Intro: [00:00:00] Welcome to the Stacey Salyer Show, the podcast for property management leaders ready to think bigger about growth. I'm Stacey Salyer and the only acquisition strategist in this industry who sat on all sides of the m and a table. I've been the buyer acquiring a 370 door competitor during COVID using seller financing.
I've been the seller building and exiting a seven figure business. And I've been the corporate evaluator as director of acquisitions, assessing over hundreds of companies nationally. That means I know exactly what you're thinking, what you're missing, and what actually works when it comes to buying and integrating in this space.
On this show, we dig into acquisitions as a real business tool. Not luck, not someday. You'll learn positioning, strategy, numbers, and integration from someone who's actually done it all. Let's go.
Stacey Salyer: Welcome back, my friends, to the [00:01:00] Stacey Salyer Show, where we talk about buying and selling property management companies. And today, I have a guest on my show who owns a large property management company in Southern California, Rent Source. And we are going to be talking today about the different businesses that he's purchased and the adventures that that entails and the different strategies that he uses, as well as his mindset around running his team.
It's a little bit different than probably your average business owner. So I'd like to welcome Kevin Patterson to my show. Welcome.
Kevin Patterson: morning, Stacey
Stacey Salyer: Good morning. So do you want to give us a little bit of a rundown of maybe how you got into property management, how long you've been doing it, maybe kind of your general location and all that?
Kevin Patterson: we're in the Southern California area. I got into property management because I was one of the largest REO agents during the crash. And so I was actually working seven days a week, literally probably realistically 18 to 20 hours a day just because we were doing so many [00:02:00] REOs.
I think I was selling well into 30 to 40 REOs a month. On top of that, we were doing hundreds of BPOs every single month. and honestly, I did that for a few years and just got really, burned out. what started in the property management business is when I very first got my real estate license the broker that, I worked under, he had a big 65-foot yacht down in Marina del Rey, and we'd always go out there.
and I'd let him know that one day I wanted to be a broker, have my own office.
He was in his late 70s at the time. And he would always tell me that property management is where all the money's at. He would always tell me, "Property management is the meat and potatoes." And he had gone, obviously, he's one of the original seven Century 21 owners or franchisees, and he still had a Century 21 franchise at the time.
And he would always say that like through the ups and downs of real estate The one consistency and the one thing that kept him alive and the reason he was still around was because he had a, property management arm that actually paid all the bills. So the real estate sales from [00:03:00] the agents was kind of his profit margins, where the property management company paid all the bills through the good times and the bad times.
So it always kind of really stuck with me, and as I became an REO agent and was doing a lot of business, one of the things I was always struggling with is, because I was constantly selling to investors, was sending them out to property management companies. Well, they would call me back pissed off because every single time I'd send them to a property management company, they didn't like the way they were doing business.
So, in 2012, I wound up just getting my broker's license. In 2014, I made the, decision to open up my property management company. So in 2014, I was, making well into a million dollars a year in actual gross closed commissions which was unheard of really. I mean, there wasn't a lot of people doing it w- during that market, but because I was such a large REO broker, I was able to do that.
So what I did was I actually worked in the property management business [00:04:00] and became, I became an accidental property management company, really, out of necessity for my investors that I was selling REOs to. Knew absolutely nothing about property management. Created a spreadsheet, charged them 50 bucks a month, and that was that.
I mean, I literally just collected rent. if there was any maintenance issue, I called the owners. We didn't have VAs or anything like that, but I'd just call the owner like, "Hey, here's the issue." If we did any extra, once in a while I would, but, but not much.
One of the things I found about the property management company was there was a lot of really good things. There was a lot of things I was good at, but what I was good at was I was good at getting the clients. I was horrible as a property manager. So I learned really, really fast I was probably the worst property manager out there.
And so that kind of became my journey over the next three years. For three years I did sales continuously. I did not take a single dollar from my property management company, and every dollar I made, I hired [00:05:00] somebody. I hired somebody that I wasn't good for, right? So bookkeeping, actual, being an actual property manager dealing with complaints.
I'm good at dealing with complaints. I'm not good at the actual day-to-day property management aspect of it. So even to this day, my employees will tell you that without them, they are the key. Really all I'm good at is, is the connection part,
Stacey Salyer: Okay. so 2014 you opened your PMC, Did you already have a real estate brokerage, like a sales brokerage?
Kevin Patterson: No, no. I was
Stacey Salyer: opened everything.
Kevin Patterson: I, I was under RE/MAX at the time because I left Century 21. When the market crashed, I actually wound up leaving Century 21 because I had better access to REO accounts through the RE/MAX franchise.
So, that's why I left to RE/MAX, and I did not have a broker's license. The broker's license came into play when all my investors were telling me that they needed a property management company.
So I always remembered that conversation in the back of my head that I had with my old broker at the time. And, I basically made [00:06:00] my broker at the RE/MAX an offer. They actually wound up partnering with me in the very, very beginning. Within six months, they dissolved the partnership.
They just didn't, they didn't like the feel of property management. They owned a handful of RE/MAX offices, and it's also some escrow and some lending offices. So they didn't like the fact that the property management kind of in the state of California exposed them and all the other businesses, to any errors that we might have.
And, and I honestly, again, I wasn't it was literally trial and error or what I like to call R&D, rip off and duplicate, because that was all I was able to do. I knew nothing about property management. I knew everything about sales.
Stacey Salyer: okay. So you opened with a spreadsheet. Did you open with a handful of clients or
Kevin Patterson: Yeah. No, no, I had a, I had a full list. I mean, again, I was closing, 30 deals a month. So th- every single deal I was closing with investors. People weren't buying homes really for themselves at that point. Very few, and they weren't beating out the investors. So that was the, that's the other problem that I had, is I, I had a very good investor [00:07:00] catalog.
