Value-adding to your properties helps you scale your business in multiple ways. Maximizing rentability and forcing appreciation which gives you greater leverage to continue growing your portfolio. Follow the trends in your market, visit new builds, get second opinions and lock down the best tenants.
Adding Value to a Property:
2:30: every time you look at a property in your mind should be, “How can I add value to this property, this situation?” And sometimes you're adding value by rectifying a problem.
4:40: Different people respond to different things. Perhaps try a direct mail campaign directly from the realtor?
6:00: It's a good idea to go out and take a look at what the new builders are doing and see what you can add to your properties that people want.
9:10: We pay Sherman Williams $150 to advise us on the colors and trends anytime we flip a house to a retail buyer.
Selling to Retail Buyers:
13:00: One thing that's really cool about older properties and why they are so desirable for flips is especially in the pacific northwest is that they tend to be on bigger lots while new construction is crammed together.
15:40: The longer you hold a property you intend to sell to a retail buyer, the more expensive it is. There’s a lot for a limited payout. Get contractors there quick and limit your holding costs.
18:53: For something that’s being wholetailed, Ryan looks for little to no work required, builder grade or something that needs a major systems update like a roof.
Maximizing Value Add:
20:30: The most obvious form of value add is to see if you can easily go from a 2-bedroom to a 3-bedroom.
21:45: With basements, we don’t usually finish them unless it’s a walkout. Egress windows are incredibly expensive.
23:18: Always ask if a garage conversion is permitted. If it’s not, you’ve got to take it out.
25:17: The way people live changes, it’s cyclical.
ADUs, Title Companies, Narrowing Focus:
26:10: Cites are particular with ADU’s and we get around it by renting out the entire property and leaving it up to the renters to decide what they do with the additional unit.
30:19: If a title company ever tells you that there’s a glitch, you need to pay very close attention to what that glitch is.
32:00: We’re really talking about rentability here, by adding value and making sure you’re meeting the market demand, you’re going to be able to rent to quality tenants.
34:45: As Stephen Covey would say, begin with the end in mind.
Connect with the Good Stewards:
Amanda: (00:00) So it's a good idea to go out and take a look at what the new builders are doing, and then see what you can do to make a few adjustments in your property that you're trying to put at a level that brand new construction would come at. Maybe that's adding lighting, updating countertops, going with a more modern color scheme.
INTRO: (00:21) Welcome to The Good Stewards podcast, the only podcast dedicated to seasoned real estate investors who want to maximize the cashflow potential in their business. We are “buy and hold” investors with a thousand plus properties and markets across the U.S. who bring an insider's view into the nitty gritty details of real estate investing. If you're looking to develop the mindset teams and systems that can dramatically build your real estate business and network, you're in the right place.
Ryan: (00:54) Welcome to this episode of The Good Stewards podcast. I'm Ryan Dossey.
Amanda: (00:58) I’m Amanda Perkins.
Bill: (00:59) I'm Bill Syrios.
Andrew: (01:01) And I'm Andrew Syrios.
Bill: (01:02) Welcome everyone. We are excited today to be with you. We're going to be talking about one of my favorite topics and probably every one of our favorite topics. And that's, “How do you add value to a property?” Matter of fact, yesterday, I got a call from a real estate agent and she brokers apartment complexes and saw one of ours. And she calls on behalf of a client, one client in particular which has a great strategy. As a matter of fact, when we were finished talking and I said, no, I'm not interested in selling. I said, but I am interested in employing you, if you stop working for this gentleman. And she said, well, actually I worked for a number of investors calling on behalf of them to see if they can acquire properties.
(01:48) And then she asked me, what are you looking for? And I get that question a lot as I bet, many of you do. And my first thought was something I can add value to. You name it. If I can add value to it, I'm interested in looking at it. So, the bottom line, as I told her, and she of course totally understood is that we're not looking to buy properties at retail prices. We're looking to buy it wholesale. And if you buy it wholesale, you've really got to have an edge in your buying criteria. And that edge usually is “How can I do something to this property that will increase this value from what people see right now, or what the seller sees right now to what it could be”. And so that's a pretty exciting topic. And every time I look for a property and I would encourage everyone out there, every time you look at a property in your mind should be, “How can I add value to this property, this situation?” And sometimes you're adding value by rectifying a problem. That's often how you add value.
