[00:00:00] ANNOUNCER: Welcome to The Real Estate Syndication Show. Whether you are a seasoned investor or building a new real estate business, this is the show for you. Whitney Sewell talks to top experts in the business. Our goal is to help you master real estate syndication.
And now your host, Whitney Sewell.
[00:00:24] WS: This is your daily Real Estate Syndication Show. I’m your hose, Whitney Sewell. Today our guest is Anselmo Torres and Kelly Stinson. Thanks for being on the show, guys.
[00:00:34] KS: Thank you so much.
[00:00:35] AT: Yes. Thank you for having us.
[00:00:38] WS: I’m honored to have you all on the show. This is a topic that you and I, we were all talking about it before the show and I don’t think we’ve talked about this specifically on the show yet. They’re going to be able to bring some good value to the listeners today and a topic that obviously is not talked about a whole lot after this many episodes.
A little about them though. Anselmo created a software program called LeakAware that helps multifamily properties monitor their water consumption and detect high consumption leaks. He’s walked over 300 properties across 30,000+ units performing audits and collecting data. Kelly, also known as the ‘Potty Princess’, which I think is hilarious, but that’s her nickname.
[00:01:17] KS: It’s a great way to remember me.
[00:01:20] WS: Nicknamed caught traction two years ago through her continued commitment to bringing awareness education and support the country to multifamily property owners. And so, they’re passionate about this water conservation and this topic and they’re going to help us to really increase our NOIs here today by learning some of the things that they’re going to help us to know about going through the due diligence process and how they can add value to us.
I’d love for you all to tell us a little more about what you all do and then let’s dive in to why this is so important to the listeners.
[00:01:52] KS: So, not a glorious name to take on as the ‘Potty Princess,’ but I’ll tell you what. I’ll take it. What I have noticed in this particular industry is that there is a huge gap in awareness in educational resources available to multifamily property owners specific to water conversation and truly how that’s impacting property NOI.
We have found in partnering with our multifamily owners and investors that the majority of their properties, whether they’re class C, class D, even class A and B properties, that there are an enormous amount of leaks that are going unreported. In addition, there’re a lot of inefficient interior plumbing fixtures, which if you’re in a particular property where it’s all bills paid, this is money that’s literally being flushed down the drain.
So, we have an opportunity here not only to preserve the most precious resource in the world, but also to put many back in our owners’ pockets and reduce the water consumption by 30% to 60% on a property. How that equates to the owners is essentially a reduction on their water and sewer bill by 20% to 40%. When you do that, let’s take for example if you have $100,000 water bill and you’re reducing it by 40%, so you take out the $40,000 and you multiply that by, let’s say, a 7% cap rate, if you’ve got one in the area. You’re looking a half a million dollars boost to the asset value, on the backend. So, for those syndicators that are holding their properties for 3 to 5 years, some of them are holding them longer, this is a perfect opportunity to quickly reduce your operating expense.
[00:03:47] WS: So, that sounds like something we need to know about. If we can save that kind of money just on that bill alone, then that’s a big deal. We need to be aware of that and we want to know that. So, I’d like for you all to go through the process a little of how this happens or how we work with somebody like yourself and what that looks like. When would somebody, like myself, contact you as far as looking at a property or does it need to be before we buy? Does it need to be after? What does that look like?
[00:04:13] KS: Yeah. That actually sits on both sides, right? So, if you’re on the pre-deal, you are analyzing a particular property and you’re looking to sharpen your pencil for deal analysis, certainly partner with a water conservation partner and we’re more than happy to support that as a cursory look at the property.
And typically, just by us evaluating our internal reports and what we have available on the property, we typically can get about 80% accurate on what we think is on the property. So, that way for that particular individual, again, looking to see if this is going to be a good deal, this can make or break it.
And then once they move into an LOI and they’re going in to due diligence or they’ve closed on the property, this is when it really focuses into more of a professional service type application, where 100% assessment can be completed on a property to document the interior flow rates of each of those plumbing fixtures that are related to showerheads, aerators as well as the toilets.
