A lot of people in the real estate industry may be in a dilemma whether to go into property management or not. Dylan Marma says there really is no right or wrong answer. Property management is not about the fees; it’s more about something you do to control your assets. Dylan began his real estate investing career in 2015. In early 2018, he joined the team at Rand Partners to expand into additional markets throughout the Southeast as well as to build out the systems to open up the doors for outside investors to partner through syndication. At the age of 25, he owns and operates over 500 units. Dylan says management can take up a lot of your time, but it’s an important piece of the game that has to be done well. In this episode, Dylan shares what property management is all about and answers the question of when to go into management. He also points out the skills you need to have to do it effectively.
Our Gracious Sponsor:
Are you wanting to learn how to gain financial freedom through having your own syndication business? Text LEARN to 474747 to begin to learn from one of the best in the industry, Vinney Chopra. Vinney came to the US with only $7 in his pocket, and now controls hundreds of millions of dollars of real estate he has acquired through multifamily syndication. He is now personally coaching others to do the same. Text LEARN to 474747 to begin your journey to starting your own syndication business! Vinneychopra.com
Watch the episode here:
Listen to the podcast here:
How To Effectively Manage Properties And Assets with Dylan Marma
Our guest is Dylan Marma. Thanks for being on the show, Dylan.
Thanks for having me, Whitney. I’m excited to be here.
I’m excited to have Dylan on the show. Dylan began his real estate investing career in 2015. He quickly rose to a leadership role in a residential and commercial real estate investment company in San Diego. In early 2018, Dylan joined the team at Rand Partners, that’s Jake and Gino, to expand into additional markets throughout the Southeast as well as to build out the systems to open up the doors for outside investors to partner through syndication. At the age of 25 years old, he owns and operates over 500 units. It’s very impressive, Dylan.
I love having somebody in their mid-twenties or younger on the show that’s been as successful as you. It shows that all these limiting beliefs are not true and that it can be done and you’re making it happen. I know you’re playing a big role with Jake and Gino. I know they’re thrilled to have you on board and your businesses. We were talking about you’re growing and your team is growing. It’s amazing what’s happening there. They are great guys. Their integrity level and business quality are fabulous and it’s showing. Dylan, tell the audience a little more about who you are in case they haven’t heard of you and what your focus is and let’s dive in.
I’m sure we can touch a little bit on my story, but we’ll start with where I am. I’m playing two different roles within Rand Partners. They still consider us as somewhat of a startup phase. As a business, we all have been involved in the last 500 units or so. As a business, we’re at roughly about 1,500 units. We hired our first employee. It’s an exciting time period for us. The two main hats I wear are number one is investor relations. It’s working with the investors on the front end. I’ve been a lot on the front end with phone calls. I’m having a lot of involvement with some of the webinars, the marketing materials, the asset management stuff to keep the investors engaged.
Number two is acquisitions. A lot of the front end underwriting, a lot of driving out to the markets, touring the markets and submarkets, looking at the deals themselves. There are four of us as a business that had been running and operating over the years together. We all have different backgrounds and different mindsets. It’s a great collaboration and the effort that we have as a team. I love the environment that we work in. Our latest hire is coming on board to help us as an associate. It’s an all-encompassing thing because we all have to wear a lot of hats starting off. That’s where we are in business. Overall, it’s been a great journey so far.
I’ve learned a little bit about Rand. I’ve seen your growth and keeping up with you a little bit. I get your newsletters as well. It’s good stuff. I love seeing good people doing great things and the growth you had. Let’s dive into a little bit about what Rand is doing with the “market” and the way it is. We hear that all the time. What are you looking for in deals? Maybe how that’s changed or how you’re looking forward to changing going forward.When looking at assets, you never want to put yourself in a box completely. Click To Tweet
It’s an exciting time in the market. Everything with interest rates getting cut further and further. We see a lot of shifts in asset prices in the way that buyers and sellers are operating. Everyone realizes that the end of this bull run is only so far ahead of us. A lot of us are looking at number one, how to preserve capital and how to protect our downside. Number two, how to still create an attractive enough opportunity for the investor base and for ourselves. For us, our bread and butter have been from day one workforce housing.
