Tim D'Onofrio is the owner of Allocated Assets, a CRE investment and commercial property management company that works through word of mouth. In this episode, Tim discusses his theories on why property management companies have such a bad reputation, what investors should do to properly vet property managers, and how his company succeeds despite doing no formal marketing.
Tim D'Onofrio | Real Estate Background
- Owner of Allocated Assets
- Portfolio:
- Minority stake across multiple properties
- Based in: Crown Point, IN
- Say hi to him at:
- Best Ever Book: 12 Rules for Life by Jordan Peterson
- Greatest Lesson: All education costs money. It can be a mistake, being taken advantage of, or overlooking details.
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TRANSCRIPT
Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel and I'm with today's guest, Tim Donofrio. Tim is joining us from Crown Point, Indiana. He is the owner of Allocated Assets. He specializes in commercial real estate investments and commercial property management. Tim's portfolio consists of a minority stake across multiple properties. Tim, thank you for joining us, and how are you today?
Tim Donofrio: I am fantastic, sir. How are you?
Ash Patel: Very well. And Best Ever listeners, fair disclosure - I met Tim because there was a property that we purchased in Merrillville, Indiana, and Tim is a phenomenal property manager. I wanted to get his story on here and share some of the lessons that he learned with all of you. So Tim, before we get started, can you give the Best Ever listeners a little bit more about your background, and what you're focused on now?
Tim Donofrio: Background is not related to real estate. I was a touring musician, hence all the tattoos, and long hair, and beard... I just never grew out of that. But I went from that, I started a family, and decided "I need to do something where I'm staying home", so I got into real estate, because I like to work for myself. And I started in the residential game, I quickly realized that it's a little bit more person-to-person interaction that doesn't suit me as well as maybe Excel spreadsheets and short emails that just get to the point... So commercial jumped out to me as an opportunity for me to get into that and I haven't looked back since.
Ash Patel: So you're saying it's hard to go from rockstar to residential real estate, huh?
Tim Donofrio: Yes, it really is. [laughs]
Ash Patel: Let's talk about that leap to commercial. What was it about commercial, and what was your first dipping the toes in commercial?
Tim Donofrio: Well, I was on a residential team with a young guy, younger than me, and he was very successful... He was a mutual friend for my partner that I work with now. He came in and started hanging out outside of the office, hanging out on weekends, having a couple drinks, and just talking about business and life and stuff. His name is Chris. He just started explaining to me the differences between commercial and real estate, and how they're basically not even the same thing at all... And that piqued my interest, and then he started getting into the incredible complexities of how commercial can be done. It doesn't have to be just leases and the boring stuff that is kind of similar to residential... And he and I just kind of hit it off as friends, just because he had a professional background in doing something professionally outside of real estate as well, we had similar music tastes, and we just started hanging out more and talking more about commercial real estate... And one of our mantras was "How hard could it be?" So that was how the property management company came into existence. It was like, "Well, how hard could it be? Let's just do it. Figure it out on the go."
Ash Patel: You started a property management company for commercial real estate. Do you do apartments as well?
Tim Donofrio: Yeah, we do a couple. We do some single family homes, some multifamilies... When I got into it, I specifically didn't want to get into residential... But I have a partner, Julie, she has her own rental properties, and she brought that expertise to the table; like, if you want to take them on, go ahead, but that's not me.
Ash Patel: Tim, let's talk about the differences between managing commercial and managing residential. I'll let you start.
Tim Donofrio: I think when you get into commercial, typically, depending on the type of asset you have people, sign leases and actually read them, and they kind of have an understanding of what their responsibilities are versus what yours are... And when you get into residential, people just -- it's a lease; "Hey, I'm signing the lease and I get to move in." That's kind of like the extent to which people review their leases, and then there's a lot of phone calls and emails and requests for things to be repaired that have nothing to do with the property manager or the property owner... And the headaches of having to explain people's leases get more and more difficult with residential, I would say.
Ash Patel: In terms of tenant interaction, problem solving - differences between commercial and residential; really, in terms of headaches.
