What’s your Niche? Where does your Property Management company truly fit? The riches are in the niches.
During this Triple Win LIVE recording, we talk to Bob Preston, CEO of North County Property Group, CRMC. Throughout the last 20 years, he’s discovered the best way to differentiate his PMC.
Hear how Bob Preston and team decided they weren't for everyone and niched down on
- asset type
- investor profile
- resident profile
And instead of shrinking their business, they have $550+ monthly revenue per home, expanded their services to include in-home maintenance, and have had zero evictions.
We hope you enjoy this recording of our latest Triple Win LIVE!
You can catch Bob’s podcast, Property Management Brainstorm, here.
Got questions? Email us at triplewin@secondnature.com
To see what other professional property managers are doing in your area, schedule a call.
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Hosted by Andrew Smallwood and Laura Mac
Featuring Bob Preston
Produced by Andrew Smallwood, Laura Mac, and Carol Housel
Edited by Isaac Balachandran
Related: Check out the other property management podcasts we recommend for single-family property managers.
Episode Transcript:
Bob Preston:
I always try to save a client. Right. But still have to this day, we have some properties that fall into that 80 20 rule right. This small number of properties are causing 80% of the problems, whether it is an owner who doesn't understand who likes to complain, doesn't like to keep their property maintained, an owner who dragged their feet and then that leads to tenant problems, whatever it is, an owner that complains about our pricing and when they get their owner statement, they always call right, threaten to fire us, whatever. I will always try to save a client but for me, if I've done that twice already and then it happens again, for me it's three strikes and we're out.
Andrew Smallwood:
What is triple win live all about? Hey, Jonathan Cook had a great quote recently of just any time you get good people together like this and you allow great property managers to learn from other great property managers, it's going to be a good place to be, a great place to learn and just good people to be around. So great to see you here. There's lots of great questions that can advance. And for those of you that are here. One reward of being live is we'd love to prioritize you and your questions. So even if you asked one in advance if you haven't done this before, we just want you to use the chat. Just drop any questions you have in the chat. I think we even got, like, a favorite movie request. I don't know. We may mix one or two fun ones in there amidst everything else. And yeah, just put those in the chat. Once you have them in the chat, Laura we'll just communicate with you in the chat to bring you up on the Zoom stage so we can get you up here with Bob and myself then and get your question asked and answered live. All right, everybody, you're in the digital lobby bar, if you will, but enhanced with a little more structure facilitation prep around it to get the very most out of this. It's all about powerful connection, conversation, and collaboration happening right here. So we'll get this kicked off. Bob, Happy Triple Wins-day. My friend.
Bob Preston:
So good to be here. Thanks for inviting me. I have been so excited to do this.
Andrew Smallwood:
Yes. And I was sneaking a little bit of promotion in there, but certainly not totally sufficient introduction for Bob Preston. I'd like to add a little bit more just before we dive in and get started here, do a tribute break down and take people's questions so Bob won't brag on himself. So I had to go find out some facts about Bob and more. And I'll share just personally a couple of things that have really impressed us about Bob over time. And we've gotten to know each other much better over the last year or two. But if you don't know Bob, you can see right in the backdrop if you're watching this on video, not listening to a recording- North County Property Group, you can tell by his setup. By the way, the Property Management Brainstorm is an excellent podcast we would recommend people go check out tons of episodes, all kinds of stuff. You can look at there that Bob's done a great job of and he's just got that quality mic and quality voice, you know, that I could listen to over and over again. So we recommend checking that out. But a couple of facts about Bob's business that were worth highlighting. In particular, we mentioned this $550 of revenue per unit, and part of that is the management company, and part of that is also a maintenance company. And so many people have asked, man do I ever need in-house maintenance, to have my own maintenance company and operate that. That's something that Bob has done and generate great, great results and a great level of service for clients. You know, the other thing that really stuck out to me was that zero evictions, we’re all knocking on wood as soon as we say that, Bob, that there's no jinx factor here with that streak can stay alive for many more years to come and we can dive into people's questions they have about that. There's so many other results we could promote. But I also just want to promote Bob as somebody who he's an educator in this industry, you'll often see him on stages. He's a past president of Cal NARPM. We're very excited to be in Napa, California, with Bob, Karen, and many of the people here and many of the people listening at the Cal NARPM State conference coming up. It's great to be back in person for that. Although the virtual event itself was very valuable and what we could do in the meantime. So, listen, Bob's a past president. He is very active in the European space. He's an educator he's a leader. And there's many ways where he's differentiated and leading in his market, they are north of San Diego and excited to get into that today. Bob, listen, I'll probably keep introducing you for 10 minutes until I feel like I've sufficiently introduced you. But is a way of starting. Is there anything else you feel like people should know about you personally or your company? That would be a good backdrop before we start.
