'm shutting off marketing, I'm shutting off sales, and I think marketing and sales is like a flywheel. It's like a merry go round. Right? Once it's spinning, you can could keep it spinning with two fingers, but to get it spinning, you have to really focus and push that deal. So that's why I'm a growth guy.

Todd Ortscheid: Yeah. I mean, I don't really disagree with what you're saying there. I mean, obviously you you don't want to ever shut off your lead flow, shut off your biz dev. My point is more that if I have to prioritize one or the other, if I've only got so much bandwidth, then I'm getting more bang for my buck. Focusing on the churn. It's always a lot cheaper to keep a door that I have than it is to add another door under management. Most management companies are spending somewhere between $1000 to $1500 to acquire a door if you factor in everything, including what you pay your your biz dev people and your marketing people. That's a lot of money to add a door. You know, it might only cost me 100 bucks of extra effort to keep a door that I've got that I would otherwise lose. So it is addressing some of that profitability issue. But the other thing I'd point out is what is growth? Does growth necessarily have to be about a door or is growth revenue growth because the average property manager is only making about 200 and some dollars? $220, I think is where the benchmark is right now, $222 for the average amount of revenue per month per door. I make $500 a door. So I would tell people, if you've got a revenue issue, you first should look at what you're making for each door you're managing rather than adding a bunch of doors. Fix that problem. I can double your revenue just on new fees, new ancillary revenue in most states in the country without adding a single door under management. So, I mean, most people should focus there after you've solved that problem, by all means. Every door you add is another $500 a month that you're getting, so it's fantastic once you get there. But you got to kind of plug these holes along the way first before you're focusing so much on just bringing in door after door after door, when they're either just going out the back door or your cost are basically in line with your revenue, and it's not really making you any more money. That's a lot of the problems that PMs have.

Pete Neubig: Yeah, and I would say that it kind of depends on what your vision is, where you want to go and where you are currently. If you are sitting around 50 doors, I don't think focusing on churn is the right thing. If you have 900 doors, then maybe focusing on churn might be the right thing. So, I think we can both be right, depending on where you are in your life cycle of where you are in your business and what you want to accomplish.

Todd Ortscheid: Yeah. And that's true in a lot of issues. I mean, a lot of this stuff is going to depend on where you are. You know, if you're Mark Cunningham, for example, who's I think 1500 doors or thereabouts right now, they've been in business for 40 years. He's not worried about bringing in leads. You know that's not a concern that he has. He can add doors without any problem. If you're a new property manager you got 25 doors under management. You're struggling to pay the bills. And, you know, adding those doors is everything to you. So, I mean, all these things are going to be different depending on your circumstances. I'm kind of giving people guidance. Generally when I send out those newsletters and everything, it's about the average property manager who's managing, you know, two, three, 400 doors. This is, you know, the average NARPM member really is what I would say.

Pete Neubig: I would also say it's not for the faint of heart, but what we did is, we were high growth and we were high churn. We're living what you're trying to solve from people, from living. And it's not for the faint of heart when you're spending all this money 30 doors in, 25 doors out, you know, month after month, and you literally are solving challenges, like I call it, like building the plane while it's flying, right? The plane's like it's shaking. And I'm trying to like, you know, okay, we need to put this, you know, this rotor in the in the engine or whatever. I don't even know if I'm using that correctly, but it is not for the faint of heart. But one of the things that we were so worried about was shutting down the marketing and sales. Because you do that, you lose that SEO. You just lose that edge. You know, you don't get as many leads and you're not showing up as much in Google. It's really hard to really jumpstart that. So if you are like Tom was saying, the 900 doors and you are receiving both, you know, don't shut it off. Like if you're going to solve churn first. Okay. I can concede that that's probably more important for this company. But don't shut down the marketing. And if you're bringing in stuff, you know, and you realize, hey, we're not going to give a great service, don't worry about it. Like give subpar service for a shorter period of time and solve it and solve the churn.

Todd Ortscheid: Yup I agree.

