Brandon laughridge welcome to acquiring minds thanks for having me Brandon today we're going to talk about the intersection of ETA entrepreneurship through acquisition and real estate and that intersection occurs in property management businesses you bought one and you own a real estate portfolio so we're going to hear all about how the two of those interact complement each other or don't but let's start off with some background on you please Brandon tell us about your journey to leading up to buying a property management business sure um I uh am currently located in Kansas City and that's where I was born and raised uh went to the University of Missouri after college I uh moved out to San Diego um but prior to moving to San Diego I had the Good Fortune of working for some very entrepreneurial uh guys in some brothers that's why I say guys in Columbia Missouri where the University of Missouri is uh and that led to starting a business kind of right as I was getting out of college and that business was internet-based and very portable and uh had some family in San Diego and a business partner that was in love with San Diego so we ended up taking that business out uh to San Diego right after I graduated from college um that was uh 2010 we lived out in San Diego for about four years ended up uh growing selling that business um had an opportunity to uh kind of take a detour and join a private Equity Firm uh obviously I did not have a traditional private Equity background uh and that was sort of my entree into officially doing something related to to entrepreneurship through acquisition uh I had been sort of a a hobbyist researcher prior to to making that turn um and then uh ended up coming back to Kansas City working for that private Equity Firm for a little while um launching a business that failed uh after leaving that and then realizing okay I need to buy a business here I I liked doing that for the private Equity Firm but I didn't really want to be transactional uh I would I would like to buy something and focus on it um and ended up buying North Terrace my property management business in 2017 so coming up on seven years here in the spring and where does Real Estate fit into all of this tell us about your portfolio sure so that um internet business that I mentioned uh starting out of college uh it was basically it eventually morphed into kind of just an online agency type of a business search engine optimization being the core service that we offered and anyone that's ever spent any time either in that world directly or um has gotten into it to you know do SEO for their for their business or for whatever reason knows that um it's a very very rapidly changing industry that's sort of the only thing that stays the same in digital marketing specifically in SEO and uh es when your full business is based around that if feels very fleeting and like Google at any moment could change something and kind of put you out of business so I'd always had an interest in real estate and in my opinion that was kind of the opposite of uh something where you know just a single change by one company could put you out of business it's Sticks and Bricks and very basic and um ill liquid and very slow moving so I started basically taking the money that I was making off of that business and and what I could afford to uh investing in real estate and were these Investments or did you perceive that you would make a career in real estate I think at the time I I wasn't necessarily um planning on making a full-time career out of it I had just um it was 2010 like I said when we started that business and I think that was yeah that was also when I bought my first investment property and at that time in Kansas City as a result of the great financial crisis kind of 0809 you could buy a great house for $30 to $50,000 and the main limiting factor was basically how much stamina you had to look at properties in a day that were just listed on the MLS it was not that deals were hard to find so uh yeah I mean huge regret now it's easy to say in hindsight but it would have been amazing to uh to have focused on it at that point in time and raised a bunch of money and bought you know you could have bought thousands of houses like that that today are you know $150 to $200,000 wow I I remember of course that time very well and I remember hearing about the the most hammered markets you they just come up all the time in the news Vegas Miami um what were some of the other ones I mean where where speculation you know where the growth in speculation had been Mo had been of course is where where it hurt the most but um I don't remember hearing about Kansas City one way or the other uh but that's that is quite a collapse and then uh and then you know back getting a return to normal over what has it been 13 years from0 50,000 to collap was certainly not as dramatic as those places you mentioned or Phoenix some of the other kind ofen Sun Belt type markets um right but uh it was significant and interestingly something that I noticed early and What attracted me um to continue pursuing this was the rents did not have the same uh reaction as the price of the homes rents didn't go down essentially um they kind of moved up over time yeah uh so the kind of fundamental value if you just think about it from purely a value perspective you could make a very clear arithmetic argument that they're just very solid you know assets to acquire great well Brandon one of the things that strikes me about this uh 13 15 years going back to to you getting out of college is that you had some zero to1 entrepreneurship experience you had online digital uh business experience then private Equity Real Estate on the side you're building this portfolio and then and then buying a business ultimately so you could have taken any of those and made a career out of them um it was there any and and where you have landed is that you're essentially a real estate guy but also kind of an ETA guy you bought a business that complement your real estate portfolio we're GNA we're going to hear all about that I'm just curious if um if there were why do you think you landed on on the path that you did when you could have followed any of those into uh into into careers I mean digital is its own career PE is its own career real estate is its own career the one you took Etc well in terms of like making real estate my career I knew that I didn't want to um go be a broker or a lender or something like that um sort of a solo uh business where there's not much Enterprise Value to it you can certainly make a lot of money and I would say um from 2017 when I bought my business until a year and a half ago could have made far more money being a broker theoretically um than owning a property management company but I was just kind of um long-term oriented in my thinking and wanted to build something with Enterprise Value not just you know uh a roll at X that in Good Times you can make a lot of money but then in bad times you're scrambling basically which is what a lot of Brokers are doing now I mean transactions are obviously way way down so to answer the real estate portion of your question um I landed on I wanted an operating business that could somehow kind of fuel and support um focusing on building a portfolio over time and I was not you know independently wealthy and able to just go buy enough real estate that I could manage it you know as my full-time job so um but then in terms of landing on real estate I had already you know been buying and building a small portfolio um and I was I had kind of gotten to the point where it was an ining as a side hustle and I needed to hire a property management company um and I went through the process of of looking well I used a third-party property management company at one point and that was a pretty terrible experience um I wouldn't say that I was uh sophisticated at all in how I vetted that group it was just a referral and went with it and it was a terrible experience um so then I started digging into the space and um for as much uh uh flak I guess as it gets as an industry and it is certainly difficult there's also a lot of opportunity um and a lot of you know kind of bolt-on businesses that you can build around it even outside of the very obvious let's use it to build a portfolio that we would manage um and I had sort of separate from that decision-making process decided that while it was exciting to uh look at deals and buy businesses for that private Equity Firm I got a lot more excited about uh doubling something that you already owned than um the inorganic growth of let's just buy more and more and more um it's a lot more exciting to make a change in a business and see it forever improved over you know oftentimes relatively simple things I know at this point the cliche is you know get rid of the fax machine I think that's like the uh SMB Twitter cliche uh but there's a lot of things like that and it's just it's more exciting and interesting um to do that and go deeper in one business to me than it is to just buy more and more and more businesses so I think it was just the convergence of all those factors basically led me to hey the shortest path to get to where I want to go is buy an operating business and that operating business should be in real estate and if it's in real estate here's what makes sense yeah and did you ever consider understanding that you had a real estate portfolio that you were already feeling this pain point of property management uh um you needing to Outsource Property Management seeing that the the what was on offer out there wasn't good you could probably do better but did you ever consider buying a different type of business outside of real estate buying you know the the HVAC business or whatever or whatever it was because uh one thing just to fill in a little bit of a gap here you knew out in San Diego you'd met Tim Ludwig uh who's a big name in search so you were pretty familiar with ETA and search for some number of years and so your aperture was going to be wider than just oh by a property management business you saw all of the all the potential that was here uh in ETA broadly um so did you ever consider buying something that wasn't directly applicable to your own real estate portfolio oh absolutely yeah um looked at deals for years um when we had that uh online marketing business that I mentioned um we had the Good Fortune of having uh an employee who then became a partner in the business and obviously it was I was very young my partner is only a few years older than me and this employee that we had who became a partner uh really kind of ran the whole business for us at a certain point and we we were pretty free I mean I would say maybe I spent 20 hours a week on that business itself and the rest of my time was free and I didn't have any kids and um now it's one of those things where I I see just how much free time I really had and wasted but um I would Ty did you quote put it in operator and it actually worked uh well we were still there and no we wouldn't have phrased it that way at the time um and we were we were still involved in the business um it's a it's definitely different because it was not um yeah just buying a business and putting somebody in and hoping it works out sort of thing we had built the business and he was there early um so really it was more of a he was a business partner uh and just didn't happen to found it you know um so no I wouldn't classify it as as the dream of putting in an operator um but uh anyway so we filled our sort of spare time basically with just constantly looking at new oportunities things that we felt like could scale much larger than that Services business um in retrospect uh to the detriment of the services business cuz it was actually not as bad as we told ourselves it was this business but um we so we looked at deals for years in every space and we got close on some I mean just uh I