(02:53) Well, let's divide this conversation into two parts. One is how do you add value to the sales price or the actual value of the property? And secondly, how do you add value to the rental price? In other words, buying it to flip it or buying it to hold it. So, let's start with buying it to flip it. I think I'll open this up and kind of talk about some specific situations that we've found ourselves being able to add value. And let's talk first of all, about if you're flipping a property, what's your criteria in looking at a property that is just ripe for flipping and for adding as much value.
(03:37) And just one more thought to put in your mind, think of yourself as a ski jumper. You know those Olympic events where people go crazy, particularly from Norwegian countries.
Ryan: (03:46) And like flying squirrel action.
Bill: (03:37) Oh, my gosh. They've fling themselves down this mountain and then they shoot themselves up. And could you imagine what that's like being on the top of that thing? Well, actually that's where you want to be in terms of selling a property. You want to make the deal so profitable that you're at the very peak of the profitability, but then you start going down. If you over rehab, if you do things that take too much time, you're spending too much energy, you start to sink farther and farther down. So, you want to be at the very peak when you sell that property.
Ryan: (04:25) The thought of that makes my knees nervous.
Bill: (04:29 ) What's some examples of folks that our good stewards here have a creating value.
Ryan: (04:37) So before we do that, I do just want to give kind of a quick tip that you mentioned from this real estate agent that we've seen on the marketing side for deals. So, different people respond to different things. So, if you cold call a list versus direct mailing, that same list, you're going to get different responses. We had a guy that we'd mailed, gosh, I don't know, for a year or two who never called us, but off of a cold calling campaign was like, oh my gosh, yes, I would absolutely love to sell. And it was like, well, why haven't you called us? So, another interesting thing you can do if you have a realtor on your team or know one is do a marketing campaign from the realtor to the property owner of, I have a client was interested in making you a cash offer for your house. They pay all of my fees. It doesn't cost you anything. Give me a call, if this is something you'd be open to.
(05:29) It's comical. We'll hit a list. We'll buy your house as is for cash piece. And the realtor piece will get different responses. So, if you've “tried” everything else, it's a potentially a good option.
Bill: (05:44) So let's dive into it. How have we seen ourselves being able to add value in various markets that we are flipping?
Amanda: (05:51) It seems kind of elementary. A lot of times we'll try to take a house and give it features that are popular in today's market. So, it's a good idea to go out and take a look at what the new builders are doing. And then see what you can do to make a few adjustments in your property that you're trying to put at a level that the new house, brand new construction would come at. Maybe that's adding lighting, updating countertops, going with a more modern color scheme.
Ryan: (06:22) Molding.
Amanda: (06:23) Right. Just sort of taking and try to obviously you're going to want to maximize your dollars spent. So, you're not going to want it got everything if unless you really have to. But really just trying to take a few elements and kind of see what's popular in the market, what's selling fast. It's a good idea to look at what kinds of things go quickly, that sort of thing. And so, see what simple things you could do in your property to kind of mimic what's going on on a new construction site.
Ryan: (06:54) I would also throw in on a flip. If you're like us, you're a “buy and hold” investor, you may want to use, like not the tan and white color scheme, or you may want to do something nicer than the typical countertops you do. I know one of the things we've seen in flips in particular is it's like the small things. If you have kind of the old, like particle board doors, updating them to the six panels. It doesn't really cost you that much in the grand scheme of things, but make someone think like, wow, this place is nice. Similar with like trim. We pretty much always paint our trim on anything we do. If you have kind of the old wood colored. I mean, it just really, really dates a property for people. Same thing with like hardware, right? Swapping out knobs on cabinets and vanities and things of that nature can make the property feel a lot newer, even if it's not.
Andrew: (07:55) I would say a couple of things. With the rentals, I would still do the pulls and knobs and stuff like that, as well as the outlet and switch covers just because they're really cheap and they bring it to life. With flips you got to take it another step further. And you also got to worry about like, have you buying a property as an old HVAC, or old electrical panel or pushmatic or something like that, tenants aren't going to care that much. Although you do need to know that they're going to be on the way out, but homeowners are going to ding you on that. We had a flip recently where we had HVAC, that was kind of align and we needed to replace it to get the sale through. We needed to take those things into account, upgrading those. You might be able to hold the HVAC that's 15-20 years old for a couple more years of the rental but you probably aren't going to be able to sell it that way without at least giving a discount.