So I reached out to all of them and I was like, "Hey, 50 bucks a house," "i'll manage it for you." And every single one of them jumped on board. And I will say this, that I think I still have well over 100 of those original guys,
you know,
Stacey Salyer: Wow, that's awesome. Are you still only charging them 50 bucks a month though? Yeah.
Kevin Patterson: No, not these days. The price of business has gone up slightly. Sometimes I feel not as much though, not, not so
Stacey Salyer: Okay, cool. So you opened yourself with a spreadsheet, used all your income from that to build a team. When-- So you and I met through NARPM or m- probably some Facebook group way back, 'cause I know those start, started to get really big in like 2017, '18. When did you kind of get more serious about property management?
Because, I mean, it is such a complicated business and litigious, especially on the West Coast. Did you-- When did
Kevin Patterson: think about three years into it, I started to really realize this is, kind of a direction I wanted to go. I remember deciding at, at, after three years that I was gonna take my first [00:08:00] paycheck in the business. And at the time, there's another company in our area, just south of our area, where I wa- was able to capture three of their employees.
And I, I wasn't trying to get their employees. I think they, there might have been, like, a fallout with one of the managers at, in their company at the time. And so I, I off- made their employees an offer that they didn't say no to. And so once I had those three employees who were very, very seasoned employees, I felt very, very comfortable because really what I got was a bookkeeper who's still with me.
I got an operations manager who wasn't an operations manager at the time. She was a property manager. And then I had gotten another property manager, so I got two property managers and a bookkeeper, and that actually changed the project- trajectory of my business and, like, how serious I kinda took with it.
Because their skill set and their knowledge and, that they had in the business was way greater than mine. So it was kind of at that point where we'd moved [00:09:00] over to AppFolio at that time. They knew AppFolio, I didn't, I barely knew AppFolio. We moved over to AppFolio. We were on Buildium originally.
Like we went from spreadsheet to Buildium,
Stacey Salyer: Okay
Kevin Patterson: which in my opinion, Buildium's a great little stepping stone and I, you
know, if I was ever to plug a company, like they've always been really, really good for the first time, in my opinion.
Stacey Salyer: Mm-hmm. Yeah.
Kevin Patterson: very, small,
you
Stacey Salyer: Yeah. Yeah. Yeah. Mm-hmm.
Kevin Patterson: and, and so they did a lot. We went to AppFolio and it was kind of at that point where I decided like I'm gonna slow down on sales because again, I mean, even at this time, I think this was 20- probably 2016, 2017, probably like 2017. My, my phone, my ringtone on my phones used to be able to change the ringtones.
I don't think, I don't know if you can anymore. I don't even turn my ringer on. But it used to be like the, the sound of like a cashier. If you remember the old school like cha-ching, cha-ching. 'Cause every time my phone rang, like honestly is, that was just my, my sales
gig was like, Yeah
my [00:10:00] phone's ringing, it's, it's the sound of money, right?
And yeah, so it was kind of at that point where in 2017 where I decided to really start to fall off and, and the, the 2017, 2018 era is kind of when the REOs really started to fade. So it, it allowed me like a little bit of breathing room, and I think because I worked so hard from, in those timeframes that I just got truly burnt out.
I felt like I was at the pinnacle of real estate sales. Teams weren't really a big thing outside of like Keller Williams, so I didn't necessarily have a team back then.
Stacey Salyer: Wow
Kevin Patterson: so you know, everything I was doing was my- myself and then I had, I had an assistant, and someone who did all my paperwork, because one of the things, again, back to knowing what's, what you're good at, what you're bad at, paperwork was something I've always been bad at.
Communication with people, like getting the sale, closing the deal, that's, that's my forte, so
Stacey Salyer: Okay. Okay, cool. So you've got a real team, you've got a real platform. It's [00:11:00] 2017 or, or whatever. You've got, what, several hundred doors under
Kevin Patterson: Yeah, at the time I think we were about 250 to 300 doors
Stacey Salyer: Okay. Okay. Which is a good size company. So-
Kevin Patterson: and actually when I, when I acquired those agents from that other company, I actually at that point was the point of where I started to scale because that actually opened up my second office at that point
Stacey Salyer: Okay. Okay. I was going to ask about that. So where was your first office? Is that
Kevin Patterson: in Palmdale.
Stacey Salyer: In Palmdale. Okay.
Kevin Patterson: that's kind of where our corporate office is even today. So northern LA County. We, we cover LA County, Kern County from that office, and some parts of San Bernardino, but not much
Stacey Salyer: Okay. So you have that one office, and then you decide now you have team platform, you're moving forward, you're gonna open a second office. Is that
Kevin Patterson: Yeah. Yeah. So when I acquired, those other three employees, obviously bringing on three employees at one time was something pretty big. So what I wound up doing was [00:12:00] they were able to bring over, they had some clients with them that they brought over with us. So we pushed into a secondary market, which was our Santa Clarita market and actually our third largest market at this point.
It's, it's not our second largest anymore. But we took into the Santa Clarita market, and I mean, that market's, a good market, but it's-- I would say it's about a 150-degree difference from where you are in the Antelope Valley market. The Antelope Valley market's a very, military market, but a very also high Section 8 market.
So we do a lot of Section 8. Where my Santa Clarita office, I don't, I think we have to this day, we just finally got our very first Section 8 tenant about maybe a year ago.
Stacey Salyer: Okay. And that's kind of more A class properties?
Kevin Patterson: A class properties,
Stacey Salyer: Okay. Okay.
Kevin Patterson: where Antelope Valley c- is anywhere from say, a, an A to a C class.
It's, it's all the way across the board
Stacey Salyer: Okay. Okay. So what year did you do your first acquisition? Like buying a, a book of business? 'Cause I know we've talked offline a little bit and, there's stock [00:13:00] purchase and then there's a book of business, which you, you've only done like the books of business, not buying the company, right?