feel like I looked at so many that now I've forgotten most of the specifics but I know at one point we uh we were fairly close on a um fence installation business in um Orange County that was pretty interesting um we dug pretty deep in the travel space at one point uh because that had become a little bit in Vogue in the search fund world in the same way that like um document management and some of those other uh sort of classic search fund Industries get kind of have a moment and shine bright and Niche kind of travel tour operators where I we had gotten kind of not far down the path but somewhat serious about a a business that took people on like Niche vacations in Europe basically like go see castles in Germany and stuff like that um so yeah we had I had looked at tons of obscure operating businesses with little to no common theme other than obviously we would hope there was some sort of way that that we felt like there might be an edge in online marketing um that we could bring to the table and why do you think you'd ever closed on any of those if if if you this search such as it was was going for so was lasting for so long I mean I think a lot of that searching predated uh really my understanding of the SBA loan program so oh raising Capital to uh actually execute on one of those deals would have been I mean I feel like now I wouldn't I would be very confident but at the time to you know if you find a business that's $4 million in Enterprise Value and don't really understand that hey there's this way to borrow 80 or 90% of that um that would have certainly held us back um and I don't know we were fixated too on scalability to like an extreme degree and like we don't want to do this if it can't be a huge business and I've certainly changed my thinking on that um and care more sort of about durability of a business and the ability for that business to last a long time rather than quickly get really large um so I think we would shut down a lot of opportunities for that reason you know it's a somewhat attractive business but can we grow it to 50 or100 million a year no okay we're not interested Brandon how how much damage has the you know kind of Silicon Valley giant quick like incredibly fast growing business that that that is the bar that we were all shooting for uh how much damage has it done lost opportunities lost Talent who for year you know people like you and me who for years didn't go do something because they thought that we had this unrealistically ridiculously high bar um it's just it's really actually quite frustrating as I articulate it well it is it's an extreme amount of damage it would be I'm sure somebody's done this the research obviously you could quantify that in a number of different ways but it's I think it's interesting how and and we weren't just to preface this a little bit we weren't necessarily like oh we need to have you know a Facebook level outcome or something like that but again like on the level of what I was saying 50100 million a year in Revenue plus kind of opportunity or this isn't worth worth our time um and it's I think it's caused a lot of damage because um if you really look at who's successful and and this took me a few years to come around see this you look at who's successful in a community and who do you want to be uh typically it's it's the small business owner that has a pretty simple business and has just kind of um incrementally made that better over time and uh you know maybe bought some real estate or whatever and it's just uh yeah lifestyle business as a pejorative um it's like the opposite to me whatever the opposite of pajora of is a compliment I guess that's what a life sale business is to me that's the whole point of a business um so yeah it definitely causes us to waste a lot of time well another another reaction to your story there boy if you guys were turned on by the idea of buying a business but you didn't know about the SBA possibility that must have just gotten you really excited when you were like you know after years of thinking you're going to have to raise money from from investors or however you're going to finance it to then learn holy smokes we can do that we we can get 80 or 90% of this thing financed by a bank yeah that must an exciting moment for sure and I think there was two like there was an initial couple years where I just didn't even know about it and it sounds funny now but I think 10 years ago it was a lot less common and there really weren't um you know even today a lot of people have the experience where they go into their local bank who says that they do SBA Loans and you say I want to buy a business with an SBA loan and they say well you can't do that it's for equipment or it's for real estate or whatever you know it's just their understanding of the program um so there's still a lot of that sentiment out there kind of like in the non Twitter World um and there weren't these like maybe Live Oak Bank I'm sure it existed but like I don't think that there were these kind of will go any anywhere focused on ETA type lenders um that existed at that time so it was definitely a much more Niche thing people doing it um and then separate from that the partner that I mentioned who was a few years older he had had a successful uh outcome prior to our business so I'm not sure how Keen he would have been on like we were very married at the time still good friends and partners on some real estate but um we sort of had a blood brother type situation where we did everything together and I would have and did I think write off opportunities that would need to be financed by things that were personally guaranteed because he wasn't interested in doing that yeah yeah makes sense but you're right I mean you know it's it's so funny one's own psychology when you get into something you assume that that's how things always were so when I started learning about ETA and you know all the way back in 2021 just two years ago uh SBA was well known but that doesn't mean that it was 10 years before that like there's been a lot that's happened since from 2011 to 2021 so I explicitly remember that when I started researching using SBA loan to buy a business um there was like a handful of websites that even talked about it and yeah one in particular that had described uh like the timeline of major changes to the SBA program that made it viable including like raising the limit from 2 million to 5 million which I think happened 2014 2015 is maybe a few years before that but so it's it's only recently for sure that it's come into the general Consciousness and then with a sizing up of the limit as well that's good um history I didn't know that another quick aside on this so travel businesses I I I can't even imagine what the the pitch is there I know Greg jonus big name in traditional search funds had a travel business I know guest workor investing online looked at a travel business but um I mean just indulge me what what what's the 30 second why did it have why did it ever have a moment a moment in in the Sun from the search perspective it doesn't seem to have any of the attributes that seem canonical today well it doesn't have recurring Revenue however um a lot of Niche travel businesses that have um you know a good marketing pitch or hook like um okay we're the uh uh Adventure travel company to South America or something like that or even that's not a great example um maybe C we're the Castle tour company and or the architecture travel company there is a very high repeat rate of customers so it's certainly not recurring but um there's the opportunity to build a really really tight relationship uh like you probably could and I'm totally making this up I'm not citing a study but I bet if you did the research on the lifetime value of like a Viking Cruise customer it's definitely not one Viking Cruise I wouldn't be surprised if it's like four or five Viking Cruises um and I think the same would hold true in sort of these higher-end Niche travel businesses they have a really interesting working capital um kind of structure negative working capital so usually you're getting paid a year in advance or six months in advance whatever it is and then you're paying for everything as it happens um so that's really attractive so you don't need any working capital essentially and then if you've got a good model um you could obviously take that working capital or at least the profit portion of that working capital and expand into new tours acquiring customers whatever it is and it could grow very fast theoretically um so the specific one that we looked at was like European focused and I think they had Castle tours and things like that and they had proven out that um it did have a high repeat rate of of business and it did have the really attractive working capital so I think those are the reasons that it was interesting and I don't know if you've planned a family vacation in the last few years it's a huge pain and there's almost uh and I know that's I'm saying family when this the um typically the profile of somebody that does this is not a family but just planned a vacation period it's a huge pain and uh personally I've never used a tour company but uh I could see the appeal for sure of just yeah here's what I want to do and you figure out the logistics I don't have to think about it well thank you for that and one thing one more thing before we return to your story you just touched on it and you said to said it to me explicitly in our preall as well um essentially you know you had this this agency it was throwing off cash uh you I I'm putting words in your mouth I think I can't remember how you put it but you didn't think it was that strong of business or that great of a of a business and so you were looking for something else uh and you now see that differently and what is what and and I think what you said on the preall was you know back then you didn't look at service you didn't smile upon service businesses generally and now of course you love them um you've you've already glanced off it but address that that uh directly and how you've evolved your thinking there well specifically the service that we offered there was link building in SEO if you're familiar with that but you know just you've got to get links to pages to rank well or websites to rank well um it's changed how you sort of qualify what a great link is but um in general a link is a vote you go out and get more votes you know and we were at the higher end of that you know there's everything from you can do very spammy stuff um up to you know the best is going to be if like the New York Times mentions you and it's just totally inorganic and or totally organic excuse me um you didn't do anything except maybe produce some amazing content to get a link so that was the business we offered um we uh our client base however was not the end user it was large agencies where um they would much rather instead of building up a capability inhouse to go out and get links they would rather just have a price from somebody like us at that time and they can just mark it up or pass it on or whatever it's um you know just like a GC versus self-performing work it's a lot easier if you own the relationship to just Mark something up so we had quite a few really good highlevel agency relationships uh I mean we had a ton of them but if you look at the top customers that we had um that were spending a lot with us I mean tens of thousands a month up to you know I think the top top customers were probably over 100,000 a month and for years um and just that feeling of Google being able to sort of theoretically shut our business off at any moment that constantly was rattling around in our brains and uh so we would convince ourselves that hey we shouldn't put much effort into this CU it could be gone at any moment um and we then allowed that to kind of creep into um how we treated the rest of the business I guess because a more