Tim Donofrio: The headaches - commercial guys can be a little bit more bullish, and maybe try and bully you around to try and get what they want, even despite what the lease says, or trying to play with words to get what they want... But give me a little bit more direction. How can I hone in on the answer?
Ash Patel: Really, where I'm going is "What's more of a pain in the ass to deal with, residential or commercial tenants?"
Tim Donofrio: Oh, residential, hands down.
Ash Patel: Yeah. And the difference is we're dealing with business owners when we do commercial, we're dealing with homeowners when we do residential. We don't have showers, dogs, kids to deal with commercial. And we have people that have a vested interest in keeping their place up, and making it look nice and inviting, versus the wear and tear that residential places often endure.
Tim Donofrio: Right. It's kind of like getting a rental car, where you kind of beat the hell out of it because it's not yours.
Ash Patel: Oh, man... It brought back memories. I used to drive those [unintelligible 00:06:56.22] stolen.
Tim Donofrio: Exactly.
Ash Patel: I think that's a great example. I'm gonna use that one. So what are you doing today to acquire more business? Or you've got your own deals as well, right?
Tim Donofrio: Yeah. So the first time we met in person I gave you our little "How we do business" thing, because I think you asked me for a business card, and I said, "My partner Chris and I, we don't do business cards", and you kind of looked at me like, "You don't do it now?"
Yeah, we do quality over quantity, so we don't do as many deals as possible in a year; we just do the highest quality returns for clients as possible... And usually with that, the type of clients that we have, we mainly deal in medical spaces, and our clients are typically doctors, or in that field where they want to stick with what they know; it's a pretty tight-knit community, as you guys probably know... And when one person hears, "Oh, so and so made me X amount of dollars on this investment", trying to outdo each other in a conversation or something like that, it's like, "Oh, let me talk to him. I want to make that X amount of percentage on my money." So we do that pretty localized, but word spreads quickly, and we have more work than we can handle... So it's really kind of just focus on doing the best we can, with fewer clients more than just turning them through the meat grinder.
Ash Patel: Tim, when somebody comes up to you wanting to get commercial real estate exposure, do you also help find the deal? Or do you just manage what they have?
Tim Donofrio: Oh, absolutely, I'll find the deal. It's something I've gotten better at; it's kind of a bit of a skill, looking at your cap rates, and reading leases, and all that kind of stuff, and vetting the deal before you even waste somebody's time with putting it on their plate so they can just tell you that they don't like it for certain reasons... So absolutely, we'll search, we'll manage; one stop shop. A lot of times we're going to underwrite the deal too, before the bank even sees it, just so that process is streamlined and we can focus on the important stuff.
Ash Patel: Interesting, and I did not know that. Okay, so somebody can come to you and they just want commercial real estate exposure - they'll tell you whether it's retail, industrial or medical, or office let's say, and you will essentially scour the market and wait till that deal comes up. And then do you get an equity share of those deals, typically?
Tim Donofrio: Completely based on the circumstances. It depends on if the client wants to give up equity, or if they just want to pay me to go away. It just completely depends on the deal. But we do operate in that field. One of our things that Chris and I do very well, and specifically Chris, is get extremely creative, especially on the financing side, whether that's us getting paid or them getting paid, or everybody getting paid... So that's one of the things that helps us stand out from other people that might just do churn and burn.
Ash Patel: Yeah, and I think you hit the nail on the head with commercial real estate. When Tim and I speak about commercial real estate - correct me if I'm wrong, but we mean non-residential commercial, right? We don't mean five units or more.
Tim Donofrio: Correct.
Ash Patel: The way to win commercial real estate is just by getting creative. Creative with acquiring tenants, drafting the leases, putting deals together, getting investors on board... The more creative you could be to find solutions, the more successful that you'll be. Tim, property management companies get a horrible rep. I can't tell you how many forums that I'm on where people are like "Are there any good PM companies in this market or this market?" And the responses are typically "No, they all suck." Why is that? What's the deal with your industry, and why so many bad property managers are out there?