A lot of what we look at when we say workforce housing is usually that sweet spot of the $40,000 to say $60,000 median income range for the most part. We’re typically catering towards residents that work in retail. Maybe they work in restaurants, retail employers or they work in blue-collar. They might work in an industrial. They were working force housing that is going to provide a safe, clean, and affordable place to live. I say affordable, not in the sense investors are used to, but maybe in the sense of a reasonably priced place to live, that’s managed well and provides good quality service.
We do all of our management in-house. Jake leads up Rand Property Management. Every single asset is self-managed. We emphasize that at a high level. We’re providing good customer service and making sure that we’re on top of it and being hands-on with operating each property effectively. Typically, on the purchase side, we’re looking at assets. You never want to put yourself in a box completely. Nine out of ten assets that we look at are built before the 2000s. They are usually going at heavy discount replacement costs. You’re also going into an asset that typically is going to be cashflowing from day one. It’s usually stabilized from an occupancy standpoint.
We’re able to go in with agency debt. We prefer long-term fixed-rate financing because that does protect your downside from one of the risks, which is your interest risks. Especially right now, it can be attractive financing rates. We’re definitely trying to take advantage of that. We’re always looking for operational inefficiencies. We’re looking for rents that are below market like everyone else, typically in value add space setting. We’re also looking for other income streams. We’ve done a good job at being able to produce that many properties. As much as 15% or more in some cases of additional income through maximizing different fee structures and things like that.
You name many things there that we could talk about. That’s good. I appreciate you elaborating on that. One thing you mentioned was we’re now in an exciting time in the market. Elaborate on that a little bit. I hear mixed emotions about that. I hear over here it’s a very scary time or it’s exotic time or we don’t know what’s going to happen. Can you elaborate, please?
It’s all in the eye of the beholder in a sense. It’s all how you’re viewing it because it’s not an easy time in the market. It’s an exciting time in the market because there is uncertainty out there in a sense. We all feel certainty in multifamily. That’s why there has been an increase in investor demand over the past few years. That’s why in many markets right now, things are getting hot. Cap rates are compressing in many ways. It’s exciting because it’s almost like an experiment. For a long time, multifamily was not this front leader of the commercial real estate world. There’s been a heavy increase in uncertainty in other asset classes in the commercial real estate world. Multifamily seems to be the one that still possesses the most certainty.
At the same time, we still need to hit certain risk-adjusted returns to make it the best investment for the people out there. You do not see as many layup opportunities. There are a lot of three-pointers out there. It’s something that’s going to take a little bit more of a savvy investor with the right mindset to see the opportunity. Things that maybe your everyday investor skims over and the financials, whereas some certain people are able to go, take a close look at things, sharpen their pencil and find creepy opportunities essentially. That’s exciting and then also, you see that with the interest rates. The interest rates have been lowering. It’s the lowest since the middle of 2017. The short-term blip of where we are at this moment is cool to see that.
It opens up buying opportunities in a sense. A lot of times pricing will adjust with interest rates, but there’s a lag because oftentimes we underwrite to where interest rates were a couple of months ago, not to where they are now. You have to be keeping a good wholesome on where interest rates are. You have to make sure you’re updating and you’re underwriting to the spread. Sellers don’t always notice it as well right away. They might have come up with a certain price a few months ago. At the same time as an investor on the buying side, you’re able to capitalize on that because you’re able to get a better rate than what it might have been initially underwritten at. If you’re a holder or if you’re holding assets or you’re a seller, it can be a win-win because your asset price will go up with time as rates continue to go down. We’ll see where it goes and see how far it goes.
It’s amazing how a little bit of interest rate change will change your underwriting. I may add $50,000 a year of income immediately. I liked that you made that point. You’ve got to keep up with that so you know that you’re underwriting properly because it could go the other way as well. You mentioned protecting capital and you talked about cashflowing from day one, stabilize, long-term fixed debt, rents below market. Are there any other ways that stand out to you that you’ve been able to protect capital?
A lot of the points that I touched on were more so the economics and then how you’re looking at the deal on paper. There are also the outside factors that you need to make sure you’re paying close attention to. It’s looking at the employment basis in the near sub-market to the property and seeing if the major employer in your area goes out of business, what are you left with? That’s why it’s important to be looking at more major MSCs. They don’t have to be all primary MSCs. A lot of secondary MSCs can still be great opportunities or even tertiary markets can be great opportunities if you know the area and you see the employment base.