appropriate response would have been to say well what are other service lines that we could offer these customers since we have these great relationships what are other things that their clients need that they would love to just mark up us offering the service and we've aggregated all this demand from a bunch of different agencies so we can even if they would perform it in house maybe we can do it better or cheaper or whatever because we've got you know we can keep a full-time team busy or whatever the thing is that would have been a much better response than let's do something totally unrelated because uh we just don't like the idea of this service business because it's never going to be um you know a 50 or $1 100 million business I think it probably could have been a $10 million business and probably with great margins um um so uh it was great it was definitely a lesson learned yeah and so and and and how does that fit into your your overall evolution of going from an aversion to Services businesses to an appreciation for them because is it kind of what we've already said that like let's not fixate on50 And1 million opportunities A10 million business which many many many services businesses can realistically get to can throw off TW you know two three four maybe million dollar a year sounds pretty good to me sort of thinking yeah and and now it's kind of a uh thing that I I will forget about or I'll you know there's some shiny object that's starting to distract me but thankfully I can I shut that stuff down very quickly now and remembering that feeling and how basically that that business still exists today uh and we sold it in 2014 and um one of our employees at that time also has started like the same business again and does very well with it so this business that in 2010 2011 we started and felt like it was going to go away at any moment so we wouldn't focus on it is still alive and doing well uh you know 13 years later um so then I use that just again as a reminder where especially in my business now because some of the issues sort of um rhyme with issues that we would have had in that business but there is no like Google that could turn it off um so that was the primary problem that we had with that business always um and just you know it's a it's a good reminder and way to uh kind of keep myself grounded and focused on what I have that's working and just keep going well I I I do want to just um throw in my perspective here and make sure the the audience is clear your concern that Google could there was platform risk what they call platform risk like one change in the bowels of the Google Organization or the Google algorithm could overnight sync that line of business and that is a very valid concern and there are countless examples of that happening with respect to SEO with respect to e-commerce if you're on Amazon FBA businesses basically any business that that somehow relies on one of the big big big platforms um is very beholden to the whims of that platform or that algorithm and it is a very very real risk so you were and I know you're not saying the opposite you were right to be concerned about that but where where you're saying you were wrong was the play was not to just exit digital agencies altogether it would have been to spin up a different line or two or three of offerings to your to these great clients that you had and and and reduce the overreliance on SEO link building stuff um so yeah just want to just want to make that clear that the platform risk that you guys perceived was real and even though there are plenty of businesses today that make millions on Amazon or make millions on link building and SEO they're very vulnerable they're they're just as vulnerable today as they were in 2014 Google itself we're seeing with GPT who knows what happens with consumer consumer habits around search but I mean there's a question today of whether SEO itself is is doomed I I'm now getting a little bit off track but I wanted to throw that in there no I do uh I have thought about that for sure over the last year since I think it's been about a year since started playing with uh uh chat GPT and other AI stuff and uh yeah the I would be absolutely frantic if we were in that business still um worried about what it looked like in the future and one other thing I'll say about an agency business I know you you and I both are my first million listeners so we're familiar with a fan favorite guest uh uh Andrew Wilkinson who's who goes on that show quite a bit and um he'll be familiar to people on Twitter as well holding company of uh mostly or almost exclusively digital businesses but Andrew uh got his start buying businesses because he had an agency that grew over some number of years um it's a kind of high-end for startups user experience I think ux agency don't it's not exactly but it's some digital agency and to your point like he grew it to the point where it was throwing off a lot of cash he owns it to this day and it was his you know Warren Buffett has had his what the insurance company or whatever the all the all the cash was throwing off from being thrown off from his insurance float uh Wilkinson and his team had the cash coming off of an agency that they then started uh deploying into into acquiring businesses so agencies can be yeah they can be good businesses to your point is basically the same story as well ah give us 30 seconds on that well with he had an agency business and they they spun off a lot of startups and uh I don't know that any of those really became too much um but then he went on to buy another agency business and kind of doubled down on their core and it was doing really well and then they used the cash that they were earning off of those businesses to go and buy unrelated businesses and then built it to the level where uh it was a pretty impressive holding company before then now he does you know uh institutional funds and has investors but that was all with his own money and you know uh kind of a a self-funded search before that was a term great history there too all right Brandon let's return to your story now okay so you were in San Diego you moved back to Kansas City uh what year was that and how big is your real estate portfolio at this point that was 2014 and I think I had about 12 units and is this when it's it's not for another three years that you buy North Terrace so tell tell us the story of the actual acquisition of North Terrace where your property portfolio looks like like where you're living ET sure so I actually prior to 2014 during that um uh period of time that I was talking about where uh you know I'm spending half my time on the agency business and then the rest kind of exploring opportunities um I had talked to the owner founder of North Terrace um and I had kind of reached out cold obviously and said hey I'm kind of interested in uh buying a property management company in Kansas City and there's not that many that look interesting to me because at that time I was pretty fixated on focusing on properties in a pretty tight geography in Kansas City um kind of cool historic kind of a hipstery type area um just cuz I thought if I'm going to spend all my time on this that's the kind of area I want to be in and so so there was really only two companies that were on that list I reached out to both of them one I didn't hear back from then North Terrace I did hear back from we had some conversations I I'd have to go look back on my email but I think we even got to a price at that time over the course of a few months and then we had a disagreement over working capital and as you'll hear a lot of people say uh where you know owner thought it was his and I thought you should get some working capital and it was enough of a disagreement I felt at the time that it's not going to work so we said hey you know let's talk again down the road maybe things will change but for now um I don't think this is a fit uh then sort of after that conversation we went on to sell the agency business and join that private Equity Firm both my partner and I um and uh bought a a few businesses for them and then in the middle of that period of time moved back to Kansas City continued working for the private Equity Firm uh they're pretty like geographically agnostic on a certain level and um started itching to really make a go at buying something um then I mentioned briefly my partner and I left that private Equity Firm and kind of flew a flag that we were going to go buy business business or businesses it was a little uh open-ended um and while we were looking for opportunities we found what we thought was a good opportunity in kind of the Insurance Le gen space and we started a business there um it was cool domain eligibility decom and started building that out and so it's truly a startup and uh it just it did not become anything unfortunately um and so that was kind of a year um of focusing on something that uh it was a good experience but um could feel that it was like we're running out of money we got to do something I then went back to that conversation and I had been running the real estate portfolio on the side this whole time and went back to the owner of North Terrace and said hey I'm in interested again and I I need to make a move and we can get past that issue we had before like I'll make it work I don't care um because now in retrospect it was pretty trivial I think it was a $50,000 difference kind of a thing and ultimately opportunities good opportunities are so finite and I was so specific and thinking you know I want this company that manages this kind of property and you know a long laundry list of things that that this company met so to lose the opportunity over okay industry standard is working capital works this way we're not seeing eye to eye like I should just eat that and chalk it up to paying more for the business if I still like the price um yeah so that conversation was uh October november-ish of 2016 and we ended up closing March 1 of 2017 and so that was that did it that that sticking point on working capital really was all that needed to be removed for the deal to progress once you said that he was in there was some stuff in the meantime that helped a lot on the seller side obviously I take no credit for any of that um he had just happened to exit a few deals that um the company obviously managed multif family deals so that took out some of the issues with it's super common and this is now an issue with with my business like it'd be pretty difficult to sell because a large percentage of what we manage are deals that I'm an owner in so why would I not why would I want to sell that but how could I sell that and how would that work it gets kind of hairy for sure um he had sold um everything at that moment uh unrelated to me potentially buying the business because it was all before the conversation had started again he had also bought a farm kind of 45 minutes away and was liking spending more time there uh I had already demonstrated that I had some of the more difficult things I think to find in somebody that would buy this sort of business like just the like block by block kind of like obsession with real estate in the areas that we focused in like it's sort of hard to put a teaser out and say by a property management company and then hope that the person that presents themselves just has that you know and he recognized that that was fairly unique um so it was just sort of fortunate perfect timing when we came back around to it why is a block byblock real estate Obsession I love that by the way why is that uh something that's critical in in Property Management I can understand that if you're going to be a real estate agent or if you're going to be a real estate investor buyer but a property manager they don't need to have their finger on the pulse of the of the values of the market as much do they as as those other groups I just said um well for one it was a