Amanda: (08:45) Especially if you're targeting a first time home buyer situation, many times a first time home buyers they're coming in with a very little down payment type of a situation and they want a brand new house because they don't want to, have to worry about replacing the water heaters.
Ryan: (09:00) They don't have the cash for it.
Amanda: (09:01) Yeah. I mean, those are…
Andrew: (09:02) And they don't know what they're looking at on this end inspection report. So, they just freak out.
Bill: (09:06) Did you say freak out?
Andrew: (09:09) Freak out.
Bill: (09:10) Thank you. Sometimes we've called it the “look”. Trying to give the property the “look”. I'm not a big fan of gray. I have to admit because I do feel it kind of doesn't wear on a person as well as earth tones. But when we are flipping a house retail to a homeowner, we are painting them a light gray. It's kind of a warm gray. There is a color out there, you can go to Sherman Williams and this is what our designer says to us. And by the way, we use a designer from Sherman Williams, which charges as $150 every time we decide to retail a house and flip it to a homeowner, because we want her to go give us the kind of buyer's eyes that we need as much as we've been in the business.
(09:53) We’re a little bit of an efficiency nuts. And she's going in there and saying, this is the look you need to give it. And we call it the “look”. And this gray, she says, anyway, I've not been able to quantify this, but it sells more than every other interior color on the market together combined this one color. And you can ask your Sherman William representative or any other paint store representative, what is the current most sold interior color? It's likely a warm gray color.
Ryan: (10:30) I was really hoping you were going to give us the name of it. I was like, what is it?
Amanda: (10:35) I think is… Isn't it Revere pewter?
Bill: (10:38) I think that's right. Thank you, Amanda. Revere pewter, yeah.
Amanda: (10:42) And, I mean, I think the other one that is right in line with it is agreeable gray. And I think any of the paints know what that is because those are both popular names.
Andrew: (10:49) I hate these names.
Ryan: (10:50) Wow. They're awful.
Bill: (10:53) You don't agree with them.
Amanda: (10:54) I think what's important is it's not really, especially if you're trying to put it out in a retail market, it's not important what you think looks good. It's important what the masses think looks good. If you're trying to do something, if you're not a designer, but you think you are, and you have a specific taste, you should go get a second opinion and not just rely on your taste.
Ryan: (11:14) That’s huge.
Amanda: (11:15) Because you like it.
Ryan: (11:17) We were looking at properties in Pensacola because we're moving and stumbled on one of the funniest listings I've ever seen because the guy's out of his mind. So, he was like property appraised for $425,000. I know what I've got though. So, don't waste my time. If you're going to offer me less than $475,000. And then every picture, every single room along the crown molding, under counter tops, under cabinets, he has like those party lights. And it's like all of his pictures are with the lights off and like different lights on in the rooms. And it's like, okay, that's interesting. We were like icing on the cake. It was the last picture I kid you not was the view from a camera inside a shower. And his listing was like, we have like a 29 camera, whole home system. And it was like, okay, you're nuts. So just because you want cameras in your shower, it doesn't mean that your next buyer is going to want that.
Amanda: (12:16) Nobody wants that. Well, creepy people.
Andrew: (12:23) Well, nobody you want doing business with does that.
Amanda: (12:26) Well, the other thing. When we're looking for a flip property, which is our specialty, there are some properties that you walk into that, it's almost, you hit a wall with like, this looks fine, but it needs so much work. We can't touch it. There are specific areas that were trickier to update. The 90s is a real tough era for us too. Because it has a lot of oak-ey wood, which is totally a taste for some people brass, pinkish countertops, and the stuff might be an okay shape, but it's just not going to be super appealing to all. And so sometimes those are things that we don't touch. But one thing when we're trying to modernize a flip or maybe taking into account one thing that's really cool about older properties and why they are so desirable for flips is especially in our area, they tend to be on bigger lots. New construction, they're just jamming it in in lots half a size of what they were doing even just 15 or 20 years ago.