Tim Donofrio: If I had to take a guess, I think it's because you get the combination of broker and property manager in the same space... And it's easy money when you are just collecting checks every month. What would make a good property manager is a) they pick up the phone, or they answer emails, or timely responses to something that needs to be repaired, because usually what the interaction with a tenant is going to be. I would say that it's very easy to get complacent when the job just turns into collecting the money and dispersing the money... Versus you have to be hands-on with reading leases, renewing leases, enforcing leases... And when you have to get into the actual work, that's when people start to get a bit lazy.
But as long as you stay on top of requests coming in, or questions coming in, it's really not that hard. It's like anything else, where you've got like a laundry list of things to do around the house, and you keep putting it off, you keep putting it off, and eventually you wind up getting to it, and you're like, "Well, why didn't I just do that earlier? It took me five minutes." If you can avoid the trap of just getting complacent with just money in, money out, it's usually the easiest route.
Ash Patel: If you had to hire a property management company in Anchorage, Alaska, what are some questions you would ask to qualify them?
Tim Donofrio: Well, I'd want to know what level of service they're providing, because not all property management is created equal. Sometimes you have them completely handle the money. That means every check that gets cut, they're cutting it; every check that comes in, they're cashing it. Are they doing a full service where they're handling the books? And if so, I'd want to know what other tenants they've worked with, with an experience with handling the money, because that's very important... Because these are investments; you want to make sure your money's in good hands.
I would like to know what systems they have in place to handle complaints from tenants, or questions from tenants, and make sure that it's streamlined and make sure that they have a history of being able to execute and read leases... Just the basic fundamentals of doing it, and like I said, making sure that if the phone rings or there's an email, they're there, and they're answering and they're going to reply in a timely manner.
Ash Patel: Tim, earlier you mentioned a lot of property managers are also brokers... Ideally, should you look for one that's solely a property manager? Or is it okay to use a property manager that also has a side hustle or main hustle as a broker?
Tim Donofrio: You don't want to paint a broad stroke where it's not necessary... So it really comes down to the individual. I'm doing it, so obviously I wouldn't hold it against somebody else if they did it as well. It's just a matter of are you putting too much on your plate?
A lot of people take on projects, I'm sure you're painfully aware, that they think they have the capacity to take it on and they don't; they won't tell you that they don't, and they'll just take it on because they can't be honest with themselves. So as long as they're capable, it doesn't matter to me one way or the other.
Ash Patel: Yeah. The reason I ask that is I had a conversation yesterday with a friend of mine, and he's in the Cleveland market. And apparently, up there he says that "All the brokers up here are also investors." So when they find a deal, they'll pick over the good ones, and hand the rest off to their buddies. And then the ones that don't get picked up gets thrown on the market. And my advice was "Find a broker that has no interest in investing in their own deals." To me, all the really good brokers that I've used, they don't invest themselves. It's strictly for their clients. So that's why I asked that... What you said makes sense. You're a broker, you look for deals as well, and you manage them, so don't typecast particular people. In terms of finding deals, what are you doing to find great commercial deals?
Tim Donofrio: It's tough right now. The standard issue, like everybody else's... Maybe you find the diamond in the rough on LoopNet or Crexi or stuff like that... But really, it's communicating with other brokers. Like you said, those pocket deals are the ones they try and keep the good ones for themselves, and the good ones don't even make it to market, because - well, for obvious reasons; everybody's looking and everybody's very hungry to pick up something right now if they can get the appropriate terms and interest rates and everything. So it's about having a good network, and not just locally; you want to be able to have a network that can span - if you're based on the East Coast, trying to get into the Midwest, and vice versa. But it's really about relationships, and typically, people who know they have something good don't even want to take it to market, so they will put [unintelligible 00:15:08.17] within their network. As long as you have your finger on the pulse, you might be able to find something.
Ash Patel: What are the big mistakes that people make when they're self-managing commercial real estate?