Bob Preston:
Oh, my gosh. Well, first of all, thank you for that amazing introduction. Most of it's true. I think the one thing I'd like that I'm probably most proud of about my accomplishment in this industry in the business is that we we’re NARPM CRMC. We got a designation for that this year. We're the only CRMC in all of Southern California, one of four in California, only one of about 60 in all of the country. So for me, if I like, you know, put a feather in our hat as a company, that's probably the one that I'm most proud of. And it really, really took a lot of work and not just by me, but by the entire team. Right? It shows the dedication of the team of people that I surround myself with every day. So that was one I'd like to point out. I think that, yeah, we're a team of 11 people. We've been doing this for about 20 years. We like to give back to the community. That's another big part of our gig here. And that's, that's pretty much sums it up. Oh, I'm also the Southwest Regional Vice President this year for NARPM. Kind of a big deal. And I see some Southwesterners from Nevada and Utah on today, and that makes me also part of the NARPM National Board of Directors this year.
Andrew Smallwood:
Bob, thanks for that. And everybody, we're going to dive right in now. You know, one of the things we wanted to start with was I think you and the company have made a very conscious and intentional choice about who is your customer? Who do you serve? And it seems like North County Property Group isn't for everyone necessarily. Right? Every property, every person working with them directly that you've you've made a choice about who you are for. And could you talk a little bit about what that is, how you define your ideal customer, and what went into that decision?
Bob Preston:
Super! Great question. And I love this because it is true when I first kind of backed into this business, I was a former Silicon Valley guy and I moved back to San Diego to be closer to the three kids I have, from a previous marriage, by the way. One of them now is the second in command here at the company, Brad Preston. But when I got into the business, and I was starting things out, I learned really, really quickly that sometimes less is more, you know what I'm saying? And the 80 20 rule made itself loud and clear in my business right away. The worst properties, and in the early days, we would take on any property or I would take on anything, and in the early days, the worst properties were taking up 80% of our time. So based on where we're located, as Andrew said, we're located in the northern part of San Diego County Del Mar, to be exact. There there was no real clear dominant property management company north of San Diego proper, and that covers more than half of the county's, right. And so I was brainstorming names to call ourselves. And so the concept of a North County property group, that's where the name came from. We focused on North County, and part of that is the coastal communities of North County are for the most part high-value properties, beach homes, things like that, where we started to carve out a niche. And as I did that, I realized, wow, okay, 20% of my properties are making up, you know, 80% of the margin here. So why am I beating my head against the wall with these, you know, sea level properties with sea level owners and sea level tenants? And at that point in time, we just started all of our messaging and our positioning and directing kind of our outreach and pitch to kind of the higher end of the market. So that is what we call our niche. Also allows us to, I think, promote ourselves as having high value. I don't like to say high-end management services, but high value, so fine, you know, we may not be the cheapest. That's okay. And if you don't like that, don't come to our company, right? But I can tell you, and this is what I say to most owners, is that we have a lot of high-value properties, a lot of high-value owners that trust their number one asset, the North County Property Group. And that makes me pretty proud.
Andrew Smallwood:
You know, it's a conscious decision to say, hey, you know, Walmart has obviously built a big business. Right. And a great business in its own right. And it's not to say that one is better than another, but, you know, you look at like who Ritz Carlton serves, you know, as opposed to like who the Hampton Inn serves. Right. And while both can be successful and people have different definitions of business success, you know, it's pretty clear who's wanting to stay in the Ritz Carlton is not the same group staying in the Hampton Inn. Right. And so I'm sure you've just seen as you've committed to that, hey, there's a resident profile, right, that we're specifically serving and there's an investor profile. Right, that we're specifically serving and ultimately a property profile, it sounds like and I think you've mentioned, you know, property values of $1,000,000 or more, but they're rental homes. Yes. And, you know, hey, maybe these people even expect a higher level of service. They want a higher level of service. And so you're willing to charge more so that you can deliver on that higher level of service and high relevance to them. So it's the highest value type of property management that can be done for them. And am I restating that correctly or is there something we should add to that?
Bob Preston:
No, I think that's a really good way to point it out. I'm not saying that all of our properties are Ritz-Carlton because they're not you know, there are we have a lot of really nice condos that are less than $1,000,000. We have some properties that aren't so great. And we do have a varied portfolio. But in terms of our target and where we position ourselves, our average is about $1.25 million probably higher than that. I haven't done the analysis well because as we all know, prices are going up. But remember, some of these are, you know, $10, million beach houses, right? So there's an average in there that kind of works itself out. But yeah, I think that's very, very well put. There is a difference between what people expect and what people want. And it's not always charging more, but we can get this. We can use the same percentage of the property management fee that somebody uses if they're doing multifamily apartments. But our revenue per unit is like way higher than ours. And so that makes it worth it to me to provide that extra level of service when each unit is putting out more revenue and more profit.
Andrew Smallwood:
I think some people may think like, oh yeah, like I read about something else. It's just a free lunch rate, you're just making more. But the reality is, we’ll also expect more, right? And so, yes, you have a higher revenue opportunity, but it has to be met with a high level of service. And you've obviously focused on that and done a great job of that by being able to be focused.
Bob Preston:
And the properties can be more complex. Right. We have some homes that have three or four water heaters, and three or four HVAC systems but that's also a business opportunity that can be turned into an ongoing revenue stream.