You don’t want to find yourself in a position where the deal makes perfect sense on paper but then some of the major employers move out or a certain industry shift because there have been all kinds of shifts lately. You can’t let one big shift put you out of business or drop your occupancy levels or your rental rates. It’s paying attention to that and having the right insurance if you’re exposed to any natural disasters or anything like that. There are definitely other factors outside of the economic and the spreadsheet math that you need to make sure you’re paying close attention to.
You had briefly mentioned too and I can’t remember your exact wording but you said, “I make an attractive opportunity.” Can you elaborate on that a little bit or maybe ways you have made an opportunity more attractive?
A lot of the time, we promote heavily buying on actuals. You want to buy at a place in which you feel very comfortable with the actual performance.
When you say actuals, what does that mean?Negative visualization is looking at the deal and pretending that everything went wrong, and then thinking what could have been done better. Click To Tweet
When you’re underwriting a deal, you’re typically basing it on the trailing twelve financials, the profit and loss statement. When you are underwriting a deal, typically the first thing you want to do is see where the deal is now. From there, you can start to ask yourself the questions of where can it be tomorrow? To me, when you look at buying on actuals, it’s buying at a place where you have a certain level of security and you feel comfortable with the deal upon purchase. That’s a lot of where capital preservation comes in. It’s where you’re purchasing. If everything went wrong or if the market crashed tomorrow or this employer moved out of town, what are you left with tomorrow? It’s like stress testing. It’s not as fun to think about it.
I forget where I’ve heard it, but I’ve heard of negative visualization. It’s able to look at the deal and pretend that everything went wrong and then think what could we have done better? What could it be on the front end? Looking at that as you’re underwriting a deal and looking at it, where is the deal standing and then determining if that level of risk is something you’re willing to do. Everyone has a different level of risk. There are a ton of different investor profiles out there. I went over what ours is, but number one, you want to start with the actuals, but then number two, how are you creating the opportunities and what can savvy investors do to find opportunities? It knows your numbers.
For us, having a property management company has played a big role in this because we know what our rates are for every line item. We’re not basing it off what the previous expenses were. We’re basing it off with what our expenses are. We have plenty of history over many years of what our deals run out for repairs and maintenance and for marketing and things of that nature. Number one is to start with the expenses and you always want to give yourself a certain level of cushion. The more deals that you manage and operate, the more comfortable you are with your expense numbers. That cushion might not have to be as heavy where at first you might almost feel like you’re guessing on these line items. You want to build it in a 30% cushion because you have no idea.
You can get a little bit more accurate the more deals you manage. You can start to narrow that cushion down to a point where you can pinpoint what the expenses are likely to be for each and every one of the line items. From there it’s going ahead and creating additional income streams. In our instance, it’s similar to the management company. We typically charge moving fees, which is a large income stream for us. Instead of security deposits, we’ll charge nonrefundable moving fees equal to 50% of the rent. That alone is something that we can start to narrow out and assume that maybe 40% of the residents move out in the first year and you have that. You might want to put that number in or maybe we can be on the conservative side and assume 20% or 30%.
You can also create additional income streams. If it’s the right asset class, you can do valet trash. A lot of people are getting creative. I see stuff like car washes and dog washes. I’ve seen all kinds of creative ideas and it does somewhat depend on the class. You’re not going to someone that’s in a C-class. Older build in a tertiary market is probably not going to need a dog wash and valet trash. You have to pay attention to what kind of assets that you’re looking at, and then determine what the market calls for with other income streams. The other one, which is probably the most focused on because it can make the biggest impact is also what the rent growth is going to be. Are you buying at a level which is below market rents? Are there any rehabs or improvements that you can do to achieve higher rents based on what the comps in the area will show you?
The non-refundable move-in fee of 50%, do you make a deposit on top of that or does that take the place of that?
We do what we call a surety bond which is pretty much like an $80 bond that they’re going to purchase. It is going to go to a collective pool of bonds, so that at move out, if they have caused damage in the property, and we need to ask them to pay for that. If they don’t pay for the damages up front when we asked, then we have a collection of bonds and it will hit their credit if they move out and they don’t pay for the damages caused.