Kevin Patterson: Correct. Yeah. we don't buy the actual companies because otherwise we take on the anything, anything bad per the DRE in the state of California. You buy the corporation, you get the good and the bad. So it's easier for us just to buy the paper. We made our first purchase, I think in during, right, 2022.
22?
Stacey Salyer: Oh, okay
Kevin Patterson: Yeah. Was our actual very first purchase of a bigger, larger company. Well, larger in the sense that it had 250 doors.
Stacey Salyer: Okay, that's good
Kevin Patterson: and that was in our Barstow office. And i- it's kind of interesting because no one would ever think that that market is a, a good rental market because it's probably by far one of the least expensive places in the state of California to live.
So at the time, I mean, I still had-- There were-- When I bought it, there was rentals that were renting for $400 and $500 a month in
Stacey Salyer: Wow.
Kevin Patterson: '22. Where in any of my other markets, we're in that 16 to [00:14:00] $3,000 a month range. Now we've come back to the $50 management fee. When I purchased that place, most of it was $50.
They did, they did do AppFolio. They did have AppFolio, but it wasn't very good. They didn't keep good tracks, didn't have a good track record. But that's part of the reason we wound up picking it up. I find that to be a lot of why people sell is they start to get in trouble and then they get overwhelmed, and then they no longer-- they just don't wanna deal with the headache anymore.
So, that was an interesting purchase because the property management company had been established for I think around like 30 years.
Stacey Salyer: Mm-hmm.
Kevin Patterson: So it'd been established for a very long time, and they were, they were the 800-pound gorilla in the area. So, by us taking it, we also became like the 800-pound gorilla.
Stacey Salyer: Okay
Kevin Patterson: Um, which and, and to this day, it's, it's a, it's been a good market for us. It's, it's a profitable market for us, right? It's not a big, like a numbers market i- as far as like rents and things of that [00:15:00] nature or the price per door. You don't get the-- That, that is probably one of the markets that suppress us a little bit from like overall having a, the average price per door average being higher would be that market.
But it's a good market
Stacey Salyer: Okay. Okay. So that was your first acquisition. What... Do you have like a, do you have a specific strategy that you use as far as acquiring? 'Cause you've done three
Kevin Patterson: Yeah, number three. No, I don't, I don't really necessarily have a specific strategy. Everything's kind of come to us. That one, I think had come to us from a referral from a friend that was interested. actually the, the broker of that company reached out to us because we were playing in a triangle, and to understand where we're at in Northern LA County, we kind of reached up into Kern County through Tehachapi, which is Kern County, and it's just s- it's like southeast of Bakersfield.
Bakersfield's a huge market, and you have, you have Bakersfield, Los Angeles, Orange County, San Diego, kind of how it would go [00:16:00] if you're looking at, at California from like central to southern. And we were in the LA County, Ventura County, playing in Ventura County, and parts of K- sorry, LA, Kern, and, and Ventura.
We were playing in parts of Kern, because Kern's the one of the largest counties in California. It's more centralized. But that kind of threw us into the Barstow area because if you look on a map, there's an interesting triangle across, Highway 58. If you're not familiar with the area, anyone that's gone from Southern California to Vegas, it would be familiar, but
Stacey Salyer: Okay. That area.
Kevin Patterson: Yeah, because you do pass, Barstow's kind of one of those like pit stops if you're from LA on your way to, to Vegas.
Everyone stops at Barstow or Baker. Those are the two stops outside of that. Next stop is Vegas. So they're not areas where you would think a lot of people would live, but there's a lot of, a lot of people there. They're building a lot of stuff out there too. They're building a casino. They're also putting one of the largest rail union trains, I think it's Union BNSF.[00:17:00]
They're building a huge hub out there. So I think it's gonna be the largest hub in the nation is what they're want up doing. So they're in the process of that right now, so. But as far as, again, how did I get them or how I've gotten any of them? All referral-based. They've all been referred
Stacey Salyer: Okay. Okay. So just by like in the market, like somebody's like, "Oh, hey, you should go talk to this person,"
Kevin Patterson: Yeah, or the brokers call us.
Stacey Salyer: The bro- okay. The actual broker, the owner broker? Okay. Okay, 'cause they weren't listed
Kevin Patterson: Two, two of the three, yes, correct. Two of the three they've called us because we're in the area. So they-- The third one I was turned onto, and which is my most, most recent one, I was turned on to through a company that does a lot of purchasing of property management companies.
It just didn't fit their, it didn't fit their box, and they knew we're in the area, so they reached out to me and we made it work
Stacey Salyer: No, that's cool. So do you mind kind of walking us through maybe your first acquisition? What like hindsight, it's always 20/20. Is there something you would've done different?
Kevin Patterson: Yeah, my first one, [00:18:00] absolutely. And this is kind of the advice I give to a lot of people. I, I got burned a little bit on my first one because, when you buy a property management company and you have sever- several hundred doors, you don't go through every single contract. You just kind of look at what AppFolio says and what the bank account says.
And then what we did is we took 10 contracts and then just, just compared them. We just took a sample.
Stacey Salyer: Okay
Kevin Patterson: Where we got burned is security deposits.
Stacey Salyer: Oh, okay
Kevin Patterson: Yeah. So we got burned on security deposits because yes, what was in AppFolio was what was in the bank.
Stacey Salyer: Okay
Kevin Patterson: However, what was in AppFolio did not match the contract
Stacey Salyer: Oh, okay.
Kevin Patterson: Yeah.
And that got us on about seven or eight of them that we were able to catch after we realized it when we were, a year down the road, two and a half, two years down the road, and a tenant moves out, and we're looking at what they have written in AppFolio. [00:19:00] We look at what's in the bank, and we look at the contract and realize the contract says two times the amount of rent.