Tim Donofrio: Self-managing, so they own the building, and they're running their own property management?
Ash Patel: Yup.
Tim Donofrio: The biggest mistake is they think it's not going to take up any time. Like, "Oh, easy money. I'm just gonna save 15k, 20k a year. I'll just pocket it and I'm just gonna collect the checks." It's really just the underestimating the work involved that comes with it, and the interactions and relationships that get developed with the tenants... Because you want to have a good relationship with the tenants, because you want them to come to you if they have questions or issues as fast as possible, because sometimes if you let this fester, they turn into something bigger, then it becomes something that wasn't your problem, now it becomes your problem.
So a lot of time investment in fielding the questions, fielding the complaints, doing the bookkeeping, the backend stuff... Don't underestimate the time involved, especially if you've never done it before; there's a learning curve to it, and you can certainly lose a lot of time trying to just get caught up to that.
Ash Patel: Tim, when somebody brings a property or a portfolio to you, do you qualify the client? And if so, what questions do you ask?
Tim Donofrio: We will qualify them... The biggest things I'm going to ask - depending, like you said, if it's a property versus a portfolio. If they have a portfolio, obviously, they have a history of other buildings... But I just want to get a background of what their knowledge is already of what their expectations of my position are going to be. And once I have an understanding of what their expectations are of me, then I can explain to them what I do on a typical basis and what they can expect of me. It's less qualifying them than qualifying myself to them. Because if they have the building, then it needs to be managed, and as long as they don't expect me to come [unintelligible 00:16:55.25] We're all just doing business here.
Ash Patel: Yeah. So any property management company that just says, "Yeah, we'll manage it", without asking questions, I would be fearful.
Tim Donofrio: Right.
Ash Patel: You want to make sure you set expectations, and that the client doesn't have crazy high expectations of what you should be doing and you don't typically do.
Tim Donofrio: Right. I'll give them options, too. It's kind of like service package options. We can do full service, where we handle all the funds, we can just handle bringing the money in, you can handle the money out, we can be putting new tenants in, you can have your own broker you want to do... It's kind of just like an a la carte situation, where we tell them what we will provide... And it kind of eliminates too many questions needing to be asked on my end outside of just what expectations they have for me. But like I said, I'm kind of giving them the expectations for me.
Ash Patel: Can we walk through that fee structure? So what do your services start at?
Tim Donofrio: On a full service, we'll do 5% of gross on a building. If we're doing something where I'll collect the money and deposit it into your account, but I'm not writing any checks for you, but I'm still doing full service as far as tending the grounds and managing leases, that can be about 4%. It's gonna be some variation of that; we're probably not gonna go too far beneath 4%, depending on what they're grossing, per month.
Ash Patel: And Tim, to clarify - when you say 4% percent, it's I can basically buy a property, hand it off to you, and just get, let's say, monthly reports. I don't have to worry about financials, writing checks, getting tenants to fill vacancies, interacting with tenants, fielding any calls at all. Is that correct?
Tim Donofrio: 5% basically means you don't exist to anyone outside of me. No one's gonna know you're the building owner, no one's gonna be contacting you about their problems. You're not gonna hear about any problems, unless maybe it's an insurance claim you have to make. For example, another building I manage - there was a tornado in the area, and it blew over all of the A/C rooftop units. And only two of them miraculously were damaged to the point where they couldn't be repaired... But the owner didn't even need to know about it. So it was like, "Hey, this is an insurance claim [unintelligible 00:19:04.24] Because the whole point of having a property manager in my opinion is -- what am I paying you for if I have to deal with all these headaches? I'm paying you to pay for the headaches.
So I try to make sure that the property owner has little to no hands-on requirements, unless they want to. That's part of that conversation, is what do you want to know and what don't you want to know? Do you just want to see your bank account going up every month? Or do you want to know there's a repair that needed to be done that you weren't aware of?
Ash Patel: Or if Karen's complaining about her neighbors.
Tim Donofrio: Yes, exactly. [laughs]
Ash Patel: Is 5% for multifamily as well, and is that typical?
Tim Donofrio: It depends on how many units we're talking about. Again, I never really dove into the multifamily too much. That's kind of why I brought my partner Julianne to do that, because she had experience and she wanted to do it. So I let her dictate based off of - if it's a single family home, again, if it's a multi-unit single-family home, because you can get maybe three or four units out of a larger home... Or if it's an apartment complex... It's completely negotiable based on the requirements on our end, and it's a ratio between what are our requirements and what are the owner's requirements. So I like to be fluid with that stuff.
Ash Patel: Yeah. That makes sense, because I don't want to manage anybody's single family houses for 5%. [laughter]
Tim Donofrio: Yeah, that's gonna change drastically.
Ash Patel: Tim, do you remotely manage properties as well? Ones that are far from where you're located.
Tim Donofrio: I have not done that. Not yet. No. It's been something that's been on my radar, and I want to be prepared for it if that opportunity presents itself, but not yet.
Ash Patel: What do you think the biggest challenge would be?
Tim Donofrio: It's so easy to be out of the loop, even when you're down the street from the property. So if you are a plane ride away versus a car right away, you need to have boots on the ground. For example, someone's saying "This common area item --" Let's just say there's a common area bathroom, and someone saying there's something wrong with the bathroom, there's something wrong with the toilet. Okay, I either have to have boots on the ground there, or I have to go check and look at it myself to make sure they know what they're talking about... Because most of the time -- what do they know? They don't remember anything. They're just saying that is broken; it's not like they know what they're talking about. So not being boots on the ground, seeing things for yourself, and then having to waste time, money or resources to get somebody out there to look at something that didn't need to be looked at.
Break: [00:21:28.21]
Ash Patel: Advice that I would offer is on your current properties maybe start keeping a log of anytime you or Julie has to go on site; and if at all possible, avoid it. I went through this during COVID; we kind of moved to a summer home that's an hour away from here, and I didn't want to go to any my properties when people called, so I put systems in place. I used my super-user tenants; I'd call them. If you have that one badass tenant that is your eyes and ears, and will let you know when the weeds have to be sprayed, or the snow removal people didn't show up yet, or didn't do a good job... So I started doing that, really out of laziness and necessity, because I wouldn't have to drive an hour, hour and a half to a property.
So I wonder if keeping that log and questioning yourself each time you have to go on site "Do I really have to go, or can I get a local handyman?" Look, I've done that, too. As a matter of fact, I had a three-story downspout pipe; tenant called, and this place is only 10 minutes from my house. Three-story office building, tenant called, downspout pipe was laying on the driveway... So I'm like "Okay--" The old me would have gotten the ladder out and got up there and spent half a day or two days even trying to fix that, watching YouTube videos. But this time, I got on to my local real estate Facebook group forum and I said "Does anybody have somebody that could fix this downspout?" I actually had a tenant send me a picture of it... And right away, two people from my network are like "Call my guy. He's awesome." And before that, I called my commercial roofer that I've used for a long time, and they wanted $3,000 to fix that. And these apartment people that have people on staff and said "Use my guy", they got it done for $200.
So I would challenge you... I know you can do it [00:24:30.07]remotely managing properties, but just start by pretending your local properties are remote. See how that goes. Tim, I want to educate our Best Ever listeners a little bit... Let's talk about some of the language or the customary things to managing commercial tenants. So one, everyone thinks of triple net when they think commercial real estate or retail. Everybody wants that mailbox money. Now, triple net isn't what it's all cracked up to be, unless it's a McDonald's that's true triple net. Can you share with us what is involved with managing a triple net property?
Tim Donofrio: Well, a triple net property is essentially easier than gross, depending on how much you care about your building. Do you want me to explain just for the listeners who maybe don't know anything at all what triple net is?
Ash Patel: Let's dive into it. Let's start from the top.
Tim Donofrio: Yeah, triple net is basically full service, where they're going to be paying the triple net fee for common area maintenance, assuming that there is common area, but it usually does just cover your snow removal, lawn care, but they also are paying for your taxes and insurance; this three components: CAM, insurance and property taxes. And they pay extra on top of their already existing rent based on the square footage and what the expenses are. And that one's generally pretty easy to deal with, because they're responsible for the repairs that are done inside their unit, depending if they read their lease and understand their lease, and don't bother you with that light bulb needing to be repaired... Which still to this day is something I struggle with. But that's going to be an easier task than your gross leases, where they pay a flat rate, and they can complain to you up and down all day that something needs to be repaired, and it's up to you if you've been that worthy, but you're not obligated to go fix it... And again, that's more on a building owner's decision than it is for, say, like a property manager. There's a budget. And then there's the absolute triple net, where they do everything; they take care of every single thing, and that's real mailbox money, and you don't have to worry about just about anything.
Ash Patel: And that's essentially you getting 5%, and I never have to hear from you.
Tim Donofrio: Yeah.
Ash Patel: But I think it's important to dispel those myths, where not all triple nets are created equal. They're not all mailbox money. And what you said was absolute triple net. And those are the ones where HVAC can go out, building can catch on fire, whatever - they're responsible for everything. That's truly the mailbox money. But those other nuances, where you still get the call, "My HVAC is out, this light that I can't reach is out" - the devil's in the detail of the leases. Sometimes you maybe as the property manager are responsible for fixing things, but you bill it back to them, or amortize it over a certain amount of time. And you've probably seen endless nuances on how to handle these things and all the leases that you've looked over.
Tim Donofrio: Yeah. And to your point, a lot of times it's just communicating upfront about each other's expectations. So unless it's, as you said, in the lease, detailed, and it says specifically that I have to get everything fixed, and then it's their responsibility to pay for it, then I send them the invoice. If it's not in the lease, then we'll just have that conversation upfront.
A lot of the times a lot of leases I've dealt with it's not specifically itemized in the lease... So I'll just have a conversation with and be like, "Listen, do you want it fixed? Just call somebody up? Here's a list of our vendors, depending on what the problem is. If there's ever a problem with the plumbing, call this guy. If there's ever a problem with HVAC, call this guy and just get it fixed." If it's our responsibility to pay for it based on what they say the problem is, we will pay for it. If it's your responsibility, you're agreeing upfront, you're not going to complain that it's something you have to pay for. Like with HVAC. Maybe it's a thermostat that's not working, and that's on them. If it's the furnace itself - yeah, we have to make sure that's in working order. So the devil is in the details. But if you want it fixed, just get them out and we'll figure it, we'll parse through it later.
Ash Patel: Yeah, a lot of our leases - our HVAC repairs are tenants' responsibility. Replacements are ours. So that's also a tough one, because they'll call somebody out and they'll say "Oh, it's got to be replaced. You call somebody out. It's like, come on; like, 700 bucks and you can get this thing working for several more years." So yeah, each lease is completely different. What are some of the craziest nuances you've seen in a lease?
Tim Donofrio: Man, that's a tall order off the top of my head. What is the craziest nuance I've ever seen in a lease? I'm kind of drawn a blank, to be honest with you, [unintelligible 00:29:05.15] Let me maybe marinate on that and then I'll get back to you with a good answer. What about you? What have you seen?
Ash Patel: The first time I saw a sight line provision, it was a Dollar Tree. And basically, you take their footprint and you drag it out across a giant parking lot to the main road - nothing could impede that sight line, the view from the road to the actual Dollar Tree. And that was a challenge, because it cut through the center of this huge parking lot that would have been ideal to have a Starbucks or Chipotle... And that was one little paragraph in a 60-page lease. And actually, we didn't catch that, until we had a coffee company wanting part of the parking lot. So it was our title company who read through all the leases and the attorneys that read through all the leases, and they said, "Hey, guys, just so you know, you have a sightline provision here. So if you sell it to this person, make sure they're off to the side." And we're like, "Oh my God. I don't know why we didn't catch that." But now we look for that.
Tim Donofrio: Yeah.