Andrew Smallwood:
And so there is more maintenance on these properties, probably as a cohort than others. But we were talking earlier about, you know, the maintenance company in the maintenance revenue, it's more revenue. There again, have to step it up on the service. And I just love that you made this decision where many people aspire to be the biggest. Right. And what you did, as you said, hey, we're actually focused on being the best for a specific group and we've quickly built a viable business. But now we can differentiate against other folks- here's really who we're for, what properties we're for, in the different ways that we do things in order to deliver the highest value possible to this group. It's a great example of whether people want to duplicate that in their own market or take a different approach and say, I'm going to initiate a different customer or a different property profile. That same playbook ultimately can be, you know, a way where people use their strengths, their interests, their passion, you know, to do it to such an extent that you have to create the success you have. Now, I want to ask you about this maintenance company, Bob, what was the decision to in-house that and the process, people have, you know, a lot of curiosity around you know, what went into the decision to ultimately do it. And then, you know, what were the key things as you started to do, to get it to the point it is today where it's very successful?
Bob Preston:
Great question. gosh, probably 15, 20 years ago, just kind of for the heck of it, I decided to get my general contractor’s license. I wasn't planning to build houses or anything, but I had done a couple of additions on my own home about 15 years ago, and like I knew I could pass the test. And so, in California, you can demonstrate to them that you're what's called an owner builder and that you have the experience and you've done enough work where you can get qualified to sit for the exam. So I did, I passed. So I'm a general contractor, right? I have a general contractor’s license. Never really used it other than maybe talking certain you know, supply vendors into giving me better discounts at Home Depot and stuff like that. Right. But early on in the stages of developing North County Property Group, we were just kind of passing maintenance or just getting because maintenance was more of a Whac-A-Mole thing. We had a small team. We just wanted to take care of things quickly, do it with, farm it out to plumbers, whatever. Just pass it right through to the owners or pay for it. And then I think it got to be to the point where at the end of the year, as I was kind of looking at the books, hey man, we paid, you know, $350,000 out of our trust accounts for maintenance. I need a piece of that you know, it's like, wow, if there is one area that I could learn how to monetize, it would be maintenance. And so that’s what I did and it's different than in-house maintenance, certainly is, I've just leveraged my General Contractors license to start a sister company called Maintenance Sink and it operates on a general contractor license where we sub out all jobs. We demand the best pricing from our vendors. They're all vetted they all have liability releases and all that. We send them out on jobs just like you would if you hired, you know, a general contractor who was going to bring on different vendors of different trades. And then from that general contractor, you get one bill at the end. That's how we run it. That's kind of a separate company, but it still rolls up under the same organization. So that's how I've chosen to do it. It works well for us. We have a separate small team that manages the maintenance. And by the way, having that maintenance focus for that team of people that work for maintenance sink, it really decreases the stress and strain of our property managers when it comes to four North County Property Group when it comes to handling the maintenance, understanding what's going on with repairs and maintenance and facilitating, you know, getting vendors to jobs I mean, all that's handled by these other groups of people, right And so it really reduces the pressure on the property management team to where they can kind of focus on staying legally compliant and moving people in making sure people have keys, you know, the inspections at the property and things like that, that are more important to the kind of legal compliance perspectives of property management so that's how we've done it.
Andrew Smallwood:
That's great. Yeah. Any follow-up questions we all want to have certainty. We've got Regina cued up here for a question, so we'll bring Regina to the stage.
Bob Preston:
I think we met one time in Kansas City. We're up on the right track.
Regina Ingram:
Yeah. Yeah.
Bob Preston:
How are you?
Regina Ingram:
I'm good. And I'm glad you said you had more than just those $2 million properties because I was thinking my question wouldn't be valid, but. All right, let's, let's take the 10 million beach houses out.
Bob Preston:
Yeah, of course.
Regina Ingram:
So on your other properties that are like normal people's properties, what would be your top two reasons? Because I'm trying to figure out what my reasons are going to be to remove properties or maybe owners from your portfolio management.
Bob Preston:
Really good question. I like that question. It comes up with us. It does on occasion. And I always try to save a client. Right. But still have to this day, we have some properties that fall into that 80 20 rule right. This small number of properties are causing 80% of the problems, whether it is an owner who doesn't understand who likes to complain, doesn't like to keep their property maintained, an owner who dragged their feet and then that leads to tenant problems, whatever it is, an owner that complains about our pricing and when they get their owner statement, they always call right, threaten to fire us, whatever. I will always try to save a client but for me, if I've done that twice already and then it happens again, for me it's three strikes and we're out. We're not going to keep doing this. So that's kind of where it comes from. So I would say Regina, it's the clients that I know we all have them. We've got them so we keep bringing new properties in. We'll always give it a try, but if it gets too crazy, too much of our time, too much conflict, and it's kind of a C-level property and C level owner, then after some amount of time, then we just remove ourselves as a property manager and move on.
Regina Ingram:
And like that, C level owner, I've never thought of that. I know about I have C-level owners. Yeah.