I have not heard of that. That’s awesome.
It’s something that’s unique. Jake had spearheaded that many years ago. It’s something that we don’t see very often. For us, it’s become a net win-win because the resident we typically cater to is not the lower-end, but the higher-end of the rent by necessity people. For them, oftentimes, they’re focused on the short-term. How much is moving to go to cost me? They have to pay for moving trucks. They have to move all their furniture. They have to pay for their first month. Sometimes first and last month rent, and then they have to pay for this big security deposit, which is usually equal to a month of rent. When they find out its half as much money out of their pocket on the front end, even though it’s not refundable, they might be excited. A lot of people assume when they put the security deposit down, they’re not going to get it back anyway. We typically find it’s a net win-win and it’s always good when you can do something that makes both parties happy in exchange like that.
That’s smart. It’s unfortunate that somebody is in that position. They have to rent. They’re there and most of them will only look towards Friday. If they can only have to come up with half the money, they’re not worried about when they move out.
There’s typically not a discounted cashflow analysis for the second half of it. It can be a pleasant surprise for some people.
You mentioned other income streams. Are there other income streams that we haven’t mentioned that you have been creative?
For us, the move-in is a big one and pet fees are standard. Most of what we do is going to be somewhat in the realm of what you see out there. Nothing super out of the box that’s coming to mind right now, but expenses, we’ve done a good job at. It’s partially due to we have a lot some higher-end and newer build product. While we are serving the workforce housing, there are less of pre amenity ideas as you won’t have in stuff that was built after the 2000s or that’s in the primary, let’s say in Orlando or something to that effect. With expenses, we’re very conscious of every expense we’re running and we’ve been able to do well. On one of our acquisitions, we had an instance where we were able to cut the garbage bill by $1,500 a month, which is saving us $18,000 a year. That’s one phone call, you’re saving $18,000 a year. There are a lot of ways that you can do a lot on income. We probably get creative more so in the expenses.
That’s probably a lot from having inside management. You know all those numbers very well.There's no right or wrong way to do property management. Click To Tweet
We have Jake who doesn’t sleep and he’s on the site all the time looking for any way he can better.
I know you all purchased a property in Wheelbarrow or maybe more than one. How did the management work? I know you are managing yours in Tennessee and then all of a sudden, you’re purchasing a property that’s quite a few hours away. Did you all manage that property right off the bat?
Yes. I talked to a lot of sponsors and guys that I meet with usually on a regular basis. For many sponsors, they’re asking themselves, “When do I go into management?” Typically, the conversation leads to a certain point where everyone says, “You have to get skills first.” In our case, that was not the case. Jake started on the first 25-unit. He was knocking on doors physically collecting rents. It’s grown organically from day one.
Is he still doing that?
He might once in a while when he gets bored. Ours has grown organically. There’s no right or wrong way to do it. I also understand why you’d want to scale though because what happens if you only have one property and you have the ability to hire three employees and one of them quit. You don’t have anyone that can quickly sub in or you don’t have someone that’s on HR to do the hiring quickly. Having skill plays a lot in effective management. With Knoxville, we have roughly 1,000 units here or maybe over. We have a great scale here to where we even have in-house construction and a CapEx team. Moving up to Kentucky was a big undertaking for us. First, we found a market that we feel comfortable scaling in because any market we choose, we’re not buying one asset there. We have to double down and scale there because of the way that we manage properties. It makes sense to do that.
We had our first acquisition there at the end of 2018. I know Jake and then our regional, Jennifer, was very hands-on with going up to the property oftentimes. I would take trips occasionally with them as well, especially when we had new acquisitions to look at. We’d be on site typically being able to make sure that everything’s going smooth with the new management. We were very fortunate to have a great community manager off the bat who had a lot of property management experience. We don’t always hire with experience. A lot of times we look more so for character and customer service aptitude, but in this case, we had both. We had a home run hire on the first one there.