pretty concentrated client base you know we had about 800 units under management um when I purchased the business today for context we're about double that um but uh I have a you know elaborate client concentration thing that I prepared for the business plan that I had to create for an SBA loan and I don't remember exactly the sort of tail on it but the top five clients probably represented half the business and then it you know kind of fell off after that so knowing what I know now I don't find that very concerning obviously at the time it felt very concerning and any reasonable lender is going to bring that up as a potential big deal um as they should and uh being able to demonstrate credibility to those clients and to the lender through just like you know we start talking about a property that we manage or one that we could manage whatever and I can say oh well I know that was owned by soand so at such and such point and they sold it and bought this and just like all this you know deep domain knowledge that you would expect to take years of of like being in the business to have if I I walked into it with some level of that um it's a lot more plausible that I'm not going to let cents I don't know what I'm do or I don't know the market or whatever the cas may be tell us a little bit more about North Terrace you said it was it had 800 doors 800 units under management uh what else can you tell us about it at the at the moment and when you bought it sure well at the moment that I bought it um we were certainly more you know quote unquote old school I guess um that's somewhat the business and somewhat just you know the market has changed um one of the things that I really liked about property management is I felt like um it was 10 years behind a lot of other businesses I think maybe that's maybe it's not 10 today but it's still a few years you know the things that have have become industry standard in say Plumbing or HVAC or even more Progressive like lead generation Industries like mortgages the way that a lead has worked for instance in the mortgage space and go fill out a quick and Loans form and then like you yeah brace yourself it's going to be hell for the rest of your life essentially yeah um it's the complete opposite in Property Management it's you got to work super hard to get like a single call back and I found that really attractive um and we still have you know super long ways to go uh on getting to the level that I want to be at you know I don't think I want to be quick in loans uh lead generation you know how we work a lead but still there's a lot of opportunity there um but we were extremely old school when I bought the business um you know didn't take online payments it was like you come in on Monday morning and there's a $20,000 in money orders on the floor which is like terrifying to me to think about now but that was like every Monday morning um with like the 2x4 in the brackets holding the door closed kind of a thing um so uh I'm trying to think of other good examples of how old school we were I mean no the resident portal pretty much only advertised on Craigslist just kind of like the you know doing business like it was 2000 or even before maybe even um today it's not like we're you know bleeding edge Tech progressives or whatever um but for the property management industry ESP for kind of this smaller scattered site small apartment building space um we at least have all the basic blocking tackling done that you would expect in larger buildings the obvious resident portals and online payments and we have a more professional office it doesn't you know when I bought the business the office had all these like Little Pony walls and you could hear every single conversation that anyone ever had there were no private offices which was like crazy um to me and drove me nuts so I'd always be outside on my phone um so yeah we've made a bunch of incremental changes like that but uh and employee wise we're probably about double uh what we so that's kind of tracked um I think we are kind of at a Tipping Point though now where incrementally you can we can add units faster than we have to add labor on the management side which is an interesting Tipping Point obviously to be at um and we've they call that they call scale Brandon that's the that's the word of choice I'm not supposed to say right but um so yeah and and Brandon H how can you give us some Revenue numbers around where it was and what it is today um and and head count you said doubled but how how many people then and now yeah when I bought it it was it was 12 or so and we're about 25 today um and today we're 4 million-ish year in reeven revenue and when I bought it we were million and a half there's a lot of pass throughs so that number gets kind of um it doesn't necessarily track with uh the reality of what's going on in the business for instance there was a year that we had a huge rehab project the way that we do accounting which is not the way every property management company does accounting is that flows through us theoretically like it depends on what what it is but like on that large rehab project that we bought all the materials for that kind of that did flow through us the materials so you know it's like a half a million dollar Spike but it's not at the same margin as regular Revenue if that makes sense okay okay all right well and and you're just kind of reminding me of something that a property a service that a property management business might deliver for its clients let's step back and just I'm sure everybody knows what property management agement is but just in case and so that we're all on the same page give us 60 seconds on what property management does and and the suite of services that it that it offers to its clients and what its typical client looks like sure so like I mentioned we focus on scattered site multifam so that's 10 to 100 units for the most part uh we do have a little bit that's larger than that where there's staff on site but our typical property is let's say it's 40 units um this the staff all works out of our central office uh we don't um have a single person that does essentially everything on the management side for that business in the way that you would if you had say a 200 unit apartment complex and you've got someone on site to do all of the management functions they're going to do everything so the services specific specifically that we provide to a property we do the leasing so we're going to Market it online uh you know coordinate professional photography and 3D tours we pretty much do those on every unit um leads are going to come in we're going to work the leads do showings process applications um process renewals just everything around uh keeping occupancy High essentially um and then the actual you know management of the property is uh G getting um bids from vendors on contract services so that's things like your trash if that's not covered by the city uh Pest Control uh Landscaping and Lawn Care uh just everything that goes into running a property and then you know holding those service providers accountable um paying the bills doing bookkeeping for the property um and then we do maintenance and turns which are two different functions in our business they're not uh carried out by the same group of people so a tenant has an issue in a building and tells us hey X small thing is happening we do that with in-house labor as opposed to calling up you know a handyman or something every time something happens uh and that's our maintenance department and then make ready or turns kind of the industry terms uh is after a resident moves out we then obviously have to get that ready for the next unit or next person that's going to move in and be able to market the unit and make it look presentable that is a separate Department from maintenance um and typically that's a relatively small scope of work but maybe 20% of the time it's like a large renovation and at large in our term terms is say $30,000 per apartment or less where we're doing like real upgrades you know might be new counters or new cabinets encounters New vanities new flooring Etc um so yeah just kind of everything that goes into running a property day-to-day there is a murky line between especially at this size between property management and asset management asset management is the higher level thinking of hey what basically the in my opinion an asset manager makes the business plan and gives it to a property manager to enact the business plan so we're supposed to be just enacting business plans what happens though more often than not at this size is you have an owner who's um not focused on it full-time and isn't necessarily A sophisticated uh real estate investor and I don't mean that in a bad way but it's again they're not focused on it full-time and they're not they don't have a professional sort of asset management program that they put every property on so we end up bleeding into doing Asset Management as well uh which sometimes is good and other times is is frustrating because it's uh uh thankfully none of the clients we work with right now are like this but at times there are clients who think basically you know I bought a property my job is done here's a spreadsheet that a broker gave me now make this happen you know um and it's not that simple it's an ongoing thing where the owner has to be an asset manager so that we can be effective property managers well so you're saying that if I am a rich person who bought a 50 unit building because I just want to park my Capital there and and and and people will say that that uh while while passive income is is Elusive and and often the it's an over promise that you might get something like that that in fact in real estate if you can get it if you buy big enough that a property manager can just do everything but you're saying that even then not really because unless you're also hiring an asset manager or also charging the property manager with explicitly with the doing the asset management as well you got to think about it more than just make sure you know the place is leased up and it's maintained you got to think strategically about it somebody's got to be making those decisions uh yeah yeah that's exactly I mean it's uh it's akin to the joke that you made earlier in our conversation about so you're telling me you just installed an operator you know um we are management for the business but uh without um you know we don't have time to divorce ourselves from the dayto day constantly and be thinking higher level uh the owner has to do that um and if they're interested in something being totally passive then they should probably invest with a real estate GP who then that is their value ad they are an asset manager and uh you know it's just not feasible for us to go and constantly shop every comp or whatever you would put in that Asset Management bucket we try to as a value ad go a lot further than typical property managers would and it's sort of like a bonus that we give feedback on that you know um but yeah it is not passive as as you might be led to believe but and why wouldn't you just offer Asset Management as an additional and premium service that is paid for optionally we should I mean it's um it's an interesting uh sort of case study and understanding what you're buying basically where um there was that like I mentioned the client concentration and a lot of the reason I think that those clients chose North Terrace was because and North Terrace was really just it wasn't just the seller but you know more or less at that time it was the seller he was a lot more involved with each individual client than I am we have just more structure and um hierarchy where there's certain things that I'm just there certain clients where I'm really just not that involved we just do property management and that's sort of the end of it but for instance at that time he wrote all of the monthly reports