Bob Preston:
Yeah. We can go through an exercise to go in a little bit more detail if I guess takes another minute or two here and here is that there's an old matrix that's very famous by the Boston Consulting Group, kind of four quadrants, right where you have your and we, we use the same quadrant where we have A's, we have a C, you know, and then down in the lower right-hand corner in the Boston Consulting Matrix terminology it's you've got your stars, you've got your cash cows, you've got your question marks and then you've got your dog's right. And it's, it's a way to assess your product offerings. But you could do we use the same kind of theory to assess our properties every year. And the theory being, okay, the ones that are causing the most problems, we don't call them dogs we just call them okay. We kind of exit stage, right? If they're in that C category and they're causing too many problems. And those are the ones we release from, kind of eliminate that product from our product line, if you will.
Regina Ingram:
Thank you. Appreciate it.
Andrew Smallwood:
Awesome. Regina, great questions and great stuff there. It's a cliche to say one person's trash is another person's treasure, right, so to speak. But there are property managers, again, who orient their value creation engine. Right. And how they differentiate and who they are for to deliver for one group where, you know, it could be different. Right. The kinds of behaviors or the profiles of property owners that somebody would want versus another. We talk to people all the time and say, I love working with intentional investors and I can't stand working with accidental landlords. And then we talk to other people who are saying, I love working with accidental landlords, and here's everything that we do, right, to educate them and set things up so it protects us and also them. Right? And we're able to build value in a great way for them. And we can't stand, you know, the intentional investor who's always pushing us for 4% management fees and everything else. Right. And so there's again, it's not necessarily that a specific type of person is exactly what you want to model, but I love what you shared there, Bob. Up here is like, here's a matrix to think through or just help define what that is for you and pay attention to it. I love that you have a three-strike rule, so some great nuggets there that people can take away. We have more questions coming in.
Laura Mac:
That's wonderful. Your question that you asked is very related to what we're talking about right now and I saw you step back so we thought we'd bring you up and see if you were free to ask your question.
Jonathan Cook:
So I've asked two questions and I ask the question for tomorrow's involvement as well. But I want to ask Bob about real estate investments. Right. So my question was, how do we see the future of real estate investing fitting in with property interest? Is that roughly what I had asked Laura something along those lines? I don't know right now. It was a very deep thought that I had at the time. Yeah, that's what I have a conversation about today. So it was all kind of a prop and wires. You asked what sets a PM apart as well. So exactly what you said. The best part was thinking about in the end of the current realm of the big, big players in our industry or Wall Street money and how they are how they have a tendency to self-manage. How can we stand apart as property managers to get what we know how to do better than the average real estate investor? Show them how to do this, how do we stand apart as property managers to say, yes, we know that some of us don't know how to do this, but I do. How do you do that?
Bob Preston:
Wow, that's a tough question. I think I think it's a little specific to each market. And knowing your market and being able to prove that right. Because we get questions from people all the time who are out of state, who look at our market and they say, hey, I'm from you know, you guys are in the South somewhere or Atlanta, I believe I, I can't remember exactly, Jonathan. And hey, I want to, you know, I'm interested in investing in California. Yeah. San Diego is is a target market for me, by the way. You know, gosh, I might want this to be a long-term play for as a vacant rental, but God, it would be kind of cool to have a vacation home that I rent on Airbnb. What do I do? How do I do it? So right. These are the kind of questions we get and is very specific to our market. So I have a chance to prove that level of knowledge and input and advice. I'm not kidding, on a daily basis, I get calls like that's right. And so I guess that's my answer if I can. How do we prove it more broadly, nationally? I think that's in large part probably why we're all members of NARPM and organizations where we can bring up the property management industry as a whole because really, our competition isn't each other. It's self-managed, like you said, with institutionalized investors and self-managed mom and pops. Right. Those are people we want to bring. And then educate, educate, educate. We do a lot on our website. I'm sure you guys do, too. We blasted out. We share as much as we can, like today, hey, this is what I can do for you. You know you let you give us a try. Maybe we don't we're not that blatant. But I think the constant education and showing people that, you know, what you're doing is one of the reasons I started my podcast, by the way, is a good way to demonstrate your level of knowledge and advice.
Jonathan Cook:
And I think that that's probably the answer that I see a lot of going to. Is the education-focused, like understanding what niche we all fit in, how real estate investors because we all in some way, shape or form with real estate investors, whether an investor owns one single thing or
Bob Preston:
Absolutely. That's right.
Regina Ingram:
8, 30, a couple hundred. So it's explaining to me what I find it the fact is I know other people in other parts of the country cannot find it the best. I know basket case and the business development in me just can't help but do it. I find it really great that we have people like Andrew that make these wonderful groups of us all the time to get it together and share our knowledge and so we can all help each other realize what you said a second ago. We are not each other's competition. Our competition is the uneducated self-management team.
Andrew Smallwood:
But you know, it's an interesting question of, you know, Bob, I'll follow up on this. It sounds like, hey, you know, somebody like Jonathan or anybody on this call, they may be talking to a prospective investor and they may hear, hey, why would I acquire a property or bring my property to you versus sell it and then put all that money into a right. Right. Why? You know, why would I do this is a long-term rental versus is a vacation rental is something that you may be encountering more in your conversations than other folks. Right. You know, maybe I'll get to this question, Bob, of what is it that an investor knows or has chosen, right? Like they've made the choice or they know this, right? They believe this, that if you see that, then you kind of know this person is actually ready to buy. Right. North County Property Manager Group Property Management versus this person hasn't made this choice or they may not be aware of this information. So I need to discuss that with them, educate them, and then let them make their choice.