And in the long-term, that will better articulate for the owners exactly what they’re progressive water savings will look like. That’s really where Anselmo comes into play, because we’re also looking for all those N-reported leaks. A lot of the residents find it difficult or time consuming to put in a work order to the office or they just can’t schedule for maintenance to come in. So, this is where we help close that loop. And Anselmo can speak a little bit more to this experience on what he sees on that.
[00:05:59] AT: Yes, absolutely. I have walked probably about 30,000 units, maybe 300 different properties. I like to believe I’ve seen it all, and typically I get in to a property and I see something I’ve never seen before and it just blows my mind the things that you see walking these properties.
So, when we look inside a unit, we’re taking a look at the kitchen faucets. We’re looking at the showerheads, toilets, aerators. We’re looking for all of these unreported leaks, and that’s typically what I come across, is unreported leaks. One, typically the residence have just – To me, I hear a dripping faucet and that causes me an alarm. To a resident, it may not mean anything to them. So that’s what I really pay attention to. I typically see that on toilets. I can hear it, that dripping, and I know it’s leaking, but the resident may never report that or just not think it’s a big deal.
Another thing that I want to ask all your owners and investors to look into doing is actually submit a work order on your property. Is it easy? Because typically what I come across when I’m asking the resident, “Hey, have you reported this leak? Have you submitted a work order?” I hear so many different answers and it drives me crazy, because they’re saying, “Well, I just don’t know how to submit a work order, or I haven’t had time to submit a work order.” So, if I could give that feedback to you guys, submit a work order and see what it is. Is it a manual process? Is it challenging? Is it hard? Because more than likely if you make it so easy for them to submit a work order, then those leaks could get fixed quicker.
But along with the assessment, again, we’re walking into every unit. We want to find out, get as much data on your property as we can. We want to know what the full rates are on every fixture, so we can help develop a baseline for your property, because they always ask, “How much can you save us?” Well, we want to know what is your baseline. How much should your property be using? When we do this assessment, it really helps us figure out what that baseline is so we can determine how much we can actually save you.
[00:08:11] WS: How does it vary between, say, properties that are tenants are paying for the utilities, say, in their name, or maybe a property where they’ve utilized the RUB system versus an owner paying for these utilities. Have you seen the difference in, say, just leaks alone?
[00:08:27] AT: I think it’s consistent across both, and the reason why I say that is in RUB’s, somebody that has a leaking toilet, it may be costing $40 a day for that one toilet alone. But when it’s spread out across all the residents, they only see a small, incremental increase in their water bill. So, it’s not a big deal yet.
And of course, when all bills are paid, we see everything. It’s surprising how often we come across leaks. It actually is not surprising anymore, but it’s not a focus it seems like where they’re not paying for it. So, it just doesn’t make sense to report it or they’re not as conscious about it.
[00:09:05] WS: What are some red flags that we may have some leaks? It can be so gradual, right? It can be so gradual that it’s noticed, or especially like from one owner to the next, but what are some ways that we should really be noticing, “Wait a minute. This doesn’t look right.” Because it may be that toilet that’s just running a little bit, but if it’s 100 units and 50 of them are running, we need to know about that and we need to be able to fix that. But if it’s been that way for four years, we may not notice it. So, what are some red flags that’s going to tell us we need to dive into that and look a little deeper.
[00:09:36] KS: So, I think the first part is any properties that are built between 1960 and 1990, would be a key indicator to first inquire if there have been any interior plumbing upgrades. And if there has not, there’s your red flag. You more than likely have those 3-1/2 gallon per flush toilets that have not been serviced and they not only are they using 3-1/2 gallons per flush, but they’re probably leaking inside the flapper. OK, so that is an increase in water usage as well. So, that’s the first piece to take a look at.
The second piece would be if you have per unit water rates that are exceeding $60 per unit in an average market. That’s probably a good red flag to peel the layers of the onion back and take a peek in there. And that’s where we can help, because the water rates are varying all across the country. In certain areas, they’re much higher than others. I think we just came across something in Tulsa last week was probably the highest sewer rate that I have seen in the country so far. And I mean, we’re working nationwide. Again, we’ve seen the gamut of it.
