Building Stability Through Real Estate | Peter Carlseen

Transcript note: This transcript was generated from the episode captions and lightly formatted for readability. Speakers are Jet Bunditwong and Peter Carlseen.

[0:10] Hi and welcome to the personal side of business podcast where every business has a story. Today we welcome Peter who is a husband to wife Lisa for 25 years, father of four and full-time real estate broker and property management at Pcelsus Property with 21 years in the industry. In his free time, he enjoys flag football, surfing, playing bass, as well as creative outlets, which include fictional writing and standup comedy. Welcome, Peter. Awesome. Thanks for having me, Jeff. Appreciate it. Yeah. So, let's talk about this. So, you're in actually two different spaces, right? Uh sort of in the same area. So, you do uh you work with realy and you also do property management, correct? How did you get into both of these sides? So, I kind of joke with people. I tell people I got into property management because I was young and stupid which I think is actually a good thing because whenever you start a business I think you have to have some sort of youth and that youthful energy because it's can be very

[1:10] draining and I think you have to be a little bit stupid because if you knew everything that isn't that owning a business entails I think you'd probably never start a business. How old were you when you got it? So 2000 27. Wow. So I was 27 when I started. I got into real estate in '04. Went straight into property management. Um, second generation in the business. So, my dad's still um a real estate agent um broker associate with our company and still does real estate. I got into it with specifically for the purpose of doing property management. Yeah. Did what was it about property management that enticed you? Was it the overall payout over time or was there something about it that you loved that just doing the work or both? So, kind of neither. But I I'd say first of all, you know, I could see the potential for the income. Yeah. But secondly, I was young. I had one newborn. I had another one on the way

[2:13] and I needed money. And that it it really just made sense at the time for me to get into it. Um, so I took over a small portfolio of about 20 properties uh that my dad had been managing as you know a favor for clients and we took that incorporated Pelus Property Management and he just handed the reigns over and said hey you need to get this going. So our income our budget at the very beginning was very minimal because some of these accounts were freebies some of them were highly discounted and I just kind of took it ran with it and started just started working it. Um during the first few years, I went back to school to get my bachelor's degree in business and used my company as kind of the guinea pig for a lot of the projects that we were doing for marketing, for advertising, for you know, procedures, for policies, all that kind of stuff. So, it really kind of filled a couple of purposes and um but getting into it, I yeah, I really didn't know exactly what all it would look like, you know, now

[3:14] we're 21 years later. And I remember thinking if I could just get 75 doors under management, 75, I would be set. I can just put it on cruise control. And then I got to 75 and that and then it was 100 because I wasn't I couldn't do cruise control at 75 and then it was 100. Then you got to scale. Then you got to hire, you know, I hired my first employee after about six or seven years and then they went from part-time to full-time and then it's a second employee and then I've got to get outside book. It just kind of expands. It's a bureaucracy that expands. But the opportunities really got better and better because it helps me it helped me to really be familiar with the investment space and know exactly what people are looking for when they want to invest in real estate. You know, they're they're looking what what's my rate of return, what's my cap rate, what's my ROI, um you know, what could we what could we expect here versus other markets? And um it's really forced me to look at the numbers. And a lot of times I'll run numbers for people. Hey, if

[4:16] I've got X number of dollars put down, what is that going to buy me here? What's my rate of return going to be? And usually the rate of return is not great, but the appreciation potential is really good in San Diego. So if people are looking for cash flow, a lot of times they'll buy elsewhere. If they're looking to stay close to home, some people want to own rental property by where they live because they don't they they don't like the idea of not being able to drive by it and see it. So, it's we've worked with a whole bunch of different clients. Um, a lot of military that were relocating. They're not sure if they're coming back to San Diego. They know if they come back in five or 10 years, they probably won't be able to afford to live here. So, they want to keep their their property. Um, so it just kind of grew. We grew by word of mouth, a lot of referral based business uh through clients, and then we started gaining traction. We get a lot of referrals from other real estate agents. I manage property for other real estate agents. They could manage it themselves, but they know what kind of headache it can be, so they have us do it. So,

[5:16] really, we've just started kind of branching out, and we're at about 280 doors under management now, and I've got several full-time employees, several part-time employees, off-site employees, and really just trying to scale it to make sense and gain uh bring value, gain value for our clients. Were did you feel like there was a point after you got to I don't know let's say 150 doors that you were like this if I decided to do this by myself I could probably cruise through or is there what's what's that threshold that you felt like I could probably stay with this and live with this or is it never ending you're just going to keep going? Well I think a lot of it has to do with quality of life like if you don't have anybody working for you you can't go on vacation. Yeah. And when you've got young kids that want to go out and do stuff and you've got, you know, a wife that doesn't want to stay at home, you know, 247 and just not go ever go anywhere, that you have to find a way to remove yourself from the

[6:17] equation. I think that's a struggle that a lot of business owners have is finding a way to be able to step back without the business falling apart. Right. Right. And so it it got to the point where I was forced to scale so that I could have somebody you know as a backup and that just kind of yeah blossomed and and and and mushroomed from there. Can you talk about that plan to scale? Did you sit down and write it out and say this is what needs to happen or I have to hit these numbers in order to hire someone. I hire someone then this happens like tell me through that process. So I did. Yeah, I went through all of that and I it's all hypotheticals and you know as a business owner you think this is this is how it's got to be but then when reality hits usually very different and I don't remember the I want to say it was Roosevelt probably some somebody really smart that said the uh in reference to I think it was World War II the plans were worthless but the planning was priceless or something to that effect and that's really what it comes down to is you got to have some

[7:18] sort of foundation or basis some sort of game plan to go off of so I can look back at that and I can say okay well this is where I messed up this is where I need to make a correction you know my next hire should be in this space at this rate at this you know it's given me a little bit more direction because hiring that first employee is a big deal um because you you don't always have the cash flow to do it you're kind of go out and out there on a on a whim saying well if I get them hired I should have the free time now to go and build the business more but if that doesn't happen then what do you do and so scaling to one the first employee was really a big step getting to the second and third felt a little bit more natural in its evolution but again it's really as a business owner it's always kind of stepping out into the unknown I I think that's a scary part about the hiring the first employee because you're giving trust into something and then I I I would assume it's like after having your first kid right you're like Okay, cool.

[8:21] I everyone live. I'm just going to keep moving to next one. But um for you, were there certain key elements in the first employee that you were looking for? So yes, but I probably could have done better in the in the looking part. I think the result was great. The person I hired was fantastic. She was great. Filled the void that I needed at that time. The struggle with scaling a business is when you hire your first employee, you have their rule or their, you know, their um scope of work that they have to do, but then as the business builds and develops, that scope of work has to change. And so sometimes that employee can shift over and do, you know, a new set of tasks, a new set of jobs, and sometimes they can't. So really, I think the biggest thing was hiring somebody that could be flexible in getting the things done that needed to be done. It wasn't a rigid I'm only here for admin, answering phones, showing property. It's these are the

[9:22] main things and then down the line this is probably what else is going to come down. And that's maybe that's how that's how it's been for every employee. I mean, pretty much it's the the roles evolve and they change because the needs change. So hiring somebody that can handle that evolution process is really key because you don't want to get stuck with somebody that doesn't know how to shift gears when the gears need to be shifted. Um would you rather have someone that was uh the ability to be fluid than someone who knew everything? Like where what percentage you feel like favors into which side? When it comes to hiring your first few, I'd say you definitely want someone that can handle just about anything. You don't always want that perfectionist in one area because that may limit you. You want someone, for me, I wanted somebody that could um get the things done that I wasn't good at. And that's another thing being a business owner, you think, well, I can do everything great. I can do this. I can. And maybe you can, but you probably can't. You just don't know it.

[10:26] So being able to realize what your shortcomings are and also what you don't want to do, what you're not good at um is is really a critical thing because somebody else can do a task that you don't like so much better and with so much more enthusiasm. Why not give them the satisfaction of doing something they like to do that you don't like to do? It's Did you make a list of things that you were like this is where I'm not doing well? And yeah, I did. I did. Um, and again, we don't always know what we don't know about ourselves, but I did, you know, I put the list of things that I didn't like doing or I didn't think I was 100% proficient at or things that I wanted to make sure somebody else could could do and I went with that. Um, when I hired my my uh other full-time manager a year and a half ago, I went through maybe a hundred resumes and just kind of whittleled it down. I said, "These are these are the specific skills that I need to have." if you don't have these skills, you it doesn't matter. And that

[11:26] process, I think, was a little bit easier. Hiring the the second full-time person was to me a lot easier than hiring the first. Um maybe it's because I'd been there and done that. Maybe the business is just in a different spot. It wasn't as much of a do or die. It was okay, this person, they can get this set of things done. Um because maybe after the first employee the business became a little more stable in it that sense right that you're like oh I have some time to myself to be able to do what I need to and someone else is take picking up the slack that I you know couldn't do myself I don't know for sure yeah finding something that can complement you in that and that can yeah take that workload off and I think that's really where I where I did well in my first couple hires my first um full-time assistant, worked for me for about I don't know, three, four years. Her husband was military, so they were here. Um, great, you know, friend of the family, just did a great job. And then when they went to move, I was stuck with, well, shoot, what do I do now?

[12:28] I've got there's no way I can go back to doing everything myself. There's absolutely no way. And so when I when I brought on the next employee, when the first my next full-time employee, I think I really got lucky with somebody that could that was number one motivated to work, motivated to get stuff done and really wanted to contribute and was genuinely seemed to have an interest in the field. Um came in with hardly any experience but had the desire and had the intangibles. And when you hire your first person, it could be a great move or it could be a complete flop. And luckily, I think I made it I I made a good decision on this one, which made it a lot easier down the road. And when you're when you're doing that hiring process, um do you feel like over time as you're uh hiring the second third person that you can see the business start to just you're like maybe I can keep hiring and I can the more I

[13:31] hire the more I back off. Is there is there a sense of that? Theoretically yes. So, I keep tell every month I go through my my tasks and what I do and I say, "What can I get rid of or what can I offload to somebody else? What can somebody else do faster, more efficiently, or better than me and there's always stuff that can that I can offload?" And I would love to get to the point where I'm 100% working on the business and not, you know, in the business per se. Um, in reality, I don't know if it's a personality defect that I have, but I really have a hard time stepping away and delegating a bunch of stuff out. Um, and that's one thing that, you know, being a business owner has helped me with. It's um, just because I can do it doesn't mean I should do it. And, you know, I I think a lot of business owners do go into it, especially soulreneurs, and they're like, "Well, I can do this. I can do the accounting. I can do the inventory. I can do the sales. I well yeah you can but maybe you shouldn't right and is that the best use of your time is that the best use exactly and you know and so

[14:34] in the process of owning a business I've really come to know what what fuels me and what drains me and so I'm trying to offload those things that drain me and might fuel somebody else. Um but again it's hypothetically it it all makes sense but in reality when you know it's not always the easiest transition to make. Yeah. And um let's walk through a I don't know an average day in property management. What does that look like? Number one, there is no average day. So, like uh uh this last Monday, I came in and we had we're already dealing with a water leak to another unit down below below ours that involved another property management company, another tenant, another property owner. So, we've got, you know, between us, our tenant, our owner, and them and our contractor. So, you got seven seven different relationships that you're trying to manage. And then I came in Monday, we had another leak at another property, and we had a flood at another property.

[15:34] And just like Mondays usually are the day where everybody waits until Monday morning and about 7:45 8 o'clock my phone just starts ringing and the texts come in and the phone calls come in and it's just putting out fires usually metaphorically fires throughout the day and then sometimes by Tuesday I can sit back and okay what is it I need to get done but a lot of it you know I I I have a weekly meeting with my staff with my team hey you know what are the properties we have on the market where are they at where are our lease renewals at? What could we do better? You know, what's what are things that we can improve on, you know, process-wise, procedure- wise? Um, but average day, I mean, it's a mix of it's just solving problems. Yeah. It's just a lot of solving problems. And I think the biggest key to that as a as an owner is, you know, in the service industry, you get I I think you get paid proportional to how well you can solve problems. If you can't solve a problem, you're going to be out of business. and solving those problems and taking those

[16:36] on but without taking them in a in a personal way. Like people there's there's people on all sides of all spectrums, you know, from personality to friendliness to whatever and really trying to work with people from all these different sets. Um a and trying to mesh well with them and knowing that they're coming from a space of I need this, I need this, I need this. And it's not if we take it personally, it would just it would crush anybody. But knowing that, okay, I'm here to solve the problem and I'm here to empower my team and them and come to a resolution that hopefully everybody's happy with. Um, I think that's probably the most of my days is just solving problems. And every once in a while, I get to work with really cool people. Yeah. So, is there something you've done differently over the years that has made that Monday morning a little bit easier? So, a couple of key hires. So, yeah, I I'd say it's a mix of getting the right people, doing, you know, offloading some

[17:38] of those responsibilities. One of the things I did about a year ago is, well, not quite a year ago, I hired a full-time remote assistant. Oh, nice. And he handles all of the maintenance issues and problems that come up. I am not good with that because it it gets to be so tedious because you're you know in the case of this other leak that we had when you're managing seven different relationships and you're trying to run a business and you've got problems coming it just it becomes a lot. I call it death by a thousand paper cuts. It's like it's not any one thing. It's just a lot of little things and I found that that was something that really drained me. Now, when you're saying relationships, are you talking about like the different vendors that you use for different vendors, our owners, our tenants, other people affected? Yeah. Um, and some people are great to work with and it brings me energy and some people really just pull that energy out of me. So, you know, really trying to see, you know, the other part of that is who do I want to do business with? Yeah.

[18:39] One thing I've learned is I don't want to do business with everybody. I don't want to earn all the business out there. There are people out there that would work great with me and not well with somebody else and vice versa. There's plenty of business out there, but what can I do to really find and attract people that share the same kind of values, the same, you know, I'd even say temperament. Yeah. Um is is really key to I think setting up the long run, you know, where where work isn't a drag to come into every day because, you know, at least some of the people you work with are really cool people. Yeah. So, and I think that comes with longevity in a field, right? Like I think when you're young and you're getting opening your business or whatever it is, whatever field you're in, you kind of just need to take everyone because you're like, I need to make money. And then over time, you're like, okay, I'm I'm doing well enough that I can turn away people. And I think that's one of the the great things about staying in an industry for a while, you know, um when

[19:39] you're transitioning from, let's just say, from the realtor side to the property management side, what are some of the things that you're looking for in a property that's different? You know, or is it when you're trying to sell or or buy a place uh for a client, you're looking for this, but these are things you're looking for for property management? Great question. So, when it comes to, you know, on the real estate side, a lot of times people are looking for there there is a lot of overlap. Number one, yeah, but from a rental standpoint, a lot of it is a little bit more utilitarian. It's, you know, how can this property help me for the next year or two or three? And a lot of that is what are the schools, what are the amenities in the area, what's the proximity to work, and what's the what's the budget. Um, some when you're looking to rent, it's not a long-term probably won't be a long-term relationship. Um, so, you know, if people have to make concessions on, well, I can't afford the house that I want in the area I want, so I'll take

[20:43] the area and take a smaller house. I can take that hit for a year or two or three. So, you know that it might be a house maybe not in the in the in the best um location on the street, per se. good area, but maybe it's got a little bit more road noise, maybe it doesn't have the view, maybe, you know, you know, there's just different aspects to it. Whereas on a on the resale side, when somebody's buying, they're looking at a lot of the specifics. Is is what sets this house apart? How am I going to enjoy it long term? Can I have my family grow in it? Can, you know, whereas with a rental, it's like, well, we outgrow it, then we'll find something else. Yeah. you know, whereas if if you buy something, it's much more of a uh long-term commitment. There there's bigger implications. And um I think that for rentals also, most people can over if it doesn't have the exact countertops they want, it's not the end of the world. If it doesn't have the perfect flooring, it's not the end of the world. If it has all that, it helps. Whereas on the resale side, people are looking at

[21:47] at those types of things. And if it doesn't have it, well, now I've got to, you know, now I got to spend 5,000 or 10,000 to get it the way I want it. And it it turns into a more a deeper exercise. Yeah. Having a rental property property I've always felt was uh you have to let go of that emotion to it. You're just like if it gets the job done, it's great, you know, like I'm I'm not looking for all these things. But coming from a primary residence buyer from the first time, it was it took me a few months to get rid of that thought like this is not my home. I'm I'm just renting it out, you know. Um when when people are going through this process in let's say San Diego, especially in San Diego, which is the it's a higher price point. How do you walk them through that this is the investment for long term, right? Because they're probably not going to be making money for a while. It's very possible. Yeah. Um, so I want to set the right expectations up front. And part of that

[22:50] is letting them know, hey, you raised your family here or, you know, your kids took their first step right over there in the in the living room. That's not the case for anybody else that's coming in here to rent it. To be blunt, they don't care. They're here, you know, to to live. And you know, those memories that you had, take them with you. In fact, I was just looking at a property the other day for someone that's going to be renting it out. And they had the height markers on the uh on the door jam of their kids as they grew. You know, you know, it's when they're 10 and this is when they're 12. And and I said, "Do you want to take that with you because I'm going to paint over it." And he's like, "Yeah, yeah, we're planning to take that out." I'm like, "Okay, good." Um, but yeah, really looking at letting them know when it's a rental, it's a business. So, number one, don't get manipulated by people who want to come in because there there are people living in properties that will take advantage of property owners and vice versa. But I do see a lot of the um the manipulation of landlords by residents that you know they felt sorry

[23:55] for them so they rent them the property and now you know it's been six months and they're not paying rent and it's been 10 months and they're not paying rent and the propertyy's trashed and they didn't start out well. So really letting owners know it's a business. We need to run it like a business. And that resonates with most people. And I and I pretty bluntly I'll tell them if if you don't see that as a possibility, you probably want to sell the property. If you come in, if there's a chance you're going to walk in five years later and it needs a lot of work and that's going to devastate you, you probably don't want to have this as a rental property. Um, and that's okay. Every everyone's in different different places and and uh and that's fine, but it's it's a numbers game. So yeah, when they're if they've owned it for, you know, two, three years, the cash flow probably is going to be terrible. It very well could be negative, but we do chart through and we can show them on a spreadsheet, hey, assuming a 3% annual increase uh or you know, your bottom line number may be negative $300 a month, $400 a month. However, you know, maybe year

[24:59] two, year two and a half, you're at break even because you're not just it's not just the monthly cash flow that we look at. It's the overall investment. What's the appreciation of the property looking at? What's the principal buy down? If they've got a loan on it, a chunk of that money that they're paying, you know, anywhere from 30 to 45% of that is principal going back into the equity of the property. And so when you take all of that into consideration and if their plan is to keep it for 10 years especially they could be making they could be doing very well you know after year three four five and it's it's much easier to leverage that towards the end um and kind of see those numbers and again the planning wise that's all hypothetical we don't know how it's going to plan you know how it's going to pan out rents may go stagnant for two years or they may you know during co they went up 10 to 15% a year on average from 2020 through 2023 I didn't expect it to go that much. Um, but when you at least have something to base an expectation on, you can decide, okay, well, is it there is a risk, it's not going to go that way. Is the risk worth

[26:01] it? It's all a risk assessment. Um, and if someone's ri, you know, if someone needs cash flow, probably not a great spot for them. you know, they may want to they might try it out and if it doesn't work, maybe they do a 1031 exchange, you know, sell it here, buy somewhere else so they have better cash flow, but not maybe not the same appreciation. Um, or if somebody's not going to need the money for a long time, yeah, let it sit here. Let it let it get that 5 to 10% annual appreciation because, you know, over seven years it's going to double. Rule of 72. It could, you know, if it goes up every 7% a year, it's going to double after after 10 years. um on a you know an entrylevel $800,000 property house it's 1.6 in in seven years that's not a bad that's not a bad return on investment when you start looking at it other than just well it's going to take me three years to break even. Yeah. But if you can if you can it's going to suck for the first few years but if you can get past that then a lot of opportunities open up. Do you

[27:05] think people that are on the fence about renting out their homes, um, do you think they're still trying to figure out if they can make that space or is it just the business mindset or both that they're just not into yet? It's a little bit of both, especially if it's their first time renting a property out. They you don't really know something until you've been there. Yeah. And so there I I tell them up front, there's going to be a lot of unknowns. There's a lot of things that you don't even know that you don't know. But I will do my best to kind of pilot you through the situation, you know, let you know what to be on the lookout for. Um, and really try to educate them because I don't want them coming back to me and being surprised. I'd rather turn down the business up front and not have them, you know, devastated in the long run. But at the same time, there is so much great potential out there. Um, the obstacles, the, you know, whether that be there's always risk whenever you rent it out. Um there's uh rules and regulations and laws

[28:07] and government interference if you want to call it that that makes it that can make it difficult that can increase the risk assessment of renting out a property. Um, but then when you have that chart and you can you can look at the whole picture and not just say, "Well, I could lose, you know, they could trash the house and I'd be out $10,000, $20,000." As opposed to looking at it in the long run saying, "This could make me a million dollars in 10 years. I mean, this could legitimately make me seven figures." It it really it puts things into perspective. And yes, there is risk, but it is more of a short-term risk. Um, and I think that most people will develop that business mindset if they're given that prompting to do it. If they're given that, hey, you've got to look at it as business as opposed to, you know, a lot of sales people, they're always trying to manipulate and pull on the, you know, pull the emotions. And my approach is exactly the opposite. Maybe not super sterile or cold, but hey, these are the numbers. This is the risk. It's there's always going to be a risk,

[29:10] but maybe it's worth it. And if it depending on what your goals are, this could be a great opportunity for you or maybe this isn't the right this isn't the right thing. Um, but I'd rather have them know that upfront and make sure they know and I always tell them, you know, make sure you talk to your your tax person. You don't have a tax person, you need to talk to a tax person. You need to get that all the implications laid out so that you know what you're what you're getting into. Yeah. Um, and for and for someone that's trying to try to do this on their own instead of hiring property manager, what do you what's your advice for them? You know, because I think one of the main things I think it's especially in uh California is the I feel like a lot of rules protect the tenants more, right? And as an owner, you're probably having to deal with a lot of legalities that you're like, I don't know what to do here. Yeah. And so a lot of people do start out doing it on their own and a lot of times it goes fine because if you have good will and good

[30:14] faith on both sides it can work out fine. The problem is when it becomes an issue it's too late to do anything about it because there are you know there's ordinances in Chula Vista in San Diego in Imperial Beach and if they're not addressed at the onset of the lease then the owner could be really set up for problems down the road. like what's what's something that comes to mind that would be like something that if I were to manage by myself, there's a good chance I might just bypass it and not really deal with it. Great question. So, if you have a property, say city of San Diego, and since it's a single family home, you know, it could be a house or a condo, attached, detached, whatever, but if you own it as an owner, it's considered a single family residence, you can exclude it from the San Diego tenant protection ordinance. But it's only excluded if you have that written exclusion in the lease agreement, word for word, symbol for symbol, citing the the the civil code, everything. And if you don't have that and you want to go move back into your

[31:15] property, you may not be able to. Wow. Or if you're lucky and you're able to move them out, you might be paying a two to three month relocation allowance based on, you know, whatever the lease agreement or fair market value depending on what city you're in. So you might be paying a tenant 10 or 15 or $20,000 to move out of the property that you're going to move back into that you own. And unfortunately, a lot of these rules are set up because there's there's some scumbag people out there that really take advantage of laws. And from a state side, you know, from the from the state angle, it's all against the law. Yeah. But for the state district attorney to come in and prosecute, it it's not likely because typically it looks big to us in the, you know, locally, but in the big picture of California where there's 30 40 million people, it's not a big deal. So these these cities will pass these ordinances so they have authorization to then go out and get these people that are, you know, doing what they're not supposed to do. Does the city send out letters or

[32:18] notices to property owners about these ordinances? How how do you find out? You're in the know if if you don't Yeah. There there's not anything that goes out that I'm aware of. I've never seen anything go out for any of these three cities that we talked about. Um, it's if you're a landlord, you should know these things. That's kind of the assumption. And if you don't know these things and you're a landlord, then you obviously are financially well off enough to where it shouldn't bother you that you have to pay $20,000 to move someone else out of the property, which is a weird assumption to make. Yeah. Um, especially because a majority of the single family properties are owned by, you know, what they call the small mom and pop shops. They're they people own one or two or three rental properties. are not rich people. I mean, that's all a relative term, but they rely on the income from those rentals to pay the taxes, to pay the maintenance of the property, to fund their retirement. You know, it's it's not so that they can go have a beach house in Cabo or, you know, go vacation

[33:18] 247. It's it's a business for them. And so, it does it can be frustrating dealing with those types of things. Um, and if somebody's not aware of all those things up front, they could really be setting themselves up. And then, you know, if you don't give proper notice to move somebody out, you could be sitting on top of a, you know, you could be subject to a lawsuit and that can be cost in the hundreds of thousands of dollars. And the the rules have made it a lot easier to criminalize landlords for in what I believe is not criminal act. Yeah. So, um, yeah. So, if landlords don't know about that, you're not going to go onto Legal Zoom and find a lease that has a San Diego exemption on it. You're not going to go on to Zillow and find a lease agreement that exempts it from the city of Chula Vista tenant protection ordinance, right? Um, most cases won't exclude it from the statewide tenant protection act. And there's a lot of misinformation about that because single

[34:18] family homes are treated differently than multif family like apartments. There's different rules, there's different regulations. Um, and so there's a lot of nuance to the business and if somebody isn't aware of that, they could really be, you know, setting themselves up for a big problem. How often do you keep up with all these ordinances? All the time. Well, like what's what's your methods or or where do you go to to keep up with it? Honestly, I network with some of the top property managers in the area. Um, I do I have monthly meetings that I go to that go over all of these legal updates. I'm subscribed to several other agencies that are there to make us aware of these things. Um I was there when we first started when they first started trying to um figure out the Chula Vist Chula Vista tenant protection ordinance and that was I mean that was kind of a nightmare but um it's just being involved in the community and being involved and trying to stay in the know working with people and leaders within the industry. And as

[35:20] much as you may not like the position or stance of the person opposite you, being able to have the um the discipline to be able to maintain a relationship with that person and you you know we all come from different backgrounds and different expectations and all that kind of stuff and but being able to have constructive conversations with people in that space but a lot of it is yeah it it's legal. There's no like website that you can go to to check on all this. Like they're just like, "Hey, this is Monday morning. These are all the ordinances that come out. Is there anything like that?" Usually we get a little bit of a heads up before they come out. It's like, "Hey, this the Imperial Beach one they heard for probably four or five months." Okay. And that was a pretty quick turnaround process. Um, Chula Vista was probably close to eight or 10 months. Um, so we get wind of these things. we kind of know what to expect. We do what we can to help influence that um in a positive

[36:23] way that we think works best for everybody. Um and then yeah, just it it sometimes it's just who you know and being in the space. And that's my job is to know all of this stuff and to make people aware. And if people are out there trying to do things on their own, yeah, you might it might go fine, but I run into so many situations where it's got really bad and sometimes it's to the point where there isn't anything they can do about it besides call an attorney, spend thousands of dollars, and see if there's a way to move the person out. But ideally catching it before that is good, but the most ideal is setting it up correctly at the very beginning. And sometimes that's hubris that makes people think, "Oh, I know what I'm doing. I can I can do it myself." Well, maybe you can, but it doesn't mean you should. Um, so and then, you know, it sounds

[37:24] like I mean between trying to keep up with the properties, uh, keep up with the ordinances, uh, and then running the business, what is that like on your personal side? Um, I kind of my question would be in two different instances, right? When when you were younger starting out the business, less of a family, I feel like you you could probably put more energy into it. But now that you have kids, wife, how does that look like? I'd say a lot of it probably is age more than the more than the kids, you know, when I first started doing this. Uh yeah, I definitely had a lot more energy and you know I I I could do 12 14 hour days, you know, on end and it wouldn't be that big of a deal. Now I'm trying to do everything I can to keep it to an eight, maybe a nine hour day. It's usually closer to 10, but trying to really conserve my energy. It's not just time management, it's the

[38:24] energy management aspect of it. Um, but you can only do that if you have good systems and processes set up and people to run those. Um, so yeah, that it it's definitely evolved over time, but it's been it's been a process for sure. And has your family understood um the the nuances of the business? I think they've grown to know it. Yeah. I mean, they've only known I mean, my kids have only known me in the real estate space. Um, they haven't known me before that when I owned a business, uh, you know, when I was in sales, when I worked at Legoland, they didn't know me in that kind of space. They know me as a real estate agent, as a real estate broker, as a property manager, as someone who is just dealing with stuff 247. And and I try to point out, you know, when when we're able to go out and we're able to go on vacation, hey, we're able to do this because, you know, I have that

[39:24] flexibility, but that comes at the cost of sometimes I get those 2 o'clock in the morning calls when properties are flooded or I get the call at 8:00 at night when the property's on fire. And we have to deal with that. And welcome to life. You know, that's part of being an adult, too. Did you see that from your side growing up that this it was chaotic at any given time? I had no clue what to expect on this because I didn't I I saw, you know, my my dad was got into real estate when I was probably about 12 and I I didn't get a great background to honor real estate until I started working for him in high school. Uh I did transaction coordination for him, which is a fancy way of saying I just dealt with paperwork. Um, and I didn't see all of the ins and outs and the the relationship side of it or the problem solving side of it and certainly not on the property management side of anything. So, I just kind of went in went into it, like I said, kind of young, dumb, blind,

[40:26] ignorant, and had I known everything, maybe I would have thought twice or three times about getting into it. But um you know it's definitely been a a a great way to to learn. Yeah. Do you think your kids after seeing what you go through would get into it? Absolutely not. I mean I is there is there a point where the financial side of it is worth it for let's say someone coming in like if you were to tell them go I'm going to you're getting into this. this is what you can expect until you hit this point and then this makes sense. So, what I normally tell people is I I talked to a lot of real estate agents that say, "Well, I'm going to get into property management because it's passive income." Yeah, there's nothing passive about the income. Nothing passive. Um maybe they got lucky and worked with somebody and it everything went perfect and think, "Oh, it's, you know, it's a free extra few hundred a month or

[41:26] whatever." But um usually to scale it to have the processes to have the software to have you know the technological backbone of everything minimum 50 60 70 doors. Um, but then you're getting to the point where it becomes a full-time job and then it probably makes sense to the next step is you got to hire an assistant and then you got to get up to 100 doors or 110 or 20 or whatever to be able to pay that assistant and pay you. And so it become it it becomes to it starts to become kind of a game of chase on on on what where the break even is at. And there's different structures for you know cost structures. There's different revenue structures, different revenue streams, um, that different, you know, that companies use. I've chosen to keep things pretty simple. I'm not a nickel and dime type of person, but there are companies out there that make money on the management fee. They make money on repairs. They make money on renewals. They make money on all kinds

[42:28] of things. But from a consumer standpoint, they see, I'm getting nickel and dimed. I'm getting nickel and dimed. And pretty soon, they call me and they say, "Hey, I'm getting nickel and dime. What can you do?" and then that's a new client of ours. Um, so I try to keep the optics very very simple, but other people they thrive very well with that. Uh, you know, with doing cost structures or or things like that. So really it's there's more than one way to do anything. Yeah. It's finding what makes sense for you, what makes sense for your client base and what can you do to bring value to the client that justifies that. And then different populations should you work with like you had mentioned um the you know um in service if they're in you know military and they need to you know take off and they're renting the house they don't want to lose a house. Is that a different type of management than someone who lives here in San Diego? It depends more on the person than I'd

[43:28] say that their situations. I have some owners that live right down the street from their property. I have some owners that live on the other side of the world. You know they're military. They're deployed. They're Japan, Guam, Germany. Um I've had uh Customs and Border Protection clients in Iceland. I've had them in Aruba. I've had them all over the place. But mostly it comes down to um they want us to take care of their investment. Um and that's kind of an across the board type of thing, whether it's whether they live local or they're out of state or out of country. usually they just they just want to make sure that they can come back to their home. Um and and sometimes they've had property management experience with other properties, whether that be in California or East Coast or Midwest. Um so sometimes I I've got to reset their expectations to this is what it looks like right now in San Diego. This is not 10 years ago Virginia. This is not 20 years ago Florida. This is not

[44:29] right now Texas. this is what is happening right now in San Diego and what can you expect and setting those expectations up front I think is really key for for making sure the client's happy long term and how many people I get pursue renting out the home on one side just renting it out because they don't want to sell their home against the side that they want to make money is it is it do you start to see people that are kind of far on each side and like I I don't care about the money as much. I just don't want to sell the home. And or some people coming in as I don't care what's going on. I just want to make money from this. I think most people that I talk to come in with a with the expectation long-term I want to make money. Some of them are short-term, I want to make money. Um I don't get a lot of I just want to hold on to the property. I do have some clients like that. Um and then when you get into those situations, a lot of it becomes emotional attachments. And so you there may be

[45:31] issues down the road when hey we need to do a major remodel or you know somebody didn't clean it right when they left. So but I'd say the majority of the people that I work with are seeing it more as what's a long what's this going to do for me long term. Okay. And and and then sometimes they'll be like well let's try it for a year or let's try for two years and we'll see. And if we keep it as a primary residence for, you know, at least two of the last five years, maybe we can avoid those capital gains taxes when we sell it. So let's evaluate after year one or year two and and see it's really little mix of everything. But um close out if you were to have someone getting into property management realy what would you what advice would you give to them? get a degree in psychology because you're going to work with all kinds of people. You're going to work with a couple sociopaths. You're going to work with wonderful people

[46:33] also, but you need to know not just how other people think be not because you need to manipulate them, but because you need to understand them so that you can best help them. And you need to have an emotional intelligence that allows you to know you and to, you know, be able to know other people as well on a, you know, on a on a deeper level, on a psychological level, on, you know, they're saying this, but they mean this. Um, and then what can I, you know, what can we do to help them get what they need when they don't know how to voice what they need. So, if I could do it over differently, I' i'd get a degree in psychology for sure. Interesting. Amazing. All right. Thank you, Peter. Uh, where can, uh, people find you? So, our website is, uh, www.prahomes.com. P R A H O M- S. Um, always you can contact me directly from the website. I'm not super hard to find. Um, you can Google me, you can pretty

[47:35] much anywhere. Um, you I I'm I'm trolling on Facebook and social media all the time. So, uh, yeah, I' I'd love to have conversations with people. Even if they don't turn out to be clients, I'd love to at least make sure people are more informed on the subject. All right. Awesome. Thank you, Peter. Thank you for listening.