for every single prop I don't do that now um I'm involved with bigger clients and involved on my deals but there's a lot of deals that I don't really see much month-to month and I kind of look at it quarterly or annually um so he sort of offered that Asset Management to everyone at no additional charge so um and it was totally blurred you know um and I don't think you called it Asset Management it was just um you know the business was started because he managed a property of his own and a neighbor basically said you're doing great like would you manage mine and it just mushroomed that way and so he just didn't think of it any other way so it was I don't think it was purposely a growth strategy but that's what it ended up being there are to use your earlier word that rhymes with so many seller profiles where they were they they kind of fell into the business because they were doing something themselves and and a business grew around them and so many of their clients at least their early clients they knew personally and they just overd delivered and overd delivered and overd delivered and when a new buyer youu comes in and really needs needs to professionalize that and set some boundaries um it's a bit of a pickle because you have to now kind of kind of claw back some of the services that that the clients were were getting for free from the seller uh and start charging for them or figure out some other way to to to to deliver them that that's profit profitable to you yeah absolutely and then there's there is an additional added um kind of wrinkle in Property Management where at times it feels like everything we charge for is a direct like value Destroyer essentially for the client or our property we're this weird dynamic where we're both partners and we their foe in a sense because uh if we just start charging more it's seen as at times or at least in the short term revenue is kind of finite but expenses could be infinite if we start charging for things and obviously that's how you value a property um so if you used to get a service for free and now it's charged you're paying for it um not only are you paying for it but you're also multiplying that through you know at a multiple the way the property is valued so it's really a big deal so I have been more focused on let's figure out how we can generate revenue for the properties and then occasionally I say hey look we've done X Y and Z I need to charge for this in this way now you know so I lead lead with the value obviously and then try and ask for a little bit of it back and is the is the kind of Counter Point to them you know yes this is some money up front yes it might look like it hurts your you know when you take the cap rate it you might hurt basically I'm just looks like might look like I'm destroying a little bit of value of this asset you probably don't want to use that word um but in fact you know I'm I'm I'm I'm tending to your business your asset and in the long term this is simply an investment you're investing a little bit more now for you know a better maintained property higher rents whatever it might be uh over time yeah I mean a good example is we over the last two years switched our leases to go from 30-day notice when somebody wants to leave to 60 days um which has pretty much become the industry standard at least in Kansas City that everybody does 60 days well the sort of old school is we would always do 30 days and in fact when I bought the business everything rolled month to month after the initial year we didn't do any renewals and that drove me insane because on a 12 unit property 34 people move out it's a sounds like a very dramatic percentage oh my gosh we're 25 per vacant well yeah we would be that's just three people you know it's a very kind of law of of small numbers hurting you um and so for one we started doing renewals they're not a ton of work but it's it's I mean to go from not doing them at all to doing them is work so we we did them for a while for free and then we started charging and the predictability then of locking in your Revenue versus not everybody has come around except for for one um and agrees with that and is like yes this is really nice I can actually tell my exposure month to month how many people could be leaving and then as part of that switch from 30 to 60 days we do a we never used to do anything prior to someone moving out except in rare circumstances to understand what condition that unit was in and prepare for what the turn or the renovation is going to look like they would move out then Within a handful of days we get over we do an inspection and then um decide what to do well with a 60-day window it's far enough that you can go say 40 to 50 days out do that inspection and figure out oh this is a big deal like here's the scope of work here's a general idea of what the budget's going to look like and you can be ready to start you know start work within a few days of that move out not start planning within a few days of that so and that we charge a little bit for that inspection but it more than pays for itself in the fact that units are coming online like a month earlier well that's a uh a great segue Brandon you talked about the proverbial the proverbial fax machine earlier swap out the fax machine put in some SAS tools and you've transformed the business uh haha it's that easy but there are but there are levers to pull in all these um business that are not very Tech forward or haven't really been um kind of looked at strategically for a long time what were some of the fax machine opportunities in your business you've already given us a few but I know there are more yeah so our website was not attractive it was like a you know uh web Builder kind of a thing where you it's almost like a Word document that you're building the website in and you upload it on the FTP server or whatever yeah so modernizing our presence online for sure um we never used to use professional pictures part of that stemmed from um the fact that how our pricing scheme worked still but but for sure then was basically you pay a management fee and that's inclusive of everything including marketing so any expense that you know we would bear was just on us so if I have to pay for every unit turn to get professional photography and it's just out of my side it's not covered by the client that's a huge expense um but then just kind of like the example I just gave about increasing turn times it's pretty obvious that professional photos are going to help rent units faster so we basically said hey I'm sorry but we're not going to cover this cost but we would love to do it so put it on the client and everybody's opted in and now there's a library built up and it's not it's sort of a one-time expense for the most part um so we've um basically a lot of branding stuff is what I'm driving at um and taking online payments because you think of just the work that goes into it used to be a check would come in we didn't have any check scanners in the office we would prepare physical deposits you can imagine the big fi you know with 50 or 60 properties the Big File fold where they're separated by owners and we're separating deposits and we've got to go twice a week for the first two weeks of the month and then once a week for the second two weeks of the month and on and on and on um now for the last say three years I think it was about two years well no two or three years into my ownership that we mandated online payments and there are still stragglers for one reason or another that do not pay that way but it's 95% plus and that every step that goes into processing a check is now just you know they pay it online and it's in the it's in the operating account um and it's basically reconciles itself so that's an extreme amount of administrative work that's saved um we used to do physical in-person lease signings which I'm always uncomfortable you know when I go to buy a car or something like that um you're constantly in these situations where you're signing a legal document but you really don't have an opportunity to review it like realistically unless you're the person that's just going to sit in the office for 6 hours and that was not by design that wasn't why North Terrace did it that way but that's just the reality here's your lease sign it and get out of here with your keys we now send that all ahead of time via and do e signature and then the day you move in just come in and pick up a copy and some keys and thank you gift whatever um so that's like another one of those things where instead of spending 30 minutes with every single person it's like a five minute thing and a better outcome for them um and super organized on the back end CU we don't have to like scan a lease it's already in the system um so trying to think of other good examples it's just an infinite list of tiny little optimizations like that basically um you know using uh we weren't cloud-based before we had a server but it was physical so you think about you go inspect a unit what does that look like well everyone of course uses their personal phone they've got the pictures on there they all have their own separate way of how they get those pictures onto the server maybe they email them to themselves maybe they plug their phone in and move it over on the computer but it's slow they probably forget half the time because it's like clunky to go do something in the field have to come back to the office and finish the process so now I'm like crazy about like any work that's performed that's going to end up on our um we use Microsoft uh in our kind of um server quote unquote that's in the cloud needs to originate there unless it's just like in some program that you can't do it that way but don't start a Word document save it on your computer and move it in there like originate it there so that I can see everyone can see that it's been started um and photos the same way um so just very long list of things like that no no single thing that's like incredible but they all add up to a lot of efficiency in organization that's you know our lives can go Haywire pretty quickly if little things are not organized so Brandon it feels like when I hear that that in fact your opportunity set was this is the fax machine story yeah I would say that it it was um or the hundred fax machines maybe I should say there's not one you can't do it in one Fell Swoop but a hundred small things as you said at the very end there add up yeah I think the the cliche with the fax machine is that that's the your job is complete once you get rid of the fax machine so um that's just uh you know it's all just table stakes in my opinion um and there's still a laundry list of things like that that we still do in an old school way it's it's interesting um I like many uh small business buyers probably have not even seven years later spent as much time in each individual Department as I probably should um it's one of the flaws I guess with the fact that this business is also like I'm buying real estate all the time and Deals can sometimes take up a lot of time so they take you off working on the business um but I'll get into some department and um realize okay we don't need to do this this way like there's no reason that a good example recently is our bank reconciliations were very manual and we do a lot of them because every property has at least one operating account sometimes they've got Reserve accounts or other things you know beyond that um so call it 150 Bank reconciliations every month and that's just monthly I'd rather that happen weekly or even daily um and that's just like crazy to imagine giving the way that that that happens now which is um like taking a physical statement or printing off a statement or exporting it into Excel and side by side on two monitors doing a Reconciliation Well turns out no one had looked into the fact that the property management software platform that we have has kind of