But first key is those properties that are older, haven’t been renovated. When they typically change ownership, most everybody is looking for the physical upgrades to make the experience look better, clean up the property, but some of the pieces that are highly overlooked is really around the water and what that really is impacting on the overall expenses on the property, because the interior water usage typically equates for about 34% to 35% of the total water bill. That doesn’t include irrigation.
So, this is a big piece and it’s such a minimal investment to upgrade, and that’s where you partner up with a full-service organization that can come in and project manage that for you. So, it’s not a giant project for the new owner that have to take on and undertake and take 3 or 4 months to get it installed and start benefiting from the savings.
So, we’ll be able to come in and complete the professional service of the full assessment, documents the baseline water savings and then project manage our crews that will come in and install 50 to 60 bathrooms a day.
[00:12:17] AT: I would also say too, just like a bit, if you look at your water bill and it typically provides the graph, a little bar graph on what consumption has looked like over a 12-month period. If it looks like a roller coaster, there is more than likely leaks taking place on it. Most of the time the reason why that roller coaster goes back down is because maintenance has found that leak, whether it’s bubbled up to the ground, or it’s come through the roof, they found it and they fixed it and that’s the reason why it dropped back down.
I mean, we can understand consuming increasing due to occupancy increasing, but if occupancy is consistent and it’s still going up, that’s a red flag for me. We always ask, “Hey, send us your water bills. We’d love to just take a look and kind of give you an idea. They’re might on this specific building or this specific meter. It just doesn’t look right.” And that’s how we can start working together with you.
[00:13:10] WS: Okay. So, I wanted to ask about that. Your analysis that’s done, say, onsite versus just over the phone, just us calling you, what’s that going to look like? You said, we can send you our water bills and at least get the process started. How often are we just going to say pay for a service like that as supposed to you all actually coming onsite?
[00:13:30] KS: So, the cursory analysis, I mean, there’s no fee charged with that. As I shared earlier that typically we can get within about an 80% accuracy rate. But what we have found is that we get on properties and we find out that there is like a certain cluster in the back of the property, where everybody thought was upgraded, but it wasn’t and it still has the pink toilets or the blue toilets.
So, with that, once an owner closes on a property and they want to proceed forward with a full assessment, they can go one of two ways, all right? We’ve got some clients that prefer to gather all the data on the front side and document all the leaks and they’re not entirely sure yet if they’re going to move forward with the water conservation project in phase one or phase two of their property improvements. So, they’ll go ahead and prepay for a full-service assessment, and that’s fine. And then if they do that and they proceed forward with an installation, all of that fee is applied towards the installation.
The other side of it is we have a lot of owners that are taking advantage of the Fannie and Freddie Green Rewards Programs, which are a little bit more difficult today to achieve the savings, because it’s split between energy and water. But that will be changing again for 2020. With that, they would just enter into a contract and then all of the full assessment, all of that is included in our services.
But for the purposes of today, we want to make sure that we’re bringing all that education and resources around and especially around that green lending, because there are so many different components associated with that and if an owner does not install the correct products that the lender is required in their schedule 6, they’re going to fail the post-install assessment and they’re going to be asked to remove all the product and install the correct product.
Through our relationships with Fannie and Freddie as well as all the energy consultants that are writing those high-performance building reports, we actually have been able to help some clients who have used some of our other friends in the industry to be able to get those particular projects approved even though they failed them the first time.
OK, this is more of, again, bringing around the education and awareness, and I think this is where my drive came in about two years ago, because this is a new area. Everybody is looking for efficient plumbing and everybody hears about the low flow toilets, and I think some of those get a bad rep to them. But the particular products that we partner are truly the most innovative and the most successful products on the market today. And we’ve partnered with Niagara Conversation because, again, they’ve been in business for 40 years, family owned company, and they’re using products that have the lowest rated water flow and they’re working, and they’re working fabulously in multifamily.