Pete Neubig: All right. Damn it. Point one to Todd. So stupid. Should have. All right, so something near and dear to my heart. Let's talk applications. This seems to be a big debate wherever I am. I've seen this on the on some of the NARPM discussion groups, some of the property management discussion groups. I'm a huge fan of first come, first serve. I know you're not. You like to review all the apps.

Todd Ortscheid: I wouldn't say that I like to read. Well, I mean, it depends on what you mean by that. So I'm not a review all the apps and pick the best applicant kind of guy because I mean, that has its own set of problems. But I am a guy who says I'm going to keep taking applications and processing them until someone gives me some money. That's kind of the way I look at it. Until someone's got skin in the game with a deposit, I'm going to keep processing apps as they come in continually until we've got a finalized tenant. So I, I'm not a big fan of, okay, I'm going to process this application and wait to see how they turn out. And I'm not going to process the next application until that's been resolved. I'm not.

Pete Neubig: So we're similar on that. But let's talk a little bit before we get into that crux. You said you're not a big guy of taking on all the apps right now. Let me take the other side of that. Although I agree with you, but I wanted to take the other side of that for the folks that do this, that I listen to saying, wait a second, I do that. Okay, so the benefit of me taking on all the apps and reviewing them, the number one argument for that I hear is, I'm basically doing the best for the owner. Right? It's like the owner is my client and I'm doing what's best for him. So that's why I pick all these. I pick all the apps, I run them, and then I pick the best one. How do you refute that?

Todd Ortscheid: Yeah. I mean, my answer to that is always that this becomes very subjective. You know, best application of a list. Let's say you got ten applications that you've received determining which one of the ten is the quote unquote best is almost always a subjective judgment call. Um, and that starts to get into some hairy territory when it comes to fair housing, if HUD shows up at my door, my office, and says, I want to know why you decline these other nine people and selected this one. It's very difficult for me to make a case that it's purely on objective criteria. That has nothing to do with any subjectivity that might stray into an area that might be a problem for fair housing. It's really easy for me to be able to say, hey, you met the criteria or you didn't. That's a very simple, clear cut and dry thing. The criteria are published on my website. You made the cut or you didn't. It's binary. It's a very simple binary decision there. So it's much easier for me to be able to defend that. So that's kind of my response to that. Now I would say if you craft some very complicated algorithm that's going to objectively weigh all these different criteria for all ten applications and determine which one is the best one, and you can defend that algorithm to HUD. More power to you. That's just a very complex thing to do, is my view.

Pete Neubig: I'm still not a big fan of that because once you get a fair housing claim, it's still going to cost you time, effort, stress, money to defend. And so, if you have requirements and you pick the first incoming application based on those requirements, then you're doing what's best for your owner client, in theory. All right. So now we got that one out of sight. But now you take on apps until you get a deposit. When I was taking apps, I basically, first come first serve, I  would hold that off until they got a deposit, all right. And I wouldn't run another one, uh, if they passed. Right. If they were approved. So. All right. So talk to me about why what I was doing was, was was subpar to what you're doing.

Todd Ortscheid: Yeah. I mean, I don't know if I use the term subpar, but the reason I like to do it this way way is, when we're talking about what's in the best interest of the owner. Getting the property leased ASAP is in the best interest of the owner. There's no bigger cost to an owner than vacancy time. That's always what hurts an owner more than anything. So, let's say I approve this applicant and I tell them, okay, you've got 48 hours to submit your deposit, but your application is approved, and I'm not going to move on to the next one until yours is resolved. Well, now we got two days of dead time where that owner is missing out on revenue. What if that applicant never pays their deposit? Because we both know a lot of people. They get approved and they never move forward because they applied to six different places. So now the owner's got two days of dead time there. Now I got to move on to the next application. I'm already two days behind where I would have been if I had just gone through and processed everybody and said, hey, first application that gets the deposit in is the one who gets it. So I'm trying to make sure that my owner is getting the best outcome in that situation. But I'll be honest with you, it's also if you're in a state like where I am, where there's nothing against rules to make money off of application fees. I'm also making a lot more money doing it that way. So it's a revenue booster.