That worked out well in terms of our first acquisition up there. We hired maintenance to follow which worked out well and then we had the second acquisition. The first one was 132, the second one is 243 so now we have some scale up there and the second one you’re going to have a lot more full-time employees on site and what we’ve done is because we felt so good about the hiring of the first one, we had promoted her to our regional. She should be gone in Kentucky so that she could also not only manage the first property but also play an active role in taking over during the due diligence and helping build out the team up there for the 243 units and that’s been good so far. That’s why management in itself is its own beast. You have to have it in you. Some people, probably it’s not a good or a bad thing. It’s a lifestyle decision because management can take the bulk load of your time if you’re running this kind of business. Management can take up a lot of your time. It could also take away time from acquisitions. It could take away time from a lot of things. If people want to travel a lot, they maybe shouldn’t manage.
It’s such an important piece of the game though. It has to be done well.
If you’re not committed to giving it your all and being hands-on, then you’re better off being a good asset manager or being actively in touch with your third-party property management and letting them get into the weeds with the management side. I share that because I know there may be some people on here that are asking themselves, “Should I manage or shouldn’t I manage?” There’s no right or wrong answer. It’s not about the property management fees. It’s more so about something you do for control of your assets. What I love about the fact that we manage it is because, at the end of the day, there’s no passing the buck.
If we had third-party management and the property is underperforming, we could say, “It’s the management team. Let’s kick them out. We’ll get a new group in there,” but the buck stops with us. If the property is not performing, we can’t blame the management because we are the management as well. Investors have different rights to be able to vote out in management and things like that if it ever got to a certain point. We are completely responsible down to the core, which builds trust and it also adds another layer of responsibility.
I know there are many people reading this that are very experienced. There are also many that are trying to get into this business. They want to be syndicators and they would love to be in your shoes and working for somebody like Jake and Gino. I wanted to ask, what was it about you that Jake and Gino said, “He’s got what we are looking for,” or just stood out to them. What’s the ticket to get that position with somebody that’s in their position to be able to work for somebody or intern or become a part of a team like that?
It’s something that I do get asked a lot, especially from younger folks in general. Starting off working with people that have experience and being able to partner and build this together, it goes such a long way because it’s invaluable what I’ve learned from these guys. I’m super grateful for the team I’m around. The question is how do you get there? The answer is not asking someone what you need help with. At a certain point, we get a lot of people reaching out to us, “What can I do to help you?” It’s a generic blanket statement and it doesn’t click well. It almost feels like you’re looking for something more than you’re seeking to serve and help.
It’s thoughtful about different ways you can add value. In this space, you have to either seek to serve or pay to play. A lot of people pay to play and invest in different coaching, mentorship, and education businesses. There are a lot of great coaches out there and a lot of different systems. It’s not an easy business to learn on your own. It makes a lot of sense. Seeking to serve is the idea of being able to find ways of adding value. For me, I took a unique path because the business that I worked for initially in San Diego was both an investment business and also an education business. I knew a lot about the education business. I saw that they were growing in their own education platform. I had made a transition to committing going full time in multifamily.
I also saw at one point, Jake and Gino were looking to build and grow their education business. I was able to provide different resources and different ways to be able to help them essentially grow and scale in that way. I did that not expecting anything in return. Through that we were able to build a relationship and then over time as I was growing in my knowledge on syndication, I spent a lot of time shadowing Vinney Chopra. He’s a great friend of mine. He was a huge inspiration and mentored me as I was learning the business when I was in Atlanta. We did some onsite tours on his properties and things like that. I was seeking to serve and find different ways that I could help him as well. In that process, I have learned the syndication aspect.Seeking to serve is the idea of being able to find ways of adding value. Click To Tweet
Jake and Gino and our partner Mike had all collaborated and built an awesome business yet to do syndication. It was almost like a perfect time where they had this foundation built. They had the management systems and the internal systems down. For me, I came on knowing the syndication side and being willing to broaden the bandwidth by being willing to take all the phone calls from the investors, which we’ve had hundreds over the last few months. I came in to help initially build the investor base and have a lot of the pre-existing contacts. I find different ways for us to start to market and build a significant base. I also play an active role in the acquisition side because having that extra bandwidth allowed us to go much further.