Amanda: (13:29) Like that can be really desirable for a family that's looking for a reasonable size lot to live on. They don't want to just have like a postage stamp backyard. And so, you can give them that house that they're looking for by taking a 25-year-old house, adding a few, putting in some lighting, updating the paint scheme and maybe changing out the countertops. And then you're giving them a house on a lot that's twice as what they could get for new construction. And so, it gives you a real edge up on the new construction market.
Ryan: (13:58) I think another thing just to keep in mind if you're doing flips, especially if you're not a realtor or not somebody who's well versed in maybe what sells retail. It's a really good idea to have a local realtor that you can chat with and get advice and kind of have some questions answered for you. We had a property that… Actually, a private lender reached out to me on that he'd funded for a first-time flipper, young kid like early 20s. And he thought that it would be really cool to knock out one of the bedrooms to have just a giant living room. So, the kid cut this property down from a 3-2 down to a 2-2 to have just a massive living room. And the realtor was like, you just cut $30,000 - $40,000 worth of value out of this property.
(14:48) I think it's important to have somebody that you can ask those kinds of questions too now, as an investor that's even remotely been in real estate, you understand that probably removing bedrooms isn't a good idea. But, potentially things like, should we close in a dining room and convert it into a bedroom? Things of that nature are going to be good questions to ask kind of a local realtor. On kind of that note, let's move over to wholetaling to an investor, or kind of like a homeowner that is willing to do a little bit of work. Because I know right now, particularly in the market, this stuff has been flying for us. So, I can take this one or if you guys have any thoughts on it.
Bill: (15:37) Well, I think I'll just start and you can jump in Ryan, but one thing I've made a mistake on in the past is retailing a property when I didn't have really the resources. And that means that it took way too long to get the contractors out. The holding cost added up. And when it was all said and done, I put all this time and energy into it. And if I would just thought of minimizing what I could do and wholesaling is certainly a good way to minimize what I could do. I could have sold it so much more quickly. I could have taken the sales price down a number of notches and found that, homeowner who has some gumption and wants to do changes themselves. So, I think that's a really something you need to evaluate and part of it is evaluating yourself in your team. What are you ready to do? What can you do most efficient?
Ryan: (16:30) And being honest.
Bill: (16:32) Yeah, for sure.
Ryan: (16:35) I had a flip that I did back in 2016 and it was one of those like, “this thing's going to change my life” kind of a deals, right? It looked like there was a hundred thousand dollar spread in profit. It's one of the only properties I've actually bought off the MLS. I got it under contract within a couple hours of it going live. And a long story short, the next day I got a call from somebody who offered me, I think a $25,000 or $30,000 assignment to take on the project. And, I was like, I'm going to make a hundred. Why would I sell this to you for $30,000? Oh, its hindsight is 20-20.
Bill: (17:18) Or 25 in this case. 25-30.
Ryan: (17:21) Yeah. On this property a year later, it's all said and done, it's finally closed after all the issues. And I got a check for $3,300. So it was like, even my wife was like, you know, like I don't normally like get into business things, but maybe we should have taken that check. I'm like, yeah, you’re not wrong.
Bill: (17:45) Well, at least you’ve got $5 an hour. I've had properties where I've had to pay out…
Ryan: (17:52) Oh, as I have. So, I think on the note of kind of looking at is this property potentially a good fit to wholetale or to sell as is? So the big thing I look at, because we've done quite a few of these lately is, “Is it livable as it sits?” And “Is it clean enough?” We did one that was a $320,000 house that I got for, I think $247,000. And we spent a thousand bucks. We had Merry Maids come in and they steamed, cleaned the carpets to kind of get some stains and some spots out. They dusted and we were able to sell it. Now the carpet isn't what I would call like, wow, this is great. But it was like a family can live here and they're not going to feel like they're living on somebody else's old mess. It's not new carpet. That's pretty obvious, but it's not like, it's not stained, right?
(18:53) So, I'm typically looking for something like that. Or a lot of the times with kind of wholetail deals that were selling either to a flipper or a homeowner buyer. For anybody who's not familiar because I get this question all the time. A wholetail, basically is a property we close on, do almost nothing to and turn around and list it on the market. It's basically a flip where we don't do any work. So, another thing that I typically look for is like builder grade level. I'm like maybe they bought the property new 5, 10, 15 years ago and haven't really updated anything. So, it's still kind of livable, finishes are decent, but it's not modern necessarily. A lot of the times those are a good candidate for something like this.