Pete Neubig: All right. So my feeling is yeah we give them two days to run. So the only difference we have is you're running it. Somebody else comes in, you're running another app. I'm waiting for two days which I get it better for the owner. You make some application fee. Um, I'll say the negative of that is I run somebody else's app. They just pay me $75 and they don't get the property. You're kind of running into the same issue as I run all the apps type thing where it's like that person, did, you know, uh, Empire Property Management didn't accept me because, and then name one of the seven, you know, the seven dwarfs I call them, or you know, one of the seven protected classes. And so I don't know about you, man, but I never want the government coming after me. I hate the government. I'm scared of the of government. No matter who's in charge. Republican. Democrat doesn't matter. I don't like the government. So I'm so worried about fair housing. So, if somebody doesn't get charged, then they don't have a claim because I never ran the app. So that's kind of like. So I let fear and my protection of my own company come over that and you miss two days sometimes. So that's kind of my my reasoning.

Todd Ortscheid: Yeah. And I definitely understand where you're coming from there. I'm the first person to tell everyone that my risk tolerance is a lot higher than the average person. So, you know, I'm willing to, to take some of those risks. And that's just kind of a business judgment call you have to make, you know, how tolerant are you of those kind of risks if you want to be absolutely as safe as possible to avoid any sort of possibility of of that sort of appearance, then yeah, you're probably better off doing the one at a time.

Pete Neubig: You've also had many years of doing this. Have you had any pushback on that? Have you had any issues?

Todd Ortscheid: We have never had a fair housing claim filed against us. We've had people threaten it. I mean, that obviously happens.

Pete Neubig: Everybody's got a lawyer on speed dial.

Todd Ortscheid: Yeah, exactly. You know, someone is applying for a $500 a month rental, but they've got a lawyer. But, I mean, we've never actually had a fair housing claim. But we do have people who get upset, so. I mean, that does happen from time to time. They'll say, I paid you an application fee. But my answer to that is always, well, we disclosed this to you up front. You know, we're very big on transparency and disclosure. So before you even enter your name on your application, there's this disclaimer that tells you this is how we process applications. So, you know, we want to be very upfront about it. But yeah, I mean, there is certainly some additional risk over the way that you would be doing it.

Pete Neubig: Todd also likes a lot of confrontation. So he loves dealing with upset uh, not even clients. They're not even tenant clients. Resident client application clients. He doesn't mind doing that. I'm not a big fan of of that stuff, so I don't want the phone to ring. So,  but you're right, it's potentially a better solution for your for your clients. And you're right, risk tolerance is a factor for sure. All right. Next one, internal marketing versus outsourcing marketing. And I know now you have an internal marketing team, but you outsource your marketing from the very beginning. At Empire, my second hire was a marketing person. So I hired a property manager, and I hired a marketing person. So tell me why, if you're starting out, you should outsource marketing.

Todd Ortscheid: Yeah. So I mean, I would say for 90% plus companies out there, it makes sense to outsource this because marketing is a very specialized field. So, you know, I have an added benefit here at my property management company where my wife is a marketing expert. So she worked for four and a half years. She was the head of their business development, and she knows marketing inside and out. So, I mean, I'm able to have her kind of manage our marketing team because she's our director of operations. So it was easy for us to find a good marketing person, manage them, all that kind of stuff. She knew what to look for. Without that, I mean, it's very difficult to even know whether you're finding a good marketing person because it's such a specialized field and it's very expensive too if you're trying to hire in the States. I mean, this is kind of like a six figure position for someone who's really good at marketing, which a lot of property management companies can't afford. So it's one of these things where for most people, fractionalizing, this is a much better way to go. You go to a company like four and a half for Upkeep or, you know, whoever it may be, there's there's several different affiliates in NARPM who just specialize in marketing. And for most PMs, it's more cost effective. It's easier to manage. And it's just kind of a set it and forget it kind of thing where it's going to produce the results good enough for what you need. Can you get better results by having somebody in house? If you're really good at being able to manage that person? Yeah, that's why I'm doing it now. But that's hard to do, is what I would say.