a uh like a mint.com style or QuickBooks Online integration that through plaid you can log into almost any bank so far we haven't found one that it doesn't connect with uh and it's doing 80% 90% of the reconciliation for you and that was just when we started using it with relatively complicated reconciliations they'll get simpler over time because it won't be a month it'll be a week or a day so it'll instantly always be right um so I feel like there's always going to be opportunities like that to discover but that just that one thing alone is probably um I think we figured out it typically reconciliations take four manday now uh two people two days and this could turn it into like a you know an hour or two hours a week type of a thing and their data is really up to date well I want to Pivot now and spend some time on the business of property management and some of this you know the Strategic value of it above and beyond um kind of the the the business operations itself so it has it has um certain characteristics that we would look for in as Searchers in a business it's business it's B2B it is very recurring it's if you're doing a good job maybe even if you're not doing a good job it's very sticky because as we're kind of getting a sense for listening to your what you all do you're you're really quite entrenched in in the operations of your of your clients's assets their their properties um it ain't going anywhere it's not going to be disrupted by a robot or AI anytime soon I mean it's very kind of physical in some sense um and and and it's extremely fragmented so you know uh North Terrace was a small business and there are countless countless really tiny mom and pop Property Management uh businesses around around the country so there's probably more things that I'm overlooking so a lot to like there and then when you add in the real estate angle if you've got aspirations of real estate it that's just kind of this interesting cherry on top so let me put a pin on that we're going to come back to it despite all the the pros that I just said one screaming con that everyone will tell you about property management is that it's a really hard business you know Services businesses generally are hard but um the property management is extra hard and we're getting just by listening to you we're getting a sense of that I mean it's it's just a lot of moving pieces um people properties stores units owners tenants turnovers I mean and that's what you're being paid for is managing all of that churn uh so talk to us about that what what what's it what's a day in the life like why shouldn't every Searcher listening to this go out and buy a property management of business or should they um well it's starting off with a little aside it's one major downside that popped in my head for whatever reason uh during that that question was the fact that I am envious of businesses that have uh more pricing power than we have we don't have much pricing power I have started um being less flexible on due clients I was quick in the past to be very flexible on our fee schedule and then I realized there's no reason to do that like it's just I'm just giving away money and it's hurting us and it's I'm going to feel it forever because once we start managing a property and the management fee is X there's no raising that um in I mean I don't think I've ever done that so yeah there's no case where we raise it versus using my example of the uh the fence business that we looked at everyone knows that uh over the last few years those sorts of service providers sure the inputs got more expensive but no problem just adjust the output and figure out a place where you've gone too far and dial back you know you can be more dynamic in how you adjust for things that's very and Brandon is that is that something intrinsic to property management or is that just the difference between recurring and project-based work where in recurring it's a little bit that actually might be one of the flaws of recurring is that it's hard to raise your prices because you're you're not going to Market every time you you know whereas Project based you're you're regoing to Market all the time so you can choose to raise your prices pretty and and and you know much more frequently I think that's true but I think it's like really accentuated in Property Management kind of for the reasons that I said earlier where every dollar that we make is a dollar that a property doesn't make and it's you know then call it $20 in value for that property that if you look at it that way as a finite thing where revenue is unchanged um so yeah I think you're right that is an issue recurring versus project but it's like even more significant here you know I get price increases on software platforms that we use annually and I don't say I never expected this price to go up um and the interesting thing is we so we get a we get a raise too every year as rents go up but that doesn't track with our expenses so you know a recurring software platform that raises their price it could be 5% one year and 20% the next year and 3% the next year and they could respond more directly to the actual inputs whereas we really can't um it's we're at the mercy of the market and our fee is a percentage of that and that percentage is rarely changing on existing clients um and and and Brandon isn't it also kind of intrinsic to Property Management because there's kind of an industry expectation of what property management should cost it's like what is it like 8 to 12% or something yeah that's maybe that's as a consumer that's as an individual that's a single family kind of pricing scale our apartments are less than that um but yes you're right there is and there's there's almost like I don't think there's any room for if you said hey I we charge 15% but look we get uh 25% higher rents it's like it wouldn't pass the smell test even if you could demonstrate it or it'd be very difficult to demonstrate I guess what do you mean it wouldn't pass the smell test people would just be like I don't I just as a rule I would never pay 15% I see Property Management even if it was like look net you're making a lot more money um so and that's like a pretty extreme example because I'm doubling the typical fee essentially but um even if it was a tighter tighter range than that hey we we don't charge seven like our competitor we charge nine but here's what you get that would still probably get some push back yeah um so that's that's tough that's one thing not to like for sure um that's a big one and in terms of you're right you do kind of you have a lot of lot of Masters and it's and they're kind of In conflict with one another you've got um I don't know if you mentioned vendors as another constituency but that's another constituency that we have where you know we've got clients residents vendors and employees and they're in a way on the same team but also in a way all In conflict with one another um so it's extremely difficult to manage that balance and I'd say that's the biggest challenge it's not the you know the I think the cliche thing that people say is you know toilets or whatever in the middle of the night but you can solve those kinds of issues with pretty low scale somebody on call it's not that big of a deal stuff happens over time it's just normal small business problems essentially um but that constant sort of tension between um how do you deliver the message to a resident that I'm sorry you're unhappy with X but it's not in the budget and you know we don't think that when you lease that apartment there should have been an expectation of X being as good as you're hoping for it's just there's a lot of like murky Nuance situations like that where there's no good closure for them and it's frustrating to sort of be the on the chopping block for that because you we don't we're not going to throw our client under the bus and say hey I'm sorry um you know uh will owns this property and he's really not interested in paying for that right now you know well it's it's a good point too that maybe correct me if if wrong the one of the difficult parts of this business is that you're the you you where you sit you get to absorb all the negative energy of the tenants you're the buffer yeah between uh that the the tenant and the owner um you're always the bad guy you're always the one just yeah like I said absorbing that energy and having to kind of try to diffuse it if you can that's true um we deal with that in a few ways one way we deal with that is by just vetting the owners and the properties that we will work with on the front end um we're not mercenaries uh and if you can tell that the person is is not going to be good to work with just get kind of get those signals then we're not going to do it um that's not how we're going to say it to them but just you know probably going to blame it on the property or something and then if the property is not a fit that's pretty easy to just say I I mean usually people aren't emotionally attached you could just say hey I'm sorry this is just kind of a crummy property we don't want to do this um and so that's that's one way we deal with it vetting on the front end um I'm also I don't put us in positions where I'm afraid to walk away from a client you know we don't get In Too Deep so if if a client seems great but then an issue happens and they say you know whatever the issue is I'm sorry that this really terrible thing happened uh but I'm not going to pay with pay for that you know we would say okay fine then we're not going to work with you um and then we do a lot to try and they're very small things but try and be um not just there's this kind of like old school landlord uh ethos of like you know we do what the lease says and that's the end of it kind of not like customer service oriented at all um and it's pretty basic stuff but like we do a little movein gift that I mentioned earlier when they sign a lease we actually leave it in the unit we don't give it to them when they come into the apartment so it starts off with our leasing team is great they're very like that's the fun part of leasing apartment so it's kind of easy to be really positive there um they make sure it's a great experience then the first interaction they have with us when they move in on moving day is they've got a surprise little gift bag from us and it's got you know it's kind of like useful stuff and it's a water so that they can take a break from moving and like just kind of thoughtful um and then yeah and we check in with them um we do like a bonus program for one of the things I'm always talking about on Twitter is Google reviews we do a bonus program where we ask hey how did um that service order go today if they say it was good if it was bad we deal with it if it was good then we say hey we'll give a $10 bonus to the maintenance tech that um did that today uh if you just mention them by name in a Google review and we really follow through and that has been an amazing hack and it's like it kind of spreads throughout the business and um we also then give a bonus quarterly to whoever gets the most Google reviews on top of just the per review mention um and it's it allows everyone to talk about a lot more positive things and you know not get so down when they're only dealing with complaints you know that's a great little hack and I feel like anybody running any sort of business where they're interacting with the public and they their teams are interacting with the public you could doesn't have to be Property Management you could offer a same sort of incentive that's um to to the consumer and that that indirectly trickles up to the to your St to your crew people yeah and it's yeah that one has been very successful for us one of the things that you said in the preall Brandon was that um because the business is so difficult the business of property management so is so difficult rather than seeing that as a negative you saw