(19:42) The other thing we'll typically look at is just major systems. And we've done a few where we've simply just slapped a roof on it and then turn around and listed it. So, properties that are financeable, that don't necessarily need a ton of work. It's more cosmetic updating, you may be able to make the same amount of money or more listing it as is. And when I say as is like, we're still going to fix stuff that comes up on inspections, but we're not doing the construction ourselves. So, it's a potentially a good exit.
Bill: (20:13) Andrew, you might want to jump into this a little bit with your teams, in terms of rehab and where you…
Andrew: (20:22) I mean, our rehab model has been very strong, try to be as straight forward quick in and out as possible. And so, with the BRRRR model, the value add is very easily, usually straightforward. But there are examples where it makes sense to kind of go a step beyond that. One of the most obvious is if there's an easy way to go from a second bedroom to a third, that's the biggest. The biggest differences is two to three. One to two, obviously, if you can do that, that's important. There aren't very many, one-bedroom houses. Three to four, kind of anything more than that is useless. But two to three, because three is like the smallest that a family can use. And so, if you find a place to add a third bedroom, a way to do that without making it, like if they have a master, you're not going to make it into tiny little closets then that's something you should do.
(21:10) With student housing, obviously, you want to create as many bedrooms as possible. With family housing if you can add a third that's important. Finishing basements if they're walkout, we don't finish basements if they are regular. Like if they're completely underground, you're probably going to get water.
Ryan: (21:26) Especially in the Midwest.
Amanda: (21:28) Or in the Northwest.
Andrew: (21:30) Sometimes we do a finish job where we basically paint the floors in oil based paint so it doesn't rub off and then paint the walls white. So, paint the floors gray, the walls white. And then that gives you…
Ryan: (21:43) We’ll even spray the ceiling too.
Andrew: (21:45) The ceiling too, if there is a ceiling. Oftentimes it's just beams and ducts and stuff like that. But that gives it a semi-finished feel. And then I might put like a pool table and something went down there. But we might make it finished if it's walkout basement where one side it's underground, a side can walk out into the backyard or whatnot. I wouldn't recommend finishing it under any other circumstances.
Amanda: (22:10) No, adding egress windows are very expensive.
Andrew: (22:13) Egress windows are extremely expensive, especially when you got to cut into the concrete.
Amanda: (22:16) Yeah. And if you have water issues in a basement, it's hard to go in and try to fix those. If you're going to have a finished basement, you would probably want to start with it in new construction. You don't really want to be trying to fix a 60-year-old basement that's had water issues for 60 years. It's just like chasing your tail around.
Andrew: (22:35) And generally we don't want to add space unless it's… In the Midwest. In other places in really expensive markets, you add space anywhere you can. In the Midwest , space isn't that expensive. So, like, we don't convert garages very often. I pretty much… I can't actually think of doing it. I think we did it once. One time, we actually unconverted a garage conversion to get the garage back.
Amanda: (23:01) I also think in some markets that garage conversion is a little, yeah, it was sort of faddish like a thing that people were doing. Like they were finishing out basements and then people wanted, or finishing out garages. And people kind of wanted their garages back for storage and that sort of thing.
Andrew: (23:16) Yeah. Because when people got more stuff in your garage.
Ryan: (23:18) That’s really good to ask if that's permitted. I think a lot of the deals we've done in Indianapolis, oh, we turn the garage into a fourth bedroom. Did you pull permits? No. Okay. So that's got to come back out, which just gets you a better deal.
Andrew: (23:35) So yeah, unless you're buying from a bank, then they don't care. But yeah… So, basically, I would say, the other thing going from a two to three bedroom and going from one to anything, more bathroom or adding a half bath in the master, those are both, those are both important ways to add value. And it's much easier if there's a basement where the plumbing is easily available underneath. And also, if you're close to the other bathroom. Like you put the bathroom right next to each other. That makes it a lot easier to run the plumbing. But if you have a place to add a second bathroom or a second or a half bathroom, especially if it's a master, that's always a good way to add value without enormous expense and that changing the floor plan or anything like that.