Bob Preston:
I love this question, but I'm if it's okay with you, I'm going to change the narrative on you because it's not so much what they know. It's more about what they don't know and that becomes apparent super quickly with most investors who call me and don't know our market or don't know enough about the California market, for example, to be in touch with the legal complexities of being a landlord. There are so many people that think they know it and that they can do it just as well as us. And after a brief conversation, you know, people have kind of left scratching their heads going, Oh, boy, I don't know if I want to do this, and I'm not trying to scare them. I'm just trying to be brutally honest that there's so much complexity and involvement in it. That, Wow, you know, perhaps you should be. It's just like if you go to court, you're going to get a lawyer. Maybe if you're renting your property should have a property manager. So that's a big part of how we try to communicate with people like that, by the way, in a very supportive, encouraging way. But to show them basically through, you know, the content that we share and our own knowledge what we can do for them, and that's how we like the project. Did that answer your question?
Andrew Smallwood:
That's great. I think if not, then we've got more people here who can jump in locations. We've got Steve Pardon cued up next. We'll bring Steve up.
Bob Preston:
Hi, Steve.
Steve:
Hi, Bob. Hey, you know, we talk a lot about being real selective with our owners. We're super selective with our owners. Once they're in. I can't be as selective with a tenant. I can't fire them as easily. And when you're talking about higher-end rental, you had things in place that you require out of your vendors. Do you have procedures in place that you do in your office? This will sound awful, but we're among friends here, for a higher class of tenants. Look, my wife expects something done a certain way differently then maybe some other people would expect that. And when you're talking about a higher-end rental with higher-end fixtures and higher-end things, you probably have higher-end people. You have challenges with that, and how do you address the work that is done? Because you can have a good owner, but, you know, still maybe it's not up to snuff of the person that is renting the place. How do you deal with that?
Bob Preston:
That's a really good question, and it's a complex one and it's a complex answer. Traditionally we've always been pretty good at screening rental applications based on kind of the old-fashioned way, right? We check their credit. We do a very thorough previous landlord verification. We check with their employer. Now, one could argue, wow, there's a lot of fraud in that we don't really find it to be as much of the case in our category of rentals. Right. It's easier to flush out. What we do get are people that come in with well, I'm self-employed. There's lots of arm-waving and smoke and mirrors. And, you know, this is how much money I make. And they're driving a Bentley and you're and then they, you know, you check their credit and they've got a 500 credit score, and their tax return shows they made $59,000 and then they show their business account and it's got a million in it. And we just stay away from people like that. So I mean, that's one way we try to make sure they're rock solid now. Doing a thorough job of that on the tenant side has become much more difficult as we've scaled as a company, right? So we're poking around at some of these newer technologies that are doing that a different way through this kind of open banking technology. And if you're going to broker-owner, I would encourage us all to explore that a little bit because there are some solutions out there that are taking a different approach. They base it on, you know, the deposits and withdrawals from your bank account. They look at all these kinds of automated things that might end up being the wave of the future for our industry and kind of, I guess, vetting out those problems. Right.
Steve:
And I think I meant more on you're doing maintenance and you're hiring vendors. I mean, when you have a very good tenant. You got them in there. I got you. Are there expectations a lot higher for your maintenance and for your procedures?
Bob Preston:
They can be. I mean, we have thousands of personalities as tenants and even the owners that are in our homes and so on. A spectrum of that many people, you're going to have super picky people and you're going to have people that like, hey, we're fine with the freckles. Don't worry about it. So, yeah, we have our house here really near the office where the owners thought the oven was okay, was like head-on these glass surfaces with scratches and the tenant moved in and after being there for about a week, decided to like it. And so here starts the conversation. Right. Okay. What is working? Yes. Has it been in the house for a long time? Yes. If you are willing to replace it, no. But at what expense then do you have this argument in this ongoing nagging thing? And finally, we just try to figure out a solution. And we worked it out and we made a compromise but those are some of the higher, I'm going to say higher maintenance. But I don't mean physical terms. I mean, you know, higher dealings, I guess that you might find with some tenants who are paying, you know, six, $7,000 a month for rent. Right. They want more and they expect more. I mean, said that you know, dude, you saw the oven and the stovetop one before you moved in. You know, so why is it now a problem? Sometimes we have to make those, you know, make those comments back and just draw a hard line. That's always tough.
Steve:
At all levels, the dichotomy is the same. You have to do some that, some that like, some that don’t.
Bob Preston:
No question, right? Because depending on how big or how expensive your house is, you're going to find freckles in any rental home. And it just depends upon how much the owner is willing to do and how much we're able to do. There was another question there, how do we vet our vendors and our technicians?
Steve:
Yes.