that as opportunity can you just articulate what you meant there yeah I mean I think it like I just mentioned that old school attitude of we do what's in the lease and that's it um dropping that attitude for one to the extent that it's possible because you that doesn't inherently have a limit like yeah sure we could come and do your laundry for you too we'd probably be everybody's favorite landlord if we did that so within reason what we can afford to do um just not having that attitude um and being customer focused without uh it having any sort of not only does it not have a negative implication for our business or for our clients in terms of like costing them more because we're just like oh you know screw it on the late fees or whatever like we're enforcing policy um but we're doing it positively and we're doing a lot of stuff uh above and beyond um so I would say that's the main way that we've um kind of dealt with that challenging opportunity um and not just you know sort of been frustrated okay well we're we're bumping up on time Brandon and I want to spend the rest of it talking about h how this can complement a somebody building a real estate portfolio I asked you on our preall are you a real estate guy with a property management business or vice versa Property Management business guy with some real estate holdings and you self-identify as a real estate you're real estate first so we've spent Mo most of our conversation talking about property management business because this is a Searcher audience but now let's let's bring them together and for anybody listening who either already has real estate or aspires to build a real estate portfolio um and more than just you know a couple units but something substantial and really build wealth over years over the long term um how talk to us about how owning a property management business has served that goal and how it fit how it all fits together yeah I mean it um it makes me think again of that comment that you kind of made about oh it turns out real estate's not as as passive as we've been led to believe um it's not it's a business just like any other business I think that there is more infrastructure in place in the real estate industry to allow it to be a more passive business than you know just buying a whatever operating business in another state like it's feasible to think that you could buy an apartment complex in another state and there are people you can find and put together a team to run that business for you but it is still a business that you have to oversee and and um that's what I want I wanted to build a big portfolio and to give me the time uh and space to oversee that business this is the clearest path uh was you know find an operating business that allows me to focus on my real estate portfolio even though I am a real estate guy with a property management business I actually spend way more of my time on the property management business than being the real estate guy I'd like for that to like shift over time and has shifted in the right direction over the past few years for sure um to where it was you know sort of 955 on 95 operating the business and five on looking for deals and putting them together and it's it's gone in the right direction where it's a lot kind of closer to an even split um and that's part of what I don't know inspires me to work on the business though to accelerate that shift um but just there's there's a million advantages um you know I know what things cost because we do projects for clients and if I was just that client I wouldn't have that exposure um I get a lot of inside information on transactions from either things that we are a party to in some way like we're managing it or whatever it is or Brokers are just more apt to share information with me um because you know if we have clients that are going to sell or if I'm person personally going to buy something uh you know they want to be there to do a deal with me so or one of my clients so it just puts me in the middle of a lot of opportunities and a lot of interesting information that you would just be on the outside of if if you were not running this business um and I I do have a funny analogy that I often make um that I don't know if I mentioned in our preall but if someone said to you hey I want to buy apartment building let's say I live in on the west coast I want to buy apartment buildings in the midwest I've done the research Kansas City is great um I have started talking to people about deals and now I just need to hire a property management company uh to kind of make it all happen and come to life and I'll I'll give them the spreadsheet and they can do it okay that I'm saying in a little bit of a flip way but it doesn't sound that crazy but if you change that from Real Estate to anything else you said uh I always say barber shops for whatever reason but if you said I've identified that barber shops are uh undervalued in Kansas City and they charge too little for haircuts and it's actually shocking they uh the haircuts look just the same there as they do in LA and all I got to do is uh find the uh Barber Shop management company who will put my business plan into practice and execute it perfectly you'd be like this person is insane uh this is the worst idea I've ever heard um so uh I I don't know if I just had to gratuitously get that uh illusion that I like to make in there but good that's kind of why you always as a owner have to at least plan to do the asset management CU it's just it is not that simple um that you can just flip it over to somebody and it'll come out the way that you were promised mhm but for whatever reason we've we've all been tricked into thinking uh that's possible even even I have been tricked into thinking that's possible to a higher degree than it is seeing it fail over and over well okay so you do you have just explained that be owning a property management company does have this kind of knowledge flywheel effect of being a player in the local market you you got access to all of these all this information that you might not otherwise and people too uh presumably let's take the question of property management o owner and real estate uh portfolio owner in three parts so if you already have a real estate portfolio which you did if you don't nor do you have any intention of building one how does Property Management look to as a as a business to get into and finally if you don't yet have a real estate portfolio uh is is prop buying a property management company maybe an accelerant to get there so you didn't have to memorize those I'll take them one by one so the first one was was you Brandon like for somebody who already has more than like a unit or two or three but maybe a substantial portfolio and they're entrepreneurial they're not just a real estate investor they might want to buy a business or have a business one day sounds like at least based on your experience buying a real a property management business makes sense how would you what would you tell that person yeah if they're going to actually operate the business or have a partner that's going to actually operate the business and they'll really be involved um then yes I think it makes sense um if they're just doing it to say we have our own management company but they're not going to be that involved then I think it's a lot more of a tossup whether that makes sense I I have seen clients uh of ours who said we're going to bring management in house and started a property management company but were not like in the business themselves and it did not go well you you should at that point just hire somebody like us um because it's effectively the same thing great now what if you are just a Searcher no interest in real estate you don't have a portfolio nor do you intend to build one what what so so the just the the the the merits of property management without any kind of strategic play into into a real estate asset Builder what would you say to that person is it a we've talked about the pros and cons but would you say look elsewhere or what would you tell that person I would tell that person at the moment it's definitely a good momentum business uh there is like um institutional demand to kind of aggregate property management companies especially in the single family space where if you had an opportunity to buy one or a few property management companies um there's a real opportunity to professionalize those and then sell them on as a business that you're thinking I might hold this forever I don't see the point in doing it if you're not also going to be building a portfolio that's what's so attractive about it is the fact that it's this rare business where the operating business you know could double for inance like mine did in seven years um but the your portfolio like my portfolio is 20 times larger than it was when I bought the business so business 2x portfolio 20x that's I can't think of many other examples of businesses where um you kind of move the client base in your direction a little bit more proprietary to your own deals or whatever it is in that other business and not scale the operating business kind of in lock step so that's really attractive and makes those kind of problems we were talking about before with all your kind of cons different constituents with opposing issues uh it lessens the blow a lot when you think about it that way um so I would say it's one of those two things either you're going to build a portfolio or you're optimizing a business to sell it on to kind of an agregator um just a pure third party business that's going to be around forever I don't know if that's an interesting opportunity to me great thank you um but let me just uh double click on the 20x your real estate your real estate portfolio 20x your property management business doubled sorry and so you're you're saying that you 20x your real estate portfolio because of the Strate iic play that that that is North Terrace like it wouldn't like if you had didn't have North Terrace you wouldn't have 20 extra real estate portfolio correct I would not have for sure okay okay great well that's pretty compelling but what about the you know you had said going all the way back to the top when you were in private Equity with your partner and friend and you guys realized that like doing transactions was less fun to you which is kind of like what you're kind of implying that that's what private Equity a lot of private Equity is if assuming you're not on the operation side of private Equity you're like the private Equity one doing deals a lot of it's just doing deal after deal after deal or and yeah and growing inorganically and you really liked the idea of getting into a b buying a business and then getting into it and pulling the levers and making it grow and you've done that in your property management business um but we're also hearing that you've been doing a lot of real estate deals as well and in fact you'd like to shift much more of your attention to doing more real estate deals so isn't doing real estate deals just that kind of just transaction by transaction by transaction the same thing that you didn't turn you on about private Equity no I classify them totally differently um because a I don't to say it's like easy to buy a property it's certainly not easy but it's nothing compared to buying a business and just the level of um you know Nuance that comes with buying a business uh it's really when we buy like an apartment building we're just buying a client uh you know it could be someone else could own that building and we manage it for them and it's going to be basically the exact same output on our side um or I might as well buy it or put together a group to buy it because it's going to be the same amount of work and at least we also own the building so no it doesn't it does not feel transactional in the same way like and it also feels like it's building the business of having