Ryan: (24:24) I kind of used the example of like, almost like a swimming pool of as you go up in like bedrooms and bathrooms, you attract such a larger pool of people. Like the amount of people that want a studio apartment is fairly low. You get to a 1-1 that's better. You get to a 2-1 that's better, a 2-1 and a half is even better because then guests don't have to like go into a bedroom to get to a bathroom or something. You get to a 3-1 and a half, 3-2. I do agree with Andrew pretty much anything over four bedrooms and two and a half baths, really isn't going to add that much value.
Andrew: (24:59) Unless this is student rental.
Ryan: (25:02) Unless it's a student rental. Correct.
Amanda: (25:04) But even some things have trended with that. Students, I think are turning a little more spoiled, I guess is maybe a little word or what I would say…
Ryan: (25:15) That’s a kind way to put it.
Amanda: (25:17) They are wanting their own bathrooms to go with their bedrooms and maybe they don't want to live with as many people. The way people are living changes and is cyclical. And it's really weird. It's either they want this really giant house and they're just going to live like a fraternity house or they want to be in a two bedroom with just one other person.
Andrew: (25:37) Aren't we supposed to be living in pods here by 2030?
Ryan: (25:43) Get that off Amazon.
Bill: (25:45) So maybe we ought to also think of some unique ways that we've put our add-value glasses on when we've gone into a property.
Ryan: (25:53) Why don't you guys talk about ADU’s?
Bill: (25:57) Yeah. That'd be one of them.
Amanda: (25:59) Well, those are great and also a little bit tricky, just because oftentimes with an ADU with our issues in Oregon…
Andrew: (26:06) An ADU as an accessory dwelling unit, by the way, in case you didn’t notice.
Amanda: (26:10) The cities really kind of crack down, so you can't rent it out to two individual people like a duplex. Technically it has to be like owner occupied on one side. But what you could do is rent the whole unit. We have a couple of properties that we rent. We just rented out on one lease. And if those people want to re-rent it or just among themselves, figure out, like I'm going to live in the studio and the family is going to live in the three bed, one bath or something like that. So, obviously sometimes we'll push limits and try to rent it out like a duplex, but then oftentimes we'll get called…
Ryan: (25:43) I was just more wowed even talking like you and Bill, both house hack, which I think that was the most surprising thing for me about Bill when I went out to Oregon. He’s like, you own how much real estate? And wait you have tenants in your house? Right?
Amanda: (27:06) Yeah. But go ahead, Bill. But you are my inspiration because I want it… [Inaudible 27:13]
Bill: (27:14) Yeah. Amanda actually built her house from scratch. It has new construction with an ADU unit in it. So that's really the prime way to do it because if you do it from the beginning, you're going to add value in a way that is going to help you pay your mortgage. And that's kind of what it's all about. It kind of moved from the ski slope of what is the aperture of being able to sell it the highest possible price to a retail buyer to now, what is the way to gain the most equity from a property by making it so rentable that you're increasing its rental value. It’s essentially what you're doing. And of course, ADU’s are one way to do that. Another one we recently are working on in Portland that we've just finished and this next week we're showing it to some groups that are looking to rent this house as a group home. And they actually have a business. And these businesses are increasingly out there where people are providing kind of community living for folks who are getting older or they have mental issues or physical issues…
Ryan: (28:26) Substance abuse or prison release.
Amanda: (28:28) Well, we actually when I bought this house because it had five bedrooms and three bathrooms. We remodeled it and rehabbed it in a way to attract group homes because there's some window requirements. The reason why this house specifically worked because it was five bedrooms, all on one level. That's huge, especially if you're looking on it, if they're going to put seniors in it to eliminate the need for steps. There’s window height…
Ryan: (28:55) That’s a whole business model in it of itself.
Amanda: (28:58) So, there's window height issues. And basically, by doing that, and obviously it costs a little bit more, but that was our kind of our target. That was our target audience to find a tenant. It went from a $2,500 a month rental to a $4,500 a month rental. And we'll kind of see how that plays into appraised value since we do have to get a commercial appraisal or a commercial loan on our residential, if the appraiser will take that into account. This is something that we're kind of experimenting with, but the cash flow will be great.
Bill: (29:32) Yeah. And one of feature of this house is actually there was a garage conversion and this hits on a number of notes that we've already talked about. It wasn't totally permitted. So, it took us months to rectify that, which we didn't really anticipate getting into the property.