Pete Neubig: I agree that most people should have a third party company like four and a half and especially Upkeep Media, since especially Upkeep is one of our sponsors here. So big fan of the guys over at Upkeep. Now, we hired a marketing person from the very beginning because we tried the outsourcing route the first few months we were in business, and what we found is that fractional just didn't do enough. Right? You get what is it, like four posts a month or you get, like two, whatever it is, right? You get a package. And if you want to be - now, you gotta remember I started, uh, in 2012. 2012, 2013 around that time frame, found NAARPM in I think '15 and became the front page of property management Google search in Houston in '16. I think it was. It took us over a year to get there. I would never have gotten there, even back then when it wasn't as busy as it is now with a fractional marketing team. Just wouldn't have done it. But all of your concerns, correct. It is expensive. We found somebody that was relatively cheap at $55,000 a year back then. I'll be honest with you, for VPM, we just hired a marketing strategist. It's more than that. I'll just put it that way. It's a lot more than that. Alright. So that is valid. Also, if you don't know enough about marketing, you don't know what questions to ask. So you don't know if you're getting a good marketing person. But if you get somebody, you now have somebody 40 plus hours a week working on your business, on growth, on your business, to get your name out there, to bring in leads. And so we found that it was very, very important for us because we had somebody that was full time on it. So.

Todd Ortscheid: Yeah.

Pete Neubig: Um, I think again, it just depends on on where you're at. Where you are in your business. And it just depends on - again, a lot of this is depending. Right. Like your vision. At Empire, you know, we wanted to get to 300 units as fast as we can because we heard that's when you're profitable. Then we weren't profitable at 300. Although that's a whole other story. Right? Then we wanted to get to a thousand. And so we always were looking at growth, growth, growth. Then we wanted to be in multiple markets and growth, growth growth. So marketing was a huge part of our of our vision. If you just want 200 homes in one market, you probably can use outsource marketing.

Todd Ortscheid: Yeah. I mean, most of the time when I'm giving advice to PMs, I'm. I mean, my first piece of advice to most PMs is you're going to be better off with your company between 4 and 800 units. I pretty much tell people that's where your max profitability is, your max time. Free time is. Everything's going to be better for most PMs in that range. So I'm usually giving people advice based on that sort of like baseline understanding. Empire was not that empire was a high growth machine. You know, you guys wanted to grow, grow, grow because, I mean, you exited and it was very successful doing that. But most PMs, that's not what they're looking to do. You know, and a lot of the advice out there we'll hear from people who grew to, I don't know if you got people who have 14,000 doors who are out there giving people advice and it's like, but that doesn't really apply to most PMs. You know, most people aren't trying to get to that. So I'm trying to kind of dictate my advice that I give people based on what the average NARPM member is, that's my community is, NARPM. So, you know, most people are going to be better off outsourcing. But you're absolutely right. I mean, if you want to grow and you want to focus on that, you're going to do better results. Like you say, having someone that does nothing but marketing all day, all week. Obviously that's going to produce better results for you.

Pete Neubig: I would say also, marketing is like the new IT to me. You know, when I graduated university back in 1992, I had an IT degree. And really what that meant back then was COBOL programmer. The internet wasn't around. Networking wasn't around. The personal computer was not in every household. I know I'm ancient, I get it. But today, you know, you have all these different versions of when you say you were at IT. What are you? I'm a hardware guy. What type of hardware? Right. I'm a software guy. What type of development like it gets so specialized. Marketing, I feel like. Is that now. Right? It used to be, I'm a marketer. But now it's like, well, are you SEO? Are you, you know, I don't even know all the different types out there. Uh, help me out here. You got SEO, and you got website design, and you got social media, or pay per click, right? And you're not going to find anybody who knows all of that. What I think today, because it's changed even ten years ago when I was doing this my marketing was still in its infancy of breaking out into these different silos, so to speak. I think today you need a marketing person to then manage the third party.

Todd Ortscheid: Yeah.