So just for instance, if it was 1,000 bucks, they have a $2,000 deposit. However, AppFolio says $1,000 deposit. Bank says it's a $1,000 deposit. So I wound up writing some checks for about an additional-- I think when it was all said and done, I think we lost like 12 or 13,000 bucks that we kind of ate.
Stacey Salyer: Okay. Okay
Kevin Patterson: That is the one advice, and I don't necessarily know that there's really a way outside of going through every single contract or getting a estoppel on every single contract.
A-and but if you want to take the time, you're more than welcome to. I think for us, it, it would just be a bigger sample, right? We'd just run a 10% sample versus just a, you know, like a 2% sample.
Stacey Salyer: Right. Yeah, 'cause 10, 10 out of what? 200, 250? Isn't that... I mean, that's not that many, but
Kevin Patterson: No, w-we could have done a better job at, at sampling, but w-when we got past the 10 and didn't see any errors, we didn't necessarily think about it. But, luck of the [00:20:00] draw. With that being said, I think the, the other big thing, and I've noticed this on every single one, is that when change happens with an owner, if they're on the fence at all, that change is gonna happen when, when you purchase a property management company.
No matter what you do to try to save the deal, you can offer them free, management for six months, doesn't matter, right? I'm not, and I don't, I don't suggest anyone doing that. But they're gonna change
Stacey Salyer: Okay. So do you find, I mean, do you track like your churn rate per acquisition or do you, I mean, do you feel like yours is, is high?
Kevin Patterson: I, I don't know that mine's higher than most, but we did track it on all three, and it, it stayed fairly consistent between 13% and 16%.
Stacey Salyer: Okay.
Kevin Patterson: So I don't know if that's high. I mean, it seems high to me, but it, it all happens within 90 days. it's instantaneous out of the box. And the other thing that I will say that for us is a drawback is our name, right?
[00:21:00] So when we go in and take over a property management company, all three that we've purchased so far have all been small mom-and-pop stuff.
Stacey Salyer: Right?
Kevin Patterson: So when we come in with our name, they automatically, even though we're still, smaller than some out there, we're bigger than some and smaller than others the, the name throws a lot of people off, and really what they're looking for is like, "Who's my property manager, and are they close to my house?"
Stacey Salyer: Okay. So you feel like, or maybe you've gotten actual feedback from clients that see you as "Oh, you're a bigger guy. You're not really in my market, so I kind of was on the fence already and now I'm gonna leave."
Kevin Patterson: Yep, 100%. That is, and that is... And they're honest because when we, when we have them drop out, like I will call and I'm like, "Hey, listen, I'm not gonna try to save you. I'm not sitting here gonna throw the, promise the world to you and, and beg you to come stay with us. I just wanna know for did we do something wrong?
What is it?" I will say that probably 80, 85% of the time it's, that's [00:22:00] exactly what it is. And on this very last one, it was actually a little bit heavier. It was a larger drop-off than what I expected,
Stacey Salyer: Okay
Kevin Patterson: because we actually weren't in that area and it was something we were trying new
Stacey Salyer: Oh, I see. So you were new to the area, so people didn't know you
Kevin Patterson: we're not new to the area. We actually managed currently-- We, we-- Before the, before We went into that area, we were already managing about 30 doors out there. We just won't-- didn't have a heavy presence. And so we-- This last one we just did earlier this year that we bought, it was, is in a town called Tehachapi, so very small town in Southern California at the base of-- just on the other side of the mountains of Bakersfield, but it's kind of like a gateway to Bakersfield.
One thing we found was that like 70% of the owners of the properties that-- of the, of the management company that we bought actually live in the town, which was astonishing to me
because I've [00:23:00] never seen that. None of our other areas are like that, right?
Stacey Salyer: Okay
Kevin Patterson: the other thing all of them wanted was for us to have a local office there.
Now granted, our Palmdale office is only 40 minutes away, so it's really not that far. It's, it's 40 minutes, 40 to 50 minutes away, just depends on traffic. So it's really not that far, and we also obviously have vendors in the area. But because we didn't have a physical office in the area and we were managing it from the Antelope Valley or from Palmdale people were not happy.
Stacey Salyer: I see
Kevin Patterson: They wanted, somebody there that they could go see, talk, talk, touch, feel.
Stacey Salyer: Okay. So knowing that, I mean, would that change like a future strategy for a different purchase? Or is it just, I
Kevin Patterson: Yes.
Stacey Salyer: you do anything different
Kevin Patterson: Yeah, I think what it does is it forces my hand to, when I look into new areas, to make sure that w- w- if we're gonna buy, we have to buy, especially when you go into smaller markets where it's mom-and-pop stuff, you gotta [00:24:00] buy enough doors to where you can actually staff that. I think before we started talking, before I started recording, we-- you and I were talking about one of our, one of the other property managers that I do speak with often and we'd put on con- we, we talk at conferences about we both run a very remote operation.
Hers is extremely remote. Ours is somewhat remote. But again, in the bigger markets, the remote markets work really well. In the smaller markets, at least what I have found, is the remote markets don't work as well. I mean, it's not that they can't work, they just don't work as well
Stacey Salyer: Yeah, no, I would agree with that. I mean, in my market before I sold so I managed in four counties, and the county that I live in is very similar. It's very rural. A lot of the investors actually lived here. It was like their second or third homes and they wanted that relationship. They wanted an actual human.
They wanted to know that whoever's managing their property, like actually [00:25:00] knew the area, lived there. They could find them at the grocery store, whatever.
Kevin Patterson: exactly. That's, that's, that's what we ran into. And, I experienced that a little bit when we bought the Barstow because I, again, back to the 80, 85% of the fallout of the, of the 12% that we lost in Barstow was because of that reason. They wanted somebody that knew the area. Now, with that being said, I still kept-- When I bought the company, I kept the employees.