that portfolio basically thank you again for your I love that you take a position that just a property management business by itself if you're not also pursuing a real estate portfolio or some kind of roll up and exit strategy it's maybe not the most compelling place to focus your years of your life as a Searcher but what about one of the other kind of strategic fantasies people have about property management where you it it it touches all the vendor relationships that you talked about you touch so many different vendors General Contractors HVAC all basically all the vendors that service the properties you have these relationships with and so you just know a lot of people you're well networked in that world but also you know rather than you know paying the you know the mechanical contractor who's a different business to go in and the landlord's paying them to go in then go into the building and fix something if that mechanical contractor were owned by Brandon as well it gets more interesting and if you know if if you have this fantasy of kind of buying all all of these different vendors up so you own a property management company and all of its attendant vendors what about that play because I've heard that people talk about that many times is that realistic I think it's interesting um we haven't done a ton of that there's definitely some and so like using an example of something in our um business that's kind of gone in and out of house a few times um groundskeeping and then also snow and ice removal so um groundskeeping used to be in house then we moved it out of house then we moved it back inhouse and it was terrible that second time and now it's like never again will it be in-house I would rather put our efforts into um negotiating and being like we it creates a little bit of an adversarial relationship with the client if even if you know we use sort of Industry standard practices to bid and you know there's no like um bid rigging or whatever you want to call it to give it to us um exclusively we still have to produce a great result of what's another very difficult business I think ground keeping is pretty hard um so I would rather on things like that just um focus on getting tons and tons and tons of bids and making a Marketplace for vendors and then hold those vendors accountable and when a client is unhappy oh hey I drove by my property and it looked terrible it's not like okay now I got this on my plate too of making sure that the Landscaping division is good you know um we can be more Nimble and trade those vendors out um and there's you know other reasons liability reasons specifically on snow where it's just like okay we can make a little bit of money but do I want to deal with the slip and fall uh lawsuit associated with the snow or would I rather just have a vendor deal with that because it's their problem um so there are niches where it's interesting um I think the more predictable kind of like capex type niches it's more interesting than day-to-day service so um you know doing project management or construction management for bigger projects and again you're just kind of negotiating with individual vendors and coordinating projects not self-performing that's pretty interesting um and we admittedly don't like charge very much for that right now we could probably charge more okay Brandon the the third case here was somebody who aspired to build a real estate portfolio over the course of their lives their careers but doesn't yet have one should they go out and get some try to get in the real estate game first and then think about bolting on a property management business as you did or is buying a property management business as a Searcher operating it you know kind of getting their arms around it for a few years and then going out and starting to build a portfolio um does that make sense yeah I think that really makes sense uh the second version that you said where if I had you know I don't know $250,000 and I could buy a small apartment building in Kansas City or that's my uh down payment and working capital to buy a small property management company with an SBA loan I would buy the property management business um because you immediately have a really really interesting different ior you you've bought a job first of all so you can focus on it full time buy one small apartment building isn't going to tick that off um the list so you still have to fill your time with something that's going to kind of pay the bills um so you've got that issue covered plus you have just a great entree into all the folks that control all the deals basically right um so I think it's yeah it's a great hack do you think that you'll buy a business again or do you just have this your you're just getting closer and closer and closer to having this real estate Port growing real estate portfolio with property management business kind of serving it uh humming along that to buy a business or to think about buying a business would just be a distraction what do you think you'll ever return to Eta proper I don't know I struggle with that for the moment uh for a variety of reasons I'm definitely not buying anything I would say probably at least 5 to 10 years um I have a seven-year-old and a one-year-old first of all um and then uh so that's yeah that's enough of an explanation right there but um and I enjoy the flexibility that I I've now kind of gotten to the point with this business where I can be pretty flexible um I mean there are times when it feels like I'm in the trenches still but then there's other times like um the past couple of Summers I have just kind of worked 10 to two or three every day with my older son's schedule and then we would do stuff outside of that and it was a lot of fun um so I want to maintain that while they're young but then my wife and I bought another business that she runs and it's good sized um certainly by like self-funded search standards it's good size um and so that really scratches the itch of buying another business and you know uh buying a larger business I guess um and then there's the two married together is well literally married together I guess but um the two businesses uh married together is very interesting and um her business we acquired it about 5 years ago um but we initially had some investors that we've since bought out so there were things that we might have considered doing earlier but now when it's just all ours we can we can do um you know uh it's kind of trendy Twitter stuff that you hear about like shared Services you know she's got I have 25 employees she's got 50 or 60 um and there's not a natural um Synergy between the two businesses but for example both businesses need HR Support and neither business has someone focused on like recruiting Talent uh both could probably afford somebody like half time to do that uh so the notion of okay this is interesting Maybe we can bat a little bit out of our league by combining some of those needs a little bit um we're just in the early stages of sort of going down that path so I think that scratches the urge uh or itch to buy another business and um focused on optimizing what we have basically yeah well it sounds like uh you got your hands full and and also lots of entrepreneurial stick simulation to go around a lot of interesting things I mean you guys and by the way uh I I I really hope that uh your wife's name is Katie I really hope well I'll convince you to convince her to come on um because the business that she bought is a big kind of institution retail uh Furnishings furniture store in Kansas City so between you I'm I'm seeing kind of this Kansas City Power couple the real estate magnate uh and and uh and the woman who owns you know a decades old I don't know how old it is but a really well-known and well-respected and and beloved um Furnishings store really pretty neat um what does so I I feel like Brandon it's fair to say without pumping your tires that this is going awesome for you that it's it's really working out uh well and as maybe with a lot of small business Acquisitions it's been a little bit slower than maybe you wanted but it's certainly going in the right direction uh and you're starting to as you just as you said an hour ago you're starting to really feel um that some good scales around the corner uh what does it what does a good outcome look like for you five or 10 years from now and are you on your way there yeah I mean I would like um I would like uh a team I feel like um I have a good team but there are some gaps and I would like um some of the things that I feel like I have to be involved with because we don't have the capacity uh inh house currently um I would love to fill that in so a great outcome would be to grow a little bit more to the level where uh I felt like we could afford a few uh additional kind of highlevel people you know we don't have like a CFO and that's it's not necessarily a common title in a property management company so that's not like surprising on the surface but um I would love to have yeah sort of a more sophisticated um financial analysis team basically um so yeah I think just growing to the point that I can afford to grow our team uh in some areas would be great um and then to feel I mean this directly related to that then I would feel like right now if I was to go on vacation for a month I would be worried I would be checking in a lot just the Classic kind of like small business type stuff um I wouldn't feel like things were probably growing in my absence um and I would love to sort of work on the business to the point that I didn't feel that way basically if I was gone a little bit more of a um self-sustaining thing not something that I have to swoop in and fix stuff although I you know swoop in and make a lot of messes too um so professionalizing and institutionalizing um and then ideally most of that growth comes from properties and Partnerships uh of my own so it's more principally owned than third party business as well anything I didn't ask you Brandon that you wanted to make sure that this this audience heard can't think of anything okay well what is a good way for people to reach out if they're if they have a question for you sure Twitter's good x uh my handle is my last name laughridge l a u g h r idge uh or email me brandonn north.com great I should say here that you did a a uh a thread on buying a business that went kind of viral back in 2020 uh and got you I guess got you a lot of attention I remember seeing it uh and I feel like it's I've seen it more than once I have it here in front of me but it basically just lays out a compelling argument for ETA This was um I don't know just the normies and the masses got a hold of it and it and and it went viral but uh I'll I'll link to it as well looks like it has 6,000 bookmarks 6,000 people have I didn't know that number yeah that that that's actually the the of all the kind of kpis of a tweet that's the one that matters the most um it's what people really want to save so congratulations for for 6,000 people um pocketing one of the thing something you put out there well any I'll link that in the notes Twitter presence is kind of underwhelming as of late I just uh I don't know last six to 12 months I've faded a little bit so um yeah I un I unpinned that for my profile and then uh nobody liked me anymore so I I faded away I guess well maybe we'll juice your profile a little bit by linking to it in the notes there we go Brandon laughridge thanks for giving me so much your time and being so transparent fascinating to learn about um Property Management real estate ETA and how they all work together thank you I appreciate the opportunity I love love the podcast thank you I hope you enjoyed that interview make sure you subscribe to the acquiring minds Channel below we are now publishing in twice a week so tons of new interviews and stories to come stories that will help you along your own path to acquiring a business