Pete Neubig: You know, to to strategize because the challenge with the third party is they have a checklist. This is what we do. We do three blogs, we do two website updates, and we do, you know, one email, whatever it is. Right. And you get that package and it's cookie cutter and it just doesn't move the needle, as far as I'm concerned. And so if you have a marketing person, they can say, well, wait a second, what's the strategy? And they can actually maybe squeeze more juice out of that company.

Todd Ortscheid: Yeah, I agree. I mean, that's a lot of what my marketing guy does. And plus what? Well obviously, my wife Abby, does for us, too, is kind of overseeing those things. Because we use PMW, we use Fourandhalf for some things. It's not just that everything's in house, but we oversee it in house and we do a lot of things like we write our own blog posts. We do a lot of that kind of stuff internally. But yeah, I mean, there's so much stuff that goes into this. So I mean, when it comes to backlink building, for example, that can be a whole job just in itself. Yeah, I could hire a VA that did nothing all day but try to build backlinks. So, you know, I mean, a lot of these things, it's not just one person who can do all of it. You got to manage a bunch of different stuff to make this all work.

Pete Neubig: Yeah. I also do believe that you can hire a remote team to run your marketing as well. And so you don't really need the marketing strategist to be in the States. You can probably hire somebody remote. The amount of talent that's out there, you know, in other countries is pretty high. Now, you do lose a little bit of those, you know, the English language is not their first language. So you do lose a little bit of the messaging potentially. But overall  for the amount that you can pay, you can get somebody to run social, or to run backlinks, or to run those things. So you can specialize and have more people, makes it a little bit more, you know, affordable.

Todd Ortscheid: Yeah. And that's what we do actually. I mean, our marketing, uh, director is in El Salvador and we pay him through VPM. So, you know, I mean, that's how we've done it. And, you know, it's not easy to find, though I will say that, you know, because it's a specialized thing, it's not as easy as looking for someone who has Property Meld experience and hiring a maintenance coordinator. You know, this is a specialized thing that there's not, you know, just a ton of people out there looking for. So it becomes more of a project to try to find that person, to make sure.

Pete Neubig: And also, I actually went the other way and I hired a marketing strategist in the States outside of the outside of the industry. So I wanted to teach them the industry. I wanted him to be more of looking at as a SaaS or a marketplace, more so than a property management firm. So, um, to be determined on how that works so far, the early returns are really good. Derek, if you're listening, you're my man. All right. Business coach versus non business coach. Let me say, I don't see you as a business coach. I see you as a consultant. You get your hands dirty. So I to say consulting is different than BusinessCoach. I'm a big fan of BusinessCoach. I hired a business coach. His name is Doug Whitney. Doug, what's up? And he was not in the industry, and I still believe he's a big reason why I'm successful. I have seen you a couple of times on the Facebook or ranting about, um, what do you call them? Uh, grifters. And, uh, like, you have some harsh words for Business Coaches. So the floor is yours. Why, uh, why do you not believe in a business coach for property management owners?

Todd Ortscheid: You know, I think of this a lot. The same way that I think of business books. I mean, if you go down to, if you still have a local in a Barnes and Noble or anything like that, and look at the the business section. I mean, you've just got a million books there. Most of them were ghost written. You had some business executive give a few bullet points to some ghost writer who threw a book together. If you pick up three of those books at random off of that bookshelf, you're going to get three different pieces of conflicting advice on what you should do. And frankly, all of them worked for somebody. And that's kind of the craziness here is, a lot of this is industry specific. A lot of it is personality specific. Um, just getting generic advice from a generic business coach is frequently not going to work for you because it's just it's not going to work in this industry. It's not going to work in your jurisdiction. Because California is very different than Georgia, for example. A lot of this stuff is just going to be very customized, and a lot of business coaches aren't going to be able to do that. Now, I will say some people just need accountability. That's all they need. They just need to meet with someone weekly who's going to kick their ass and say, you got to keep doing this. This was on your agenda to get done and you didn't get it done. And they just need that accountability partner. If that's all you need, then sure, a BusinessCoach can accomplish that for you. If you need someone to come in and tell you how to maximize your revenue at your property management company, though, they ain't going to be able to do that for you because they don't know how to increase revenue in this specific industry. So a lot of it just comes down to what you need. But in my view, I mean, let me put it this way. Anybody can call themselves a business coach. Anybody can hang out a shingle and say, I coach business owners. There is no credentialing required for it whatsoever. There's no degree for it. There's no school you go to for it and get some sort of official government certification. Anybody can do it. It's just like a life coach. So, you know, it's very difficult to figure out who the legit people and who aren't. And there are a lot of grifters out there. So just be careful with it.