Amanda: (29:48) Well, especially because right before we were closing the title company I called you and said, oh, we found there's a utility bill that didn't get included in the title. And you said, okay, we'll go ahead and pay it. It wasn't a utility bill. It was a penalty from the city of Portland for outstanding issues. And then it was like we got into it and then it unraveled. It wasn't our best. It wasn’t our best.
Ryan: (30:12) Yeah. Well Portland is just so gracious to work with from what I've heard.
Bill: (30:19) Well, once in a while, I mean this situation we had to close it, but you really want to know if a title company is saying, yeah, we can close it, but there's only one little glitch on the title that you'll need to accept. You really need to look at that glitch very closely. That was the lesson there because that costs us thousands and thousands of dollars trying to rectify that. Now, because it had a garage conversion, two car garage conversion, it actually lends itself very well to this group home concept because the house manager or the owner operator will be living and their family will be living in the two-car part of the conversion. And then another five bedroom will be for their business and for their customers, their folks are taken care of.
Ryan: (31:07) So I think kind of one of the important things to highlight here is how this helps you scale your business. By having things like central AC, as many bedrooms and bathrooms as possible, that makes sense for the particular situation. I think the big thing we're talking about here is boosting rentability. So, the easier it is to fill properties with quality people, the faster you can grow in scale. I mean, I'll be blunt. One of the issues we ran into in Indianapolis was our GC who no longer works for us, had a really, really hard time with that last 10%. And that's really typical. I've heard a lot of people say, the first 90%, the last 10% is just as difficult to get done. It's all the kind of punch lists finishing things. And we had a phase where we were having a hard time getting properties filled because that last 10% was just kind of meh. So, you look at, like Andrew mentioned small things like light switch covers and trim and things of that nature.
(32:17) It's kind of like the bow isn't on the present, so to speak whereas if you really want to grow your business and scale it in a way that not just growing for the sake of growth, but scaling intelligently by having kind of some of these value-add options, making sure you're meeting the demand of what the market's looking for and not what you would personally like, you're going to be able to fill stuff quickly with quality people. I mean, we went from pretty slow fill up and lease up to, I mean, we've had 12 to 15 rental applications this week. That's not showings. That's people that have said, yes, I'll take it, screen me and paid, right? So, I think that's kind of by doing these value-add things, making sure like in the Midwest, a lot of properties are on window units. I don't know about you. I'm not going to deal with window units, right?
(33:14) Doing things that attract the largest pool of qualified applicants, not only are you going to make more money, but you're going to be able to scale your business because you're not going to have a big lag or breakdown when it comes to renewal or you're not going to have a ton of turnover. You may be able to fill a place with window units, but that family lives through one Midwestern in July and August of it being 82 degrees in the house. And that window unit starting to blow warm air, they're probably not going to renew.
Bill: (33:43) Yeah. And that means, I think looking at your value-add proposition and spending dollars right off the bat and not trying to, I guess, cheap it out.
Ryan: (33:57) As long as you've got to get a good deal to begin with. If you only try to cheap it out, if you sold yourself on buying a deal, you shouldn't have bought in the first place.
Bill: (34:04) Yeah. That's a very good point because that means you might need to pass on that property because yeah, maybe I could do this or I could let this go and let this go and let this go. But what is the end product? If you're going to be customer centric, either in the sale of a property or in the rental of a property, then you got to say, what do my customers really value? And what's it going to take to rent this property to quality people who are going to live there a long time and enjoy themselves? And if you do it at first, if you do most of the work upfront, rather than a turnover and the next turnover, the next turnover, you're going to get the kind of person you want right off the bat and you're also going to be able to charge the highest amount of rent possible.
Ryan: (34:45) Nobody wants to be an accidental slumlord. So, go into it, begin with the end in mind.
Bill: (34:54) Hey, that sounds like a good book title.
Ryan: (34:59) Bill's like, yes!
Bill: (35:02) Thank you, Stephen Covey by the way. I hope you've enjoyed this process. There's a lot more ideas and we'll certainly be sharing those, but we'd also like your ideas, your comments, your thoughts, your suggestions. And if you want us to answer questions and deal with a specific topic, please let us know. Go to thegoodstewards.com. Tell your friends about it. Throw us some likes. Don't throw us a shade, throw some likes. Okay. Anyway, enjoy your day. And we'll be back at it again next week. Thanks.