Bob Preston:
That's a tough one. Right? Part of it is making sure that we get them and are really careful bringing them into the program, that they understand our pricing structure and that they're willing to participate in that and that they're going to do things the way we expect that is part of our contractor agreement we put in place. And if they kind of earlier we're talking about a three-strike rule, the same thing with our vendors, three strikes and you're out. And that's just the way it's going to be. It's going to be harsh. But if that's how it turns out, then guess what? You know, the best vendors are going to get the bulk of our business. One thing that I do is every year remember I talked about that moment of truth when I looked at our panel and I was on our panel is our balance sheet and I saw that there was $350,000 that went out on, you know, maintenance checks and I wanted a piece of it. Well, we took that. We broke it down and so we do that every year, and then we send it to our vendor group. We call the preferred vendor list and we say, Okay, here's how much we spent with plumbers last year, want a piece of this, right, want a piece of me? Well, okay, you got to do this. You got to do this, you got to do this. And a lot of that's making sure your insurance is in place. You give us the best pricing, because if you don't do all those things, then you're going to get taken off the list.
Steve:
Thank you.
Andrew Smallwood:
Awesome. Steve, thanks for the questions and the conversation. It's interesting when you're working with the clients. I like this father, remember, is talking of like the average credit score for your residents is like 744 or something like that, right?
Bob Preston:
776 yeah.
Andrew Smallwood:
776. Okay. You know, and you think about the risk, you know, part of what goes into zero evictions, right? Is, Hey, there's a standard for a resident, how do we attract the best residents? And I know you're your resident benefits package and things like that help attract people and keep them in place. But it sounds like there might be some other policies and procedures. I think you do some like preventive maintenance and actually proactively going to the property versus just handling maintenance reactively. Could you speak to a little bit of that is just kind of a cherry on top for what Steve was talking about of your level of service? You get to the properties.
Bob Preston:
That's a really, really good question. You know, we like to go into properties because with the way we run our maintenance and the way we care for the properties, we like to go in at least twice a year. Now, I know that a lot of property management companies don't want to do this. It's difficult to scale. We do what's called a midpoint inspection. We don't call an inspection in front of the tenant. So like among friends here, midpoint inspection, we call them a midpoint condition report, something like that, where we get our we get someone in to use the inspector or similar inspection tool with photographic evidence and we take pictures, you know, appliances, all those kind of thing. Well, why? Because then I give that to our maintenance manager for a maintenance company and say, look through this report and see if there's anything we should be paying attention to. And almost inevitably we can identify enough maintenance activity just off that one inspection to pay for the effort to send somebody out to do that inspection. So I look at it a little differently, right? I don't look at it as an issue of scalability or a cost that, you know, drives that windshield time associated with our team. I look at it as a business opportunity it's just my way of doing things right to offer better service and also drive business for the maintenance side.
Andrew Smallwood:
That's great. You know, a quick follow up and then I think we've got Amber, who will queue up next in just a moment and then maybe around after that, you know, could you share a couple of things, Bob? Like what are a couple of practical things done on these proactive inspections? Because I think a fair question people ask is, okay, the owner can pay for it or it gets paid for somehow, right? And we go out there, you know, what are examples of things that you do on every six months or once a year type of inspection that it's easy to see hey, once that's done, that's created a triple win outcome for everybody. What are the things that you find or prevent or diagnose or certain? Not the whole list because we don't have the whole podcast to go through it. But what are some of the top things that you guys identify and say this really drive a better outcome for everybody?
Bob Preston:
Sure. Yeah. You'll love this. When we look to see if there are any air filters lying around the garage, right. If they've actually been installed by the tenant or if we need to do that while we're there. It's kind of a funny one, right? Because that does happen, but for the most part, we're there to cast our eyes on the property to be able to check that mark with the owner and to let them know, Hey, here's what we're seeing and look, some properties we go to and they look great. There is there's no business opportunity there. That's fine. Then at least we can rest a little easier that we've got a good tenant in the property. Others it's just more or less, I guess I call it a minimal light. You know, for those people who know the term mi-mo in California, let's move in and move out so it's kind of like you're moving in inspection or you move out inspection where you're moving somebody in or out and you're doing a really thorough job. This is more of a light if you will. We still use the inspector or a similar app. We, you know, look under sayings, we check the appliances. We're just looking for anything that in our mind a good property manager should know and communicate to the owner and should suggest that it be fixed or we recommend and we kind of break them into three categories one is, oh yeah, this has to happen, right? We went to your property. We saw that this is going on. We got to fix this now. The second is recommended and then the third category is okay. These are things we're seeing that affect the health, the long-range health of your property. We think that this is something you should pay attention to, but if you don't want to do it now, we understand this is more optional, so there's have to have recommended and optional.
Andrew Smallwood:
Yeah. Thanks for walking through that. All right, Amber, we'll bring it to the Zoom stage. You can come off mute. I'm not sure if you have one question or two different questions, but any questions you have. Feel free to just come off mute on Zoom and ask away.
Bob Preston:
Hi Amber.
Amber:
Hi, So I just asked you because you're in California. Yes. So are you allowed to have are your maintenance employees part of your actual management company or are they a separate entity?
Bob Preston:
We are a separate entity.