Stacey Salyer: Okay
Kevin Patterson: The only employee I didn't keep was a broker,
Stacey Salyer: I see.
Kevin Patterson: But the employees stayed the same, so that helped out a little bit. So, but at the end of the day, what scared those-- W- w- the big feedback we got was they wanted mom and pop. We, we came across as a bigger corporation and, not everybody likes that
Stacey Salyer: That's, that makes sense. Okay. And so how many doors are you around now?
Kevin Patterson: I think as of this morning, I think we're around like 1450,
Stacey Salyer: Okay. All right. Well, that's a good size. That's a good size. And you're actively acquiring, you're [00:26:00] still growing out your California market. And you, I know you kind of mentioned you guys run remote, but I mean, you have... How many offices do you have total in California?
Kevin Patterson: one, two, three, four, five
Stacey Salyer: Okay, so you have five offices. So you're, I mean, you run remote but not remote or what? I know you
Kevin Patterson: That's all? Well, so, so my Santa Monica office one runs remote. Actually, I got six because Tehachapi would be six. So, Tehachapi re- is remote, Santa Monica's remote the rest are all staffed
Stacey Salyer: Okay. Okay. And I know you, you don't live in California anymore, so
Kevin Patterson: No, I still have my house in California, but that is more of like my hotel when I am in California. I don't have much there
Stacey Salyer: Okay, so you go to California frequently
Kevin Patterson: I'm, I'm in California about 10 days a month,
Stacey Salyer: Okay.
Kevin Patterson: I think. So between seven and 10 days a month I'm in California
Stacey Salyer: Okay. And then you, but you still have local team that live or, live and work in most of your,
Kevin Patterson: Yeah, [00:27:00] as a matter of fact, my operations manager actually recently, of last year, beginning of this year, moved out to Tennessee where I am at currently. So he
Stacey Salyer: Okay
Kevin Patterson: lives in Tennessee as well. My bookkeeper moved away. She's in Washington. She's up by you actually, in
Stacey Salyer: Okay.
Kevin Patterson: State. So, and then obviously we got remote employees, but we do have people that need boots on the ground and property managers in those areas where all the offices are. And generally we run at least a minimum... The other thing that we have found is that with the boots on the ground in California we run a minimum two-person crew.
Stacey Salyer: Okay
Kevin Patterson: 'cause we've found that that, that's kinda what works the best and it's, that one is scalable. So
Stacey Salyer: Okay. And so, so it sounds like you've learned a fair amount from acquiring. I mean, you're probably always learning every time you do one.
Kevin Patterson: You always learn, yeah
Stacey Salyer: You also, I know I don't wanna run out of time for all the, the things, but so you also have a maintenance company 'cause we didn't really talk about that.
When did [00:28:00] you start your maintenance company?
Kevin Patterson: We actually started it right away. Probably within the first three years we started the maintenance company because we realized running houses from A to C class, it's interesting. There's a lot of work, And one of the things that, one of the things that we found when we're talking to owner, potential owners, was the reason they're leaving their property management companies is because it was always maintenance related. Maintenance or communication,
right? It was never fraud. It was never like they're a crappy property management company. I mean, in their idea, their, their idea of them being a crappy property management company was the maintenance side, right? It was never like, "Oh, they're defrauding, taking my money," or, "They're mean to me," right?
But it always fell back to maintenance and then lack of communication were the two main things that I always got feedback from. And to this day we always ask "Hey, why are you moving?" And it's, it's always that.
Stacey Salyer: Okay. And so your strategy, [00:29:00] 'cause you and I have talked offline a little bit you prefer like C-class management.
Kevin Patterson: Love it.
Stacey Salyer: You love it. And... Right. Okay. And you find that, I mean, having a maintenance company side by side, that does very well for you. Yeah
Kevin Patterson: Yes. Yes. Well, because in California we can't charge ancillary fees.
Stacey Salyer: Okay
Kevin Patterson: So r- and I refuse-- I mean, I know a lot of people do it, a lot of my competitors do it, but a lot of my competitors, they don't necessarily have a, a maintenance company, but they charge like a, say a 15% add-on to
Stacey Salyer: Oh, that's a maintenance markup. You're
a anti, anti-maintenance markup. What? Tell us why. I know you love to debate things, so
Kevin Patterson: Yeah, no, no. I, I just feel grimy on it. It's already hard enough that we battle, a perception in this business as it is, and I truly feel like y- you're getting paid as a property manager to manage the property, and b- really 70 to 75% of your [00:30:00] job all day long is gonna be maintenance related.
Stacey Salyer: Mm-hmm.
Kevin Patterson: So you're really getting paid for that, right? So why would you-- You know, things are already expensive enough for owners, especially in California. A two-by-four is a two-by-four. It doesn't matter what state, what city you're in, it still costs almost exactly the same whether you're in Beverly Hills or Barstow, right?
Same with paint. A gallon of paint is a gallon of paint. The labor changes obviously.
But at the end of the day, it, it's all the same. So point is, is that if I'm managing C-class properties where their, their rent is, $1,000 or $1,500 a month, or I'm managing a property in my Santa Monica office where the rent is $30,000 a month and I gotta go do a repair, the repair costs exactly the same,
Stacey Salyer: Hmm.
Kevin Patterson: right?
It just doesn't hurt that $30,000 a month owner like it hurts the $1,000 a month owner. So I always felt that if I'm trying to do my best for my investors [00:31:00] or my clients, like the l- the last thing I wanna do is tack on another 15% to their maintenance bills, right? Now, obviously, we don't have control over how people treat a house.
We don't even-- We're at a point where we don't even show-- We do all self-showings just so that we don't even know who's putting in applications to, to fight, so no one can ever come back and say "You discriminated against us." That's a whole different story in California. But
Stacey Salyer: yes. Yeah
Kevin Patterson: point is this, is that you don't know how someone is gonna be able to treat a house.