Pete Neubig: Alright. Well said. I will say, where do most people that start a property management firm come from?

Todd Ortscheid: Real estate.

Pete Neubig: Real estate and or investor?

Todd Ortscheid: Yeah.

Pete Neubig: Those are the two big ones. Okay. Um, what happens to most people is they fall into property management. And even though they're a realtor and they should be running their realty business as a, as a business, let's be quite honest, 99% of them do not run their real estate like a business. Right. And so, this is what happened to me. I came from the investor side. I was a W2 team member for a big organization. And I knew IT. And I was really good at it, but I didn't know the pillars. I didn't know about marketing. I didn't know about sales. I didn't know about HR IT, HR finance, and operations. Right. Those are the pillars of business. And when I hired my business coach, he was part of a franchise called Action Coach International. And they had to go through some type of training program. And my business coach had a business that he took and sold it for many millions. And, you know, now he's doing this as a second business and kind of living a lifestyle business. So I agree with you that yes, anybody can hang a shingle and you should be buyer beware, right, of a coach. By the way, there's a lot of good coaches that are just for the PM space. And, you know, some of those folks, they've exited and they've grown a business and stuff like that. So you can find a good coach for the business. But for me personally, this is very near and dear to my heart because I didn't know my butt from my elbow in all honesty, about business. And without that business coach to teach me what what you would think is rudimentary stuff, right? Like marketing, and a lead, and the TOFU - top of funnel. Like, I didn't know any of the language, man. I didn't know any of the language. So, uh, to me, having that business coach teach us, okay, marketing is the first important thing you got to get leads in. This is what a conversion rate is. And it sounds so trivial, like. Oh, how do you not know that, Pete? But if you don't know and you don't speak business, you have to find somebody. Like, could you go to a business school? I would say that's probably the worst option. Like hire somebody who's been there. Like, what is it? Tony Robbins, you know, has the, what does he call it? He calls it modeling, right? Find somebody who's been there, done that and model them. Read some books, go get a business coach. So to me personally, I don't think I would have been in business today if it wasn't for the business coach. And it definitely if I didn't find NARPM, I'd have been sued 15 times to hell. I would have been sued out of business. So that's the reason why I'm a big fan of business coach but, point taken. All right, we got time for one more. Todd, I'm going to go. Something that's near and dear to your heart. Upcharging maintenance versus not upcharging maintenance. I can't imagine where you fall on the side of this argument. So what do you believe in?

Todd Ortscheid: So, I mean, number one, the biggest thing I would tell you is if you're not making money on maintenance somehow, then you're not running your PM business right. Because this is the probably the most important thing you do in property management. Um, and it is also one of the most time consuming things you do.

Pete Neubig: I would say it could be the most risky thing.