Amber:
Because I have the same thing here in Nevada because with the contractor's board rules you can't have handy management as a person as an employee, because for the contractor work rules, it's $1,000 or less with labor and materials to pay anyone.
Bob Preston:
I'm not exactly sure I understand the question but remember I said that we don't have any technicians or actual repairmen on staff. They're all subcontractors in our case.
Amber:
And I was late joining in the call. So I might have missed that part, but that's why I was curious if in California they're actually part of your staff as employees.
Bob Preston:
The technicians, then the people that get sent out to jobs today are not. That's just how we've chosen to implement it as we grow. And if someday we have thousands of properties, yeah, sure, we'll probably have trucks. Right. And but again, it's a separate entity. So from that perspective, it would just be like running a contractor company.
Andrew Smallwood:
I'm making sure I understand this to Bob, but hey, two entities, separate business entities, right? The property management and the maintenance arm. And then what your maintenance arm does is effectively coordinate general GC work, right? Crown coordinating and handling that. But they will subcontract out the actual electrical work or plumbing or HVAC or whatever needs to be done.
Bob Preston:
Correct. And you know, the way we position that is like, look, what other maintenance company or contractor in San Diego will you find that will take any job, right, any time of day, you know, seven 24, 365 and do it gladly. And quickly and efficiently and get your property in good shape for your tenant. You know, there are many places you can call for that. So that's what you armaments company. That's right. They're built to support our property managers in our property management operation.
Amber:
Are you actually a GC?
Bob Preston:
Yeah, exactly. Licensed general contractor and the company maintenance sink is, is that is the sister company. Right. So we're related to dual ownership or ownership of both. And of course, we disclose that to our owners as well.
Andrew Smallwood:
Any other follow-ups?
Amber:
Because I do the same thing. So that's why I just was curious how in California it is and I know California is a lot tighter on certain rules in a lot looser on many others. Is so curious how you were handling that.
Bob Preston:
Good question.
Andrew Smallwood:
Yeah. Thanks for your questions, Amber. Much appreciated. Laura, who do we have next?
Laura:
Ron submitted a really awesome question, and we can read it on his behalf. How did you choose your staff and did you have certainty that they would fit into the mission and goals of your business? And if so, how did you accomplish that?
Bob Preston:
Wow. Tough question. And it depends. Some of our best employees are people who have randomly reached out to me, present themselves, and have been persistent and, you know, people have just found us and walk through the front door. And we have one person who on our team has been with us for gosh, almost ten years. When I met her, she was working at Kohls in the cosmetic department of Kohls. Okay. Was from Ross from Russia, then speak very good English joined our team and now she today she's a broker associate and our leasing manager handling all the entire leasing operation know. So when we find good people we treat them as gold and we just help them advance to treat them while giving them good benefits. Right. Compensate fairly and equitably and my theory towards having staff and employees is I wouldn't do something for one person. I wouldn't do it for another person. In other positions, we struggle with. I mean, finding good property managers is a tough ask. I mean, really a tough assignment. I'm sure we all I'll find that when we do open up an ad, it's usually on indeed. And we have and go through kind of the assessments that are on and deed answer the phone interviews. We put them through a pretty thorough scrubbing, you know, with meeting people inside the company, not just me as the owner of Brad, who's my son, who's the director of property operations. But you know, once we get a shortlist putting them through the wringer with everybody, and then we kind of make it a group decision, okay, who are the best candidates? And there's a chart that I have up in my office that is kind of our culture chart that's about customer service. And, you know, in the middle of the stakeholders, the clients, the vendors are our tenants. And it talks about customer service that we expect. And I just come out and say, hey, look, if you can't live up to this level of customer service, or if this type of philosophy about our culture isn't, what's going to make you want to get up out of bed and come to work every day? I don't take this job because you're not going to do well here. I mean, and then we find that that's the case. The people that don't fit in present themselves as such very quickly. And so kind of the old adages, you know, take take a long time to hire, but, you know, short time to fire. And that's kind of where we have always felt about it. It's like there's a problem, face it and move on because 11 wrong people in the wrong seat can affect your whole team.
Andrew Smallwood:
Great question. Yeah. We are coming up on our schedule. Time does you know, we sometimes go a few minutes over if we can. But hey, we've had some questions submitted in advance here that we'd love to get to.
Bob Preston:
Oh, boy.
Andrew Smallwood:
Most importantly, this may be your toughest question yet. A favorite movie that came through. We're going to ask. It'll be a quick one.
Bob Preston:
God, this is a slam-dunk Scottish heritage. So Braveheart, got to be, right? Your heart is free. Learn to follow a famous William Wallace quote from Braveheart movie.
Andrew Smallwood:
I can tell there are people who can just hear freedom extended ringing out in the back of their minds right now. A cool. All right. Thanks for taking a fun one. We've got a couple more here. What's the most interesting fee or program that you have that nobody knows about or maybe few people know about? What's one of the unique or interesting fees or programs that you have.