There was an awesome synergy because I found a creative way where I could come in and bring something unique to the table and they’re both unique. It’s one of those things where my path was my path. I like the Steve Jobs quote where he talks about, “You can never connect the dots looking forward, but you can always connect them when you look backward.” I always say that when someone is looking to get in this business, if you’re committed enough, you’re serious, you’re in it for the long run, and you’re keeping the right things again and again, you’ll find your path. You’ll find what works for you, whether it’s a deal you come into. For me, my first deal was 21 units with a few friends in upstate New York in a place I used to live in. Things will click with you if you keep your head down and keep in the right things. Stay patient and don’t rush it.
That’s awesome. There are many questions I’d love to ask you that our audience has for you as well. I’d love to have you back on and talk about investor relations and some of that. What is your top advice for taking care of investors?
Pour into them and show care. Try to put yourself into their shoes. For instance, we send out investor gifts when we closed on a deal. We do a lot of webinars where we’re completely transparent and showing them what we’re going through challenges and opportunities. We went out to New York because that’s where the majority of our investors are. We had about 60 or so people come out. We did an open bar for them. We bought food and drinks. We did not speak, did not pitch, did not do anything else. We maybe spoke for 30 seconds and it was literally face-time with the investors, getting a chance to build relationships.
At the end of the day, this is a relationship-based investing. No matter how many CrowdStreet that are out there or how many sponsors are on the internet, it’s always going to rise and fall in relationships. As a passive investor, you should always focus on the relationship first because when things get tough, which things will get tough in a matter of time for any sponsor at some point. You want to make sure that the person you’re working with is actively caring. They care about you. They have the right ethics in place. Don’t forget about the relationships.
Relationships are important. What’s been the number one thing that’s contributed to your success?
I’m a big learner. I love learning. When I started in this business for the first several months, I didn’t let a single day go by without learning, taking CCM classes, online courses, working with coaches, picking people’s brains. I still fall into that category. I’m one of the few people that love reading through PPM. It’s the most boring thing in the world but I love learning about different ways that deals are structured in different ways that things take place, whether it’s the legal side, the accounting side, the real estate side. It’s having a passion for educating myself.
Tell the audience how you like to give back.
My big thing giving back where I am in life at this point is mostly helping other people through real estate investing. I’ve done some coaching and mentorship. It’s fulfilling to be able to help people that are on the path, maybe a few steps behind on the path, collaborating that or even further ahead on the path. That’s my big focus and down the road, I have different ideas in mind. I’m passionate about the idea of somehow impacting the overall education system. That’s one of the biggest things where we’re missing as a country. In some ways, I think it’s very outdated. At some point, I’m about to play an active role in being able to make an impact along those lines.
You’ll have my support. Dylan, you’ve been a great guest. You’ve provided so much info. Tell the audience how they can learn more about you and get in touch with you.
You can reach out to me through email, Dylan@RandPartnersLLC.com. My Instagram is @DylanMarma. I’m pretty active on there as well. Follow our show Wheelbarrow Profits as well, I’m on there. Jake and I do a show, that’s going to be the Rand Partners Podcast, where we also plugin for different tips and tricks that we’re actively performing in the business.
Thanks again, Dylan. I appreciate all our audience being with us. I hope you will go to Life Bridge Capital and connect with me in the Facebook group, The Real Estate Syndication Show. Go over and check out Wheelbarrow Profits. They are going to add tremendous value to you if you do. I appreciate you all being with us and we will talk to each of you soon.
- Rand Partners
- Rand Property Management
- Vinney Chopra
- @DylanMarma – Instagram
- Rand Partners Podcast
- The Real Estate Syndication Show – Facebook
About Dylan Marma
Beginning his real estate investing career in 2015, Dylan quickly rose to a leadership role in a residential and commercial Real Estate investment company in San Diego. There he began investing residential Real Estate, learning how to evaluate markets and manage properties remotely.
In early 2018, Dylan joined the team with Rand Partners with Jake and Gino to expand into additional markets throughout the SouthEast, as well as to build out the systems to open up the doors for outside investors to partner through syndication. He has since been a sponsor on over 500 units. Dylan spends a lot of his time analyzing & underwriting new opportunities out of the home office in Knoxville, TN. He also works closely with brokers in our target markets and plays a role as front line contact with investors upon introduction and throughout holding period for asset management communications.
Love the show? Subscribe, rate, review, and share!
Join the Real Estate Syndication Show Community: