Peak Portfolio Management

 

portfolio management

Are you prepared to hit a peak in your investing cycle?

Whether you’re an old hand at investing or a beginner, you’re probably wondering what to expect in a changing political and social environment and how you can optimize market cycles to work for YOU.

On our latest show, we interview successful multi-family investor and Rich Dad advisor, Ken McElroy.

Ken currently owns over 10,000 units and provides safe, affordable housing for thousands of people.

We picked Ken’s brain so we could get YOU his best advice on managing multi-family rental units and figuring out what tenants want.

We also chat about what’s changing in real estate, how to get started as a new investor, and what to do when you’re at your peak.

In this edition of The Real Estate Guys™ show you’ll hear from:

  • Your peak pontificating host, Robert Helms
  • His past his peak co-host, Russell Gray
  • Award-winning multi-family investor and Rich Dad advisor, Ken McElroy

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Your cycle as an investor

One person can look at the metrics and notice that unemployment’s down, the stock market’s up, and wages are trending higher. That person might think the market’s ticking up.

A different person can look at the same metrics and note that home ownership is down and inflation is up. They will conclude that the market’s trending down.

There are so many different metrics to measure market cycles.

Here’s the secret: there’s more than one cycle.

Rent prices can be up while occupancy is low. When home ownership trends upward, landlords will have fewer tenants.

The most important cycle is YOUR cycle as an investor. You might be still acquiring knowledge, OR you might be an investor at the top of your game.

Wherever you are personally as an investor, there are things you can do to optimize your holdings (and potential holdings).

We think Ken McElroy is a GREAT example of how to optimize holdings at the peak of a cycle.

Q&A with Ken McElroy

Ken and his partner, Ross McCallister, of MC Companies, were recently honored as one of the top 10 management companies in the U.S.

We sat down with Ken to get an insider’s view on what’s happening with multi-family units right now.

What’s going on in the apartment space right now?

For now, Ken said, “It’s time to sit back and let others buy.” Last year MC Companies only made one new deal, and he’s moving really slowly.

Not that that’s always easy. MC Companies has over 800 investors. With his partner Ross, Ken manages a team of 350 people who buy, manage, and close on properties.

To have the discipline to say no … especially when they have the equity … is difficult. But it’s what’s best for their company right now.

They wait until they see the right fit for their investing philosophy. Then they buy.

Not before.

How’s your tenant retention?

Ken hasn’t tested it this cycle, but across the nation, 96% of rental units are occupied. Occupancy is high across the board right now, with some exceptions in certain markets.

“What will really be interesting are the next few years,” says Ken. “The companies that are hunkering down now are the ones who’ll do really well.”

How are tenant expectations changing? What can investors change to add value and retain tenants?

Ken’s properties are a level below high end. What he’s really seeing demand for, he says, are basic services you’d come to expect: a safe community, garden spaces, pet options, and WiFi.

Those things are pretty easy to deliver. Especially when you take Ken’s approach:

“We’re continually trying to figure out what tenants want,” he said. “That’s what keeps people there.”

Tell us more about pets.

A couple years ago, Ken and his company realized they’d never had a problem with a pet.

So they took a leap and decided to completely embrace tenants with pets.

They’ve even formed a whole brand around it, including pet clubhouses and pet parks in every community.

They’re now known as the go-to management company for pets.

It’s all because they went back to basics, Ken says. They looked at what residents want, and they asked themselves, “What could we do differently?

Ken’s tenants have, as you can imagine, a doggone good time.

What are some technological changes you’re seeing in the real estate market?

Ken pointed us to what’s happening in retail right now: thousands of big box stores are closing, while online retailers are booming.

People are buying differently now … and that includes real estate.

It’s possible to find and bid on properties electronically, rent apartments online,  and even buy properties … all without physically seeing them.

Ken projects brokers will need to make themselves resources in an age where heaps of information reside online.

You figured out a way to show apartments without labor. Tell us about that.

Ken’s company has actually moved away completely from paid advertising.

Their strategy now has two parts.

First, they’ve moved toward community and blog-based awareness. Ken has a team that manages his company’s digital presence and writes blog posts.

As soon as they started blogging, he told us, their traffic went up.

Second, they’ve reallocated the money they spent on advertising to call centers that help answer questions and set up appointments.

Interested potential tenants can make an appointment and then just show up at the property. Although every property has an office with a property manager or two, prospective tenants can look at open model units on their own.

This gives people the option to engage how they want, then ask questions after. And, it means a property manager is always in the office.

What’s your advice for newbies?

“I believe in my soul that real estate investment is the greatest thing,” Ken told us. “There’s nothing better.”

Ken’s lifestyle attests to that. He takes several months off every summer to travel with his family … and the money still comes roaring in.

For Ken … and for many others … real estate investing means financial freedom.

Ken’s advice? “Start how I started.”

Ken started with a single two-bed, two-bath condo. He worked on the ground, getting to know every aspect of the real estate business.

Fifteen years later, he’s living proof of the benefits of real estate investing. He now co-owns a company with 350 employees, builds his own units, and has hundreds of investors.

To be successful starting out, first get educated, Ken says. “People invest in us for what we know and what we stand for.”

Then, “Jump in.” You have to start somewhere.

The timing matters, the market cycles matter, yes … but ultimately, you just have to DO it.

A stellar example of smart, successful investing

We’ve learned a lot from Ken over the years, and we think Ken has a lot to offer to you, too.

Ken was the first person to help us think about strategic market selection. We realized there was a strategy to choosing markets.

Success wasn’t actually just dumb luck.

Ken was looking at geographies in a way that made sense, and now he’s looking at market cycles the same way.

He’s not buying right now … but not because he doesn’t have the money. He’s simply unwilling to compromise his company’s needs.

Of course, if you’re like Ken, the temptations you’ll face are many.

There’s pressure to perform from investors and employees. There’s the thrill of the deal.

Not giving in to those temptations is one of the reasons Ken is so successful.

He’s figured out a way to channel his DESIRE for acquisition into his current portfolio … by fixing, leveraging, remodeling, improving, and generally taking his investments to the next level.

Ken uses his time and his team to focus on ways to bring quality up and costs down so he can squeeze every penny possible from his holdings.

And he never neglects the human factor. His properties provide a great environment for tenants.

When the market pulls back, he’ll be prepared.

We like to say that “There’s no perfect investment, but real estate is the most perfect you can get.”

Ken started his entire journey with a single duplex. Look where he is today.

Wherever you are in your investment cycle, we hope Ken’s journey inspires you!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

3/21/10: The Investor’s Dilemma: Hang on for the Long Term – Or Cut, Run and Redeploy

As the economic tide rises and falls, every investor needs to re-evaluate his or her holdings and ask, “Should I stay or should I go?”  This is especially true if you were late to the last party and are now wondering where the exit is.  But is there a new party about to start – and are you at your limit or should you stick around for the fun?

Standing by the punch bowl pontificating brilliance:
•    Your designated debater and show host, Robert Helms
•    Co-host and chief party mix monitor, Russell Gray
•    The Godfather of Real Estate, Bob Helms

We’ve already done several shows on HOW to clean up your portfolio if you have underwater and/or negative cash flow property, so we thought it was time to talk about WHY you would want to bother – or if it just made sense to give up and move on to greener pastures.

Like most of real estate, there is no magic formula.  Instead, there are lots of things to take into consideration – many of which are personal, such as time frames, investment objectives and risk tolerance.

With that backdrop, here are the talking points for this week’s show:
•    Considerations When Evaluating Your Current Portfolio
•    When It Makes Sense to Hang On
•    When It Makes Sense to Let Go
•    Ramifications of Selling Beyond the Direct Costs
•    How to Answer the All-Important Question: “Compared to What”?

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