[00:16:53] WS: It’s neat that you all have crews that will actually come in and solve all the products as well, but what if we already have own crews or maybe we’re already doing the remodeling process on all these units anyway? We’re going to go in there and be remodeling and ripping out all this stuff. Can you all just advice, say, “These are the top units.” We pay for that, pay for you all to kind of guide us on what to use, but our crews install it.
[00:17:19] KS: Absolutely. We will customize whatever partnership works best with our owners, because it’s not a cookie cutter situation, right? Especially, every property is different across the country. If an owner is so blessed to have their own internal crews to be able to facilitate that type of project, we will support that through our consulting services and we can also provide the product.
But again, it’s a matter of how quickly can their crews install that? And you’re dealing with plumbing. Especially in aging properties, when you pull a toilet, sometimes you just don’t know what you’re going to get. So, our crews, our factory-trained and have continuous improvement processes in place that if by chance, a pipe broke, an angle stop just starts spewing water out, they know exactly what they’re going to do. Step one, to seal off that water to help protect that resident’s belongings in that unit.
[00:18:24] WS: What about the time to complete something like this?
[00:18:27] WS: So, once we enter into a unit, it takes about 20 to 30 minutes for the actual installation to commence. It’s on the long-end if we have to shut the water off to do an angle stop repair or a flange repair. Then with that, again, it’s 50 to 60 toilets per day that the crew is able to install and they’re able to be so efficient in that because of all the due diligence that we’re doing on the front side.
With entering 100% of those units, not only are we documenting those interior flow rates for you guys and the leaks, but we’re also looking for door swing issues. We’re looking for subflooring issues, any of those things that could delay or essentially shut down a job
[00:19:12] AT: We also look for like tub diverters too. It’s something that we pay attention to, because as we walk all these units and we’re seeing these leaks, if it’s not the toilet, which is one of the biggest culprits, it’s usually the tub diverter. We install a showerhead, but it does you no good if all the savings we just saved you is lost on that tub diverter. So, we want to report that back to the main and studio owners saying, “Hey, we noticed this tub diverter is not working properly. It needs to get fixed.”
[00:19:43] WS: So, you had mention about the Green Programs changing in 2020. Could you elaborate on that?
[00:19:48] KS: I don’t have that official information for 2020 yet. But what I do know is that since I’ve been involved with these programs, they seem to be ever evolving and there’s been a lot of focus around the water conservation that now this year they flipped it a little bit between water and energy conversation where it needs to be a 30% blended reduction of water and energy, but 15% of that has to be applied towards energy.
The challenge here is that a lot of properties have already upgraded their interior lighting fixtures to LED. So, now they’re being asked on the energy side to put in those programmable Nest thermostats. Well, I don’t know if you’ve looked at that lately, but that is a very expensive investment. While it is great, the return on the energy is not as great as the return on the water, because the water rates are much higher than the energy.
So, I know that there has been a lot of focus on potentially adjusting that for that next year and I will be a part of some of those conversations here in the next couple of weeks, because I think they’re going to have it locked down here towards the end of October. But the funding has already tapped out for 2019 for any new Green rewards loans. If you have an owner that’s looking at purchasing a property and taking advantage of Green Rewards, they’re not going to be able to close on that till next year.
The other option is they take advantage of the different type of product within their loan. And on this type of project, they could write that into their CapEx, and we can help them with that cursory recommendation.
[00:21:35] WS: Nice. So, what’s the biggest problem that you ran into working with an investor who’s trying to accomplish this?
[00:21:43] AT: Education. You’d be surprised how many of them really don’t understand water conversation or haven’t looked into it. I think that’s the biggest thing, is we have literally for like the last two months just been on this education tour it feels like, just basically providing information on water conversation can do.
[00:22:02] KS: And the resources that are available to them. While we certainly would love to have those individuals come back and partner with us, I think the most important thing is for these owners and investors to be educated and to know where to go to get reputable information, and that’s what we’ve pieced together.