I remember when I first got into this business, one of the things I would do and this is again in early 2000s, I would go to your house and see how you kept your house. But that was a,
that
was like...
Stacey Salyer: landlord?
Kevin Patterson: Yeah.
Stacey Salyer: You were doing the interview? Did you also look in their car?
Kevin Patterson: I don't know. Well, if I would walk past their car, right? But I would, I would look at the house, look at the people, and I mean, I, I would, I don't know how many times I've said "Oh, it's-- we're gonna get the best, the best qualified person into the property," [00:32:00] right? And, and I do love the fact that like California has the rules they have, especially when I go into other states and see other things, because honestly, I've made some decisions where I thought "Oh man, this guy's a police officer, this guy's a doctor, this guy's a fireman."
And I was like, "These are way better than a Section 8 tenant." Only to find out that the nastiest people I've ever had in my houses, I've had some bad Section 8 tenants.
Stacey Salyer: Sure
Kevin Patterson: professionals, doctors,
Stacey Salyer: Yep
Kevin Patterson: firemen, and police officers, especially single dudes.
Stacey Salyer: Yep.
Kevin Patterson: I don't know why. I'm assuming because they're never there.
They, maybe they like to party. I don't know. No offense to anybody that's, a doctor, police officer, or a fireman, but those are by far, those are by far the worst houses that we have.
Stacey Salyer: Yep. Yep. Yeah. Yeah, I actually, I had to evict a cop one time.
Kevin Patterson: I've done a couple
Stacey Salyer: Yeah, which was kind of, kind of wild. I'm like, "Yeah, yeah, your, your buddies from the other precinct are gonna show up." Anyway, that's a story for another time. Okay. No, that, that makes [00:33:00] sense. So do you-- So does your operations manager also run your maintenance company, or how do you
run that?
Do you run that
Kevin Patterson: no, for the most part-- As a matter of fact, it's funny you talk about I like to, I like to argue. If she ever sees this, this, this podcast, sh-she'll she'll tell you, she loves to get involved in the maintenance side.
Stacey Salyer: Oh, your
Kevin Patterson: is-- Yeah, she's, she's an amazing person. No, by far. She's-- Everybody that knows me, if you've seen me at a conference, you've seen her.
She-- Everyone thinks that, probably thinks, half the people think we're married. But she's an amazing person. I couldn't do any of this without her. But she's she's such an overachiever that, and such, such a perfectionist that, I'm a very pick and choose your battles,
Stacey Salyer: Uh-huh. Yeah
Kevin Patterson: And if it's going well, like if it ain't broke, let's not fix it, because the amount of employees we have now and trying to get everybody on board, anytime you make a change
is tough. And as you grow, like if you're just a, an office of a few people, it's not bad. When you're an office of 20 people, 25 people, it becomes like, shit.
I come back from conferences with [00:34:00] ideas and I'm just like, "I'd love to implement these," but the reality is,
Stacey Salyer: yeah. Well, yeah, the saying of the ship, right? I mean, if you have a rowboat, it's a little bit easier to turn than like a big Titanic. I mean, right?
Kevin Patterson: Absolutely. A- and so when I say that she tries to get involved, she does. She's always pointing out what's wrong and what we need to do to fix it, and I'm always and then my battle comes in as because I kind of run the property man- the, sorry, the maintenance side. That's
Stacey Salyer: Okay. So you're, you're-- that's kind of your baby
Kevin Patterson: Yeah, it's kind of my
Stacey Salyer: So you're still in like day-to-day. You're not like...
Kevin Patterson: mean, I'm in the day-to-day. I really enjoy the maintenance side. When I am in California, I, I actually enjoy to get out there. I'm kind of handy, a little bit handy, not great. I could put like a smoke detector on and change an air filter and a few things like that. But I understand because I come from a building background,
Stacey Salyer: Mm-hmm.
Kevin Patterson: I understand everything about a house.
I understand plumbing, electrical. I know everything there is to know about a house. So when something goes wrong, I know ways to fix it. I know ways around it. So that's kind of why maintenance is [00:35:00] for me, it's very fun. When I am in town, I do like to go with my guys and even by myself. I'll pick up a couple work orders if they're small, right?
I'll pick up some work orders and just go knock them out. Happen-- What, what, what I really like about it is, is it allows me to get eyes on a house. It allows me to interact with my tenants. I love interacting with my owners and my, my tenants, specifically my tenants, because they're always fun. And, and, and I think that like I always want to hear their side of "Hey, how do you like living here?"
Right? It doesn't matter where their house is. I just wanna know. I wanna know what the positives and negatives are so that I can take it back to the team and say, "Hey, I was over at so-and-so's house." Or when I get to the house, I'll call my office and like we just had a-- I was just in California a couple of weeks ago, and I go to a house to what I'm thinking I'm changing a sink faucet, only to find out I wasn't changing that sink faucet.
They have three goats in the backyard, and this is like a track home.
Stacey Salyer: Oh. "
Kevin Patterson: Three goats."
Stacey Salyer: Is it in an HOA? Okay.
Kevin Patterson: No, we don't have a lot of HOAs in where I'm out there. [00:36:00] But regardless, still in a track, and there's three goats, right? And I'm just thinking to myself like, "How does my team not know that there's three goats back here?"
So of course, I leave and call. And the owner-- I mean, the tenant never knew who I was. She just thought I was some maintenance dude, right? And I call my office and I'm like, "Hey, when was the last time you guys were at this house? Because we're supposed to be doing yearly checkups and this, these are goats." This ain't like, ain't like we just brought them home. Like you're not hiding them. And they're in a cage. And I mean, it's, it's, it's not a big backyard
by any stretch. And so of course, like I kind of jump in my property manager and start questioning her like, "When was the last time you guys were there?"