Todd Ortscheid: Yes. Absolutely. I mean, there's tons of liability risk here. I mean, there's a lot that goes into it. And more than anything, it's maintenance and leasing take up 80%-90% of a property managers time for the most part. So this is one of the biggest areas where it's consuming resources, it's consuming time, labor, everything goes into it. And the idea that you should just take your base management fee and everything has to come from that doesn't make any sense to me. For one thing, it's not fair to the owner. So let me put it this way. Let's say you have no maintenance upcharge, no maintenance fees, nothing. And you just have a management fee. Well, the problem with that is you have to inflate your management fee. In that case, in order to get the revenue that you need to run your business right. Because you got to pay for insurance, you got to pay for your maintenance coordinator, you got to pay for Property Meld or whatever software you're using. All of this costs money. So somehow you got to get the money. You're either charging it specifically on the maintenance, or you're charging it on the management fee, and you're inflating your management fee to cover it. Now, if I inflate the management fee to cover it, every single owner is paying the same percentage or flat rate or whatever it is, regardless of how maintenance intensive their property is. And I look at that, and I just say, that's unfair. I've got a client who just bought a brand new house and a new townhome community. That property is not going to need maintenance for five years, seven years, whatever it is. I've also got a client who's got a 1955 house that has a bad roof, the air conditioner hasn't been replaced in 20 years, the water heater is ten years old. This house is going to be a maintenance hog. Why does the owner, who has the brand new townhouse, have to subsidize the owner with the 75 year old house that needs tons of maintenance? My view is the fair system is that I upcharge maintenance. I use a percentage and that way the owner whose property needs all the maintenance is the one who's paying for the service they're getting and the owner who's very low maintenance on their property, they're getting the better deal. So I mean, that's kind of the way I look at it. I just view it as a fairness thing because we got to get the revenue from somewhere.

Pete Neubig: I would say, I would use it as a competitive advantage and use it as a marketing fee. So by saying I don't upcharge maintenance, I understand I'm losing some income there, but that becomes a marketing fee and it helps me convert. So I would be a big fan of being. That's one way to be very different than the competition. It's something that your potential clients really like. It's, you know, knowing that there's no other maintenance fee, hidden fee, so to speak. And so then you can use that as the money you're losing on maintenance. You just point to it's a marketing fee. So that's kind of my argument to no maintenance fee.

Todd Ortscheid: I mean, I agree with that. The only problem I have there is, most owners don't pay attention to it. It's kind of the thing. So when we get owner leads in, 99% of them are looking at only three things what's the management fee, what's the leasing fee, tenant placement and what's the renewal fee? And they ignore everything else. It's just like when you buy an airline ticket, all you look at is the fare. You don't pay attention to all the other fees. You're going to be charged. You don't think about what the parking is going to be at the airport, how much the sandwich is going to cost at the terminal.

Pete Neubig: That's a good point. And then also when they do get the invoice or the quote, even if the quote was 10% less or however, whatever the percentage you're using, they still are not happy with it, right? They're not happy with anything going on with their property. They think that they buy a property and nothing goes wrong, right? Even if it's built in 1950 and nothing's been changed. All right, point Todd on that one. Man, this has been fun. We're up against it. We're going to take a quick commercial break, and then we're going to finish up with Todd O. here in a second. We'll be right back, everybody.

Pete Neubig: All right, Todd. So, my first podcast with going round by round with with you. I actually thoroughly enjoyed it. We seem to fall on the same side of some things for sure. I would like to invite you on air to maybe be a recurring guest. And we'll get other PMs in here. I'll be the moderator, and we'll come up with some topics that we could debate. What do you think?

Todd Ortscheid: That sounds like a lot of fun to me. I'm always enjoying this sort of thing, so I'm happy to come back anytime.

Pete Neubig: All right. Somebody wants some consulting, not coaching, or they want to maximize their property management company, how do they get in touch with you?

Todd Ortscheid: Yeah. Our website is propertymanagerassist.com, so you can go there and find all of our information. If you want our newsletter, you can go directly to pmassist.substack.com and we release two newsletters a week. One is free, one is paid. But you can sign up for that right there and get all kinds of content from us. So yeah. Always happy to work with anybody in the industry.

Pete Neubig: The old pmassist.substack.com. I mean, it just rolls right off the tongue. Oh man. And if you want to be cool like Todd who has virtual team members especially through VPM, give us a call. I mean sorry shoot me an email, personally. I check all my email. I do not have a VA or an assistant that looks at my email. I look at all my emails. pete@vpmsolutions.com or just go to vpmsolutions.substack. Just kidding. vpmsolutions.com. And if you are not a member of NARPM, and you're listening to this, we'd love to have you become a member. Go to narpm.org or give the good people at NARPM a call at (800) 782-3452. And I really do need glasses. Todd, thanks so much for being here. See you, everybody.

Todd Ortscheid: Thanks.