Bob Preston:
The most unique fee? And I'm not sure it's unique, but it's the hardest one to work on. How about that? Can I answer it that way? It's the most challenging, and it's what we call out of scope of service, right? We get asked by, you know, if you're not careful in this business, you're going to get taken advantage of because owners would call Townsville call and say, I need this done. Can you go do it? Let me give you one of the common examples. During the mortgage rates were kind of coming out of now the loan book, you know, Bob and team, I've got an appraiser I need to send to my house because I'm going to refi so I can pay less than my monthly mortgage. Can you find us an appraiser and meet them there so they can do a walk through the house? Yes. Like sure. That's not part of property management though. So, you know, training my team to be able to track out a scope of services, track their hours and then capture that and an hourly fee. Super, super important. And you'd be surprised how quickly it adds up but it's the most challenging, one most challenging for you to track. And we've most recently, about a year ago implemented QuickBooks for our corporate books, and they have a tracking time tracking module that you can put on your phone. And so I just tell everybody I give Melissa's categories if you're going to do this, here's what's expected, right? Turn on your app, track your time, your mileage, all this kind of thing. And, you know, we charge some nominal hourly fee plus mileage, and then that gets put on the owner statement at the end of the month.
Andrew Smallwood:
Yeah, the most challenging one. Yeah, for sure. I'm thinking we'd like to highlight that. I also think is unique that you do we you know something about being a triple win-driven property manager and the idea that, hey, we're doing property management, that, you know, benefits and we think about all parties, but so something that kind of stands out. And part of the idea behind triple win is when you bring value to the whole community and all stakeholders in the community, that community is more likely to embrace you not just stick with you, but also talk about you and, you know, spread the word to other folks. And I know you guys have a focus of really being like a pillar in your community and you've made this niche decision in your business about who you're going to serve. And many of the properties in North County you wouldn't serve, right. And wouldn't want to want to serve, but you do as a byproduct of your business, have some programs, things that benefit the whole community, and people that you wouldn't necessarily work with. Can you talk a little bit about that and what you guys are doing there?
Bob Preston:
I think you're referring to our social responsibility or our Community Responsibility Program. That's right. Yeah. Kind of collectively corporate responsibility. We're big corporate responsible in terms of recycling and sustainability and all these kinds of things. Right. But also in terms of our community and social responsibility to give back. Again, it was one of these aha moments, Andrew, at a certain point of our company development, we got to the point our profitability allowed us to start thinking this way. And again, it was kind of at the end of a fiscal year. And I looked in our books and I said, Yeah, we need to start giving back. We need to start doing some things. This market, this industry, this business has been really good to all of us. We should start doing more. So we started up internal philanthropy. We call it CPG Cares, and we have two favorite charities through which we contribute and serve time. One of them is Habitat for Humanity. If you've never done that, it's a blast. Like we actually, you know, get in our jeans and T-shirts and work boots, and we'll go work for a day on a site in San Diego and give back that way through our time. The other way we like to give every year is to the San Diego Food Bank, which is an incredibly gifted organization and well-run organization by the Jacobs family. You know, the founders of Qualcomm here in town. And we always send out our Christmas card every year that, hey, in lieu of gifts or any other thing, in the spirit of giving, we're going to donate, you know, to like we've done it to $2,500 last year to the single foodbank to help families in need at this time. And we get a lot of good feedback from that. And it's kind of a talking point that we're proud of again. And we, we now use it to promote ourselves. But when it comes up, we're really proud of it. And we, we, we get asked about it a lot. One of the things I did last November during the election is right when we had the elections, as I join this organization, that's called Time to Vote. I don't know if you've ever heard of it. And basically, it's a pledge by CEOs and corporations to say, okay, I'm going to give no questions asked. I'm going to give my team members at least 4 hours off, paid to have time to vote. And I think I put that up on Facebook and a couple of social media posts and oh my God, I got so much great input on that kind of thing. So when you give back, when you do the right thing and you get recognized for it and it's kind of like anything you volunteer for, it's going to come back to you tenfold.
Andrew Smallwood:
That's really cool. You know, it's a lot of people in business think like, Hey, I have to choose between doing well as a business and doing good for others. And it's part of that whole triple win mindset of saying, instead of choosing an either or, it's a both and type of approach, right? We can do good by everyone in our business, and even while we're doing well, we can do good in our community beyond that and and support the community beyond that. Again, that just endears you more and more to the people around you in your community. There's a benefit that comes back there, you know, sometimes indirect ways, sometimes indirect or over time. But thank you for sharing that, Bob. Much appreciated. Thanks, everybody, for participating today. I hope you guys enjoyed it with Bob. I just want to say thank you again. My friend. Thank you for being generous with your time offering to do this, stepping up to do this, answering the questions, taking them live, doing the follow up questions. You know, it's not for everybody, but we really appreciate you doing it and all the the value that you shared here today and for being generous with your time and being with us today. Much appreciated, my friend.
Bob Preston:
Thank you. And I the phrase came out of this, Bob party. Okay. Thank you, everybody, for the Bob part, as I said.
Andrew Smallwood:
There you go. All right, everybody happy, happy Triple Wins-day. Keep stacking your triple wins. And we'll see you in a couple of weeks on our next triple win live.
Bob Preston:
Take care. Thank you. Cheers.