"You need to go put, post a notice because there's goats at this house." And there's a few other things that I wanna make sure that it's not, there's broken mirrors, and I, I guarantee you we didn't-- I don't, I know we didn't rent them a house with broken mirrors. A few other things that I noticed, but that's what I do love,
Stacey Salyer: Okay. Yeah. So what, yeah, so what I'm [00:37:00] hearing overall is like you enjoy... I mean, it really is a huge benefit to your clients and, well, maybe not your residents who are bringing home goats, but to your clients especially where you guys do in-house maintenance, so you can make sure you're getting in there and your team's probably pretty well-trained on what to do.
'Cause even if you hadn't happened upon that, I'm assuming your maintenance guys would've alerted your team,
Kevin Patterson: Yeah. They-- My maintenance guys would've, would've definitely called in. And the other thing, good thing about the maintenance side is we're-- we keep a very... everything's fully disclosed. Our price per hour is fully disclosed. It is what it is. We don't do a markup on materials. So whatever the markup, whatever the material costs, what it is.
We make, we make our money in there but it's, it's strictly off the hourly. We don't make our money on top of material costs,
Stacey Salyer: Okay. Okay. Well, yeah, so it sounds like you've built pretty good business. You're still working on acquiring. And I know before we end this, I'd love to kinda talk a little bit more about maybe what you presented at PM Systems. So you were at [00:38:00] PM Systems in January. I know I got to sit in on your presentation.
I actually had my, well, now 20-year-old with me, and he was actually engaged. I think he even asked you a question afterward, which is always amazing when the kids actually listen. 'Cause you run your office as, well, a little bit different, I think, than probably the average PMC owner. You a lot about mindset and health, so if you'd like to share with everyone kind of
Kevin Patterson: Yeah, no, absolutely. So, so every year one of the things I do every year is we give a gift to my employees. Every year, my gift is health and fitness related. Now, does that mean they're gonna go do it? No. But I encourage them. We've also offered gym memberships things of that nature, but we give them things of such as bands.
I mean, I give them an entire This last year I gave them entire gym bags with everything in it from a, from a towel to bands to gloves, water bottles shaker cups, things of that nature. When we do buy food for the offices, it's always healthy food. I [00:39:00] encourage them to every time they eat, take a walk, 10 minutes, right?
If they, if they don't wanna go out and walk 'cause it's too hot or the weather is crappy, guess what? They all have, every single person in the office has a set of bands. So do some bands, do some calisthenics, sit in your chair, do some arm stuff, right? just to kinda keep your body to move.
Because I'll say this, of the things I was talking about at Systems was just the health and fitness of not only you as the broker, but your employees, right? I mean, one of the things we battle is if your employees get sick and they're a key employee, what happens?
I mean, then you're left doing all the work, not that everyone's not entitled to their sick time, because we all get sick no matter how healthy we are, and not that everyone's not entitled to their vacation time, but when it's planned, for the most part, you can work around it. When it's unplanned, it kinda came from the fact that a few years back I'm personally into health and fitness a lot due to some health challenges that I've personally had, and then I've started to see two of my employees, one of them had a, stroke during COVID.
Stacey Salyer: Hmm.
Kevin Patterson: and I learned right away, it was a key employee, [00:40:00] right? And I learned right away like, wow, what do I do? Because we had to scramble. We didn't have a two-day notice. We literally had a phone call, "So and so had a stroke, and she may not ever come back," so I'm like, but in the state of California, I can't fire her 'cause she went out on, out on medical leave.
So I gotta keep this position open. I'm a small company. When it, when, really, when it's, when it's said and done right, property management, we don't run on a huge margins, especially not in California with no ancillary fees. And I gotta hire another property manager to take her place for Whatever timeframe, she is gone because she's allotted, a long time in the state of California where I have to give her back her job.
Thankfully, she's made a full recovery. Her replacement, we did wind up moving her replacement on. But when you're looking for somebody to come and take over as a property manager, first of all, it's very difficult to find a quality property manager. Second of all, it's even more difficult to hire somebody and then know [00:41:00] that you're probably gonna have to let them go at some point if that employee does come back.
Just the rules, it's just the rules of the game, right? Either that or you hope to acquire enough doors, in which, in our case, it's about 100 and-- I think right now it's about 118 or 119 doors that a property manager has to have underneath them just to absolute, like absolute, absolute break even on just their payroll.
Stacey Salyer: Okay
Kevin Patterson: you an idea, I mean, our property managers make well above $70,000 a year plus full benefits,
Stacey Salyer: Right
Kevin Patterson: Minimum, and a car. So when you take into everything into consideration, car, gas, medical benefits, and then 401, they're well into the six figures, right?
Stacey Salyer: so have you had any success stories, like any of your employees like
Kevin Patterson: Yeah. No, actually I have. I, I'll ask for permission to share, but one of my employees, when I was in California, she just told me she was down 30 pounds this year so far. And then another one of my employees who's actually one of my-- He's [00:42:00] my maintenance coordinator.
He-- Last year, well, at the beginning of the year, I he asked to come for some help. Put him on a program, and he went from I wanna say it was like... Actually, I can look at it real quick. It Cause I want to give you the actual facts
he just did a nice Facebook post, a before and after. four photos and, and is where he started part of his journey and then where he's at right now. I think he said he lost like 42 pounds, and that's k- I was kinda trying to get the exact number, but I wanna say it was like 42 pounds.
Yeah, and he's 50 years old, so, all, all my employees are older than me. I don't have one employee,
Stacey Salyer: Okay.
Kevin Patterson: that are younger than me. But for the most part, all my employees are older. So one of the things is, he took the program that we put him on. He asked for it. I, it wasn't nothing that, you know...
I let all my employees know "Hey, I'm here if you want help.
Stacey Salyer: Mm-hmm.
Kevin Patterson: you don't, I'm not gonna shove it down your throat. However, I am gonna give you guys all the tools you need," right? " I'm gonna offer you the tools that you need. If you wanna take advantage of it, take advantage of it. I encourage it, [00:43:00] but you don't have to."
So, but yeah, he's shredded to the bone. He's down to I think like 180, 185, and he's 6'2", 6'3". he took a really good picture of like his shirt off, and it was impressive. I was actually like, I was like, "Whoa, dude, you did a great job," right? And, and it's things like that that just really, helps me and encourages me to keep going in the direction I wanna go. Because there are times, like I'm, there's days where I'm like, "I'm just gonna sell my company. I'm done with this," right? And we all have those days, especially as property managers where we just get tired or something happens and it's just we, we reflect on is it really worth it?
But then when I see my employees taking advantage of just not only changing their lives from a financial aspect, but also changing their lives from a, like a health and fitness aspect, like in my opinion, I think as a boss or as a, team member or a leader, like that's what it's about.
Stacey Salyer: Yeah, absolutely. Yeah, I love that. That's cool. I think we need to talk more about that in the industry. [00:44:00] Maybe you can get on some stages
Kevin Patterson: Yeah, and, and it's hard, because a lot of people don't want to face the fact, right? our biggest enemy is ourself. We look in the mirror, that's, the one that lies to us the most, and we all have these huge, lofty goals, and another thing like you and I talked about is I actually have to make my goals every eight hours.
So I have three goals a day,
Stacey Salyer: Three goals a day. Okay
Kevin Patterson: it's the only way for someone like me who I don't have to win all of them, but I do wanna win a majority of them. So in other words, I wanna win two goals every single day. If I lose one goal, I'm still batting 600, 700, right? And, and I'm still winning.
I'm still above. And so I think that like a lot of times as just individuals and humans, we just create these big goals, and we, we put them out long enough that we can make excuses every single day and think that we're gonna have time to reach those goals. But the reality is we actually never, ever reach those goals.
But if we make... it's like taking small bites out of a big bowl, right?
Stacey Salyer: Yeah. No, I like that. Yeah, three goals a day. That's very [00:45:00] attainable. 'Cause you're right, a lot of people will do their yearly goal, I even say, break it down by quarter or month, but
Kevin Patterson: No, they do it all the time. And, and, and I try to tell, I explain it even when I'm coaching people, it's like, no, break down every eight hours. And if, and sometimes, depending on what you're trying to do, if it's an eight-hour workday, if you're talking to an employee and having them break it down to eight hours "No, no, we're gonna break it down every 15 minutes."
One of my buddies, Steve Rosenberg was at one of his classes years ago, and one of the things that I got from him was once a year, analyze every single employee break them down every 15 minutes as to like what they're doing to help, figure out their time management, right?
And if you do that for five days in a row, you will see where you can gain them time back, right? Because ultimately, we all have the same 24 hours in a day, and it's within those... Yeah, it's within those eight hours that you work and that you wanna get the most out of your, out of your employees.
And you want the employees to get the most out of their work, right? So they're not feeling like they're drowning all the time. And so I've kinda picked that up, [00:46:00] and it's been a very useful tool to find out even for myself, like my phone, and I think probably all of our phones nowadays, my phone every week gives me a weekly update, and it's like, "You spent one hour and 10 minutes longer this week than you did last week," "and this is what you spent your time on," and it's all social media, right? And you're like,
Stacey Salyer: Yeah, I like to ignore those messages
Kevin Patterson: Yeah, exactly. Exactly. It's, it's like, it's like the honest truth, right? And, and nobody wants to real- you know, look back and be like, "Damn it, I spent 14 hours this week on Instagram or,
Stacey Salyer: but I was doing my marketing. There goes the excuse, right? Human excuse. cool. Yeah. No, I like that. That's cool. Well, before we wrap up do you have any quick words of advice for anybody that's looking to buy a PMC? Just maybe quick
Kevin Patterson: And I think, the advice I would have is, follow your, follow your dreams, follow your gut. But also be very cognizant as to like where, where you're buying and what you're buying. As somebody that takes on [00:47:00] challenges in life, they've cost me a little bit, but I've kept them long enough that it's, it's rewarded me back.
But sometimes they do cost you. They cost you because you do get a little bit like, "I'm gonna do this," but I didn't follow through everything that I knew I should have done because I was more concerned with getting the deal closed. And I was excited. Sometimes that excitement
Stacey Salyer: can cloud,
Kevin Patterson: make bad decisions.
Stacey Salyer: yeah, cloud the
Kevin Patterson: And so
Stacey Salyer: cool
Kevin Patterson: be, that'd be my only advice is just know what you're buying and
Stacey Salyer: Yeah. Yeah. That's good advice. All right. Well, thanks for coming on the show. Really appreciated it. Thanks for sharing everything. We'll put all your contact info in the show notes, but I know you also do coaching. Is
Kevin Patterson: Yeah.
Stacey Salyer: Coaching. Speaking. So-
Kevin Patterson: speaking. Yeah
Stacey Salyer: so if you would like to work with Kevin or want him to speak on your stage, his contact
Kevin Patterson: Yeah, give me a call.
Stacey Salyer: All right.
Kevin Patterson: All right. Thank you, Stacey.
Stacey Salyer: All right. See ya.
Outro: Thanks for listening to the Stacey Salyer show. Here's the deal. You can read about [00:48:00] acquisitions anywhere, but you can't learn acquisitions from someone who's done it the way I have as a buyer, a seller, and from the corporate side evaluating hundreds of companies. That's why I need you to subscribe and share this with someone in your network who needs to hear it.
And if this episode landed, leave a five star review. It's how more PM owners find the only acquisition expertise in the space that comes from all sides of the table. And while you're at it, grab my Acquisition Readiness checklist on my website at staceysalyer.com. Then when you're ready to move from Growth Thinking to Growth Building, explore the Built to Acquire program.
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