I mean, just in the last week alone, we had conference calls with two individual high-profile owners who have not ever considered looking at water conversation on their properties. They know it’s a big issue, but they don’t know how to approach it. We’ve kind of mapped that out for them and we’ve developed a process.
In the long run, what we’re looking at is trying to reduce that water consumption by 30% to 60%. At the same time, support that environmental impact, because so many of the millennials nowadays are looking for some of those green improvements on the properties and this will certainly hit that mark.
[00:23:10] AT: We just met with a property management company a couple of weeks ago and they had no idea that we could actually do the install and take it off of their shoulders where they didn’t have to do any other contracting work. They didn’t have to do it. It was us. We could do it and take it off of their shoulders and they were completely blown away. And since then, it’s been beautiful, because now we’re a resource for them. Yeah, we love that.
[00:23:35] WS: Nice. Just a couple of questions before we ran out of time, but what’s the number one thing that’s contributed to all your success?
[00:23:40] AT: Great question.
[00:23:41] KS: That is a really great question. I think just being genuine and offering the support to answer to the questions. No question is considered dumb around here. Anybody and everybody is learning and we’re still learning along this journey. And we want to be the best resource out there to bring education and awareness around water conservation and the impact to the multifamily market.
So, I think that that’s probably the biggest piece of value that we bring is just the true partnership of being that resource. Won’t you say?
[00:24:23] AT: I agree, and that and the fact that water and sewer rates are continuing to increase. Owners and investors want to find out how to either manage that cost or reduce that cost, so they’re actually doing homework and researching and looking who’s available, and I think that’s where we come into play. It’s nice now for them to be reaching out to us saying, “Hey, I need your help. Help me out.”
[00:24:47] WS: How do you all like to give back?
[00:24:48] KS: Through the absolute education piece of it, and we love to support the success of our owners. So, even when we meet passive investors through the particular networking events we’re in, it doesn’t matter if you are a big deal syndicator, if you are a passive investor, we want to give back with as much education and resources and being able to connect people together, successfully.
[00:25:19] AT: You were just mentioning earlier about you did an analysis on the previous year about how much water you saved.
[00:25:26] KS: Yeah. So, I was running some numbers last week and looking at the fact that just in 2019 alone, I’ve been able to reduce operating expenses for my existing clients by over $2 million and I’ve also reduced water consumption by over 200 million gallons. I mean, that’s huge. I mean, that’s going to fill out over 300 Olympic-sized swimming pools.
As a I look on the side of — I have two little girls and I’m like I’m creating a more sustainable environment for them as they grow up, but the non the long run, this is extremely rewarding and successful because I’m improving the NOI for my client’s properties.
[00:26:15] WS: Awesome. Appreciate you elaborating on that and how much water you all have been able to save. Tell the listeners how they can get in touch with you.
[00:26:22] KS: Yeah, absolutely. You can visit our website at www.sasconserve, like conserve water. So, sasconserve.com or you can feel free to reach out to me through LinkedIn at Kelly Stinson. You could even put in #thepottyprincess and you will get to me and Anselmo and I will team up and make sure that everybody is taken care of and any questions are answered.
[00:26:53] AT: The same for me, I am really active on LinkedIn. So that’s probably the best way to reach out to me. You can reach me through message and send me an email. And I’d love to go from there.
[00:27:04] WS: Awesome. That’s a wrap guys.
[END OF INTERVIEW]
[00:27:07] WS: Don’t go yet. Thank you for listening to today’s episode. I would love it if you would go to iTunes right now and leave a rating and written review. I want to hear your feedback. It makes a big difference in getting the podcast out there. You can also go to the Real Estate Syndication Show on Facebook, so you can connect with me and we can also receive feedback and your questions there that you want me to answer on the show. Subscribe too, so you can get the latest episodes. Lastly, I want to keep you updated. So, head over to lifebridgecapital.com and sign up for the newsletter. If you’re interested in partnering with me, sign up on the contact us page, so you can talk to me directly. Have a blessed day, and I will talk to you tomorrow.
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