Ash Patel: They've also had competition clauses where they can't have any other discount store. Well, wait a minute, what's a discount store? Have the retailers out there now are discount --
Tim Donofrio: It could be Walmart.
Ash Patel: Yeah, they're discount retailers. I don't know, man, crazy things like that. I know Starbucks - they used to sign 10-year leases, and now they do a five-year kicker, where they have the option of getting out in year five. And it's only the savvy landlords or property managers that are like, "Okay, guys, we know this trick. Here's the deal. We'll give you the five year out, but it's going to cost you two years of rent, or one year of rent. You're paying $100,000 to get out of this lease." That's why I love commercial, because there's no playbook written on this stuff. Apartments, single families, mobile home parks, there's bootcamps, there's masterminds, there's entire books and courses written on that asset class. With commercial, every deal is so different.
Tim Donofrio: Have you spent any time doing transactional residential real estate at all?
Ash Patel: I've gotten my ass kicked every time I've done residential. For the most part. I've bought apartments, mixed use... The problem is, I fall for every sob story. If somebody can't pay their rent, first, it's probably several weeks before they even hear from me. And then it's like, "Oh, okay, I'm working on this. I'll have it to you next week." "Awesome. Thank you. I hope you're well. Anything I could do for you." And then a couple more weeks go by, and it's another sob story... I'm like, "Alright, cool, man. Just let me know when you got it." And next thing you know, we're six months behind, and I just got screwed.
Tim Donofrio: Yeah. To the point, that is so inside the box thinking that you have to do. It's like, "Here's the box, make it work inside the box." That's from the lending side, that's the title side, it's from actually the whole residential side... And it gets so boring and tedious. I kind of liken it to if you're a cartoon artist that has to [unintelligible 00:32:12.09] or a tattoo artist that's just doing tracing, versus someone who gets the freehand or do their own designs. It's kind of like liberating to be able to create your own lines that you operate within. You don't have to fit inside the box.
Ash Patel: You're right. For example, you take a vacancy - do you slice it in half? Or in thirds? What's the easiest way to rent it out? Is it too big to find a single tenant for 30,000 square feet? So there's a lot of moving pieces.
Tim Donofrio: Yeah. The answer is always yes. It's just how much does it cost.
Ash Patel: Yeah. Awesome. Tim, what is your best real estate investing advice ever?
Tim Donofrio: If it sounds too good to be true, most likely it is, but you have to find somebody that you trust. The same thing as having an accountant or a bookkeeper; you have to have somebody that you can trust to be putting you in the best position possible... Because it's so easy for somebody to take advantage of your money if you give them too much trust. They are looking out for themselves and not looking out for you. So it's very much like if you won the lottery, and someone says "I can take care of your money for you." And if you don't keep an eye on your books, and you aren't educated yourself, at least to the point where you can catch both -- if you can't sniff it out, then you're not going to catch it, and you need to be watching your own back no matter how much you trust the other guy. So I would say get educated yourself as much as you can without being the guy that is capable taking down the deal yourself.
Ash Patel: Yeah. Great advice. Tim, are you ready for the Best Ever Lightning Round?
Tim Donofrio: Let's go. I'm ready.
Ash Patel: Alright, Tim, what's the Best Ever book you've recently read?
Tim Donofrio: I'm gonna do 12 Rules for Life by Jordan Peterson.
Ash Patel: What was your big takeaway from that book?
Tim Donofrio: Oh, man... Just clean your room. Stand up with your chest out, taking absolute responsibility for everything that you do, and educating yourself in all aspects of life. It comes down to that personal responsibility things. If you're going to do something, make sure you're educated enough that you can do it without being taken advantage of.
Ash Patel: Help me understand something - as an effective and successful property manager, you have to be meticulous, attention to detail... Are you a type A personality?
Tim Donofrio: I like to think so. I'd say [unintelligible 00:34:24.07] I'm going to say yes to that. I'd there's probably an exception or two, or you might catch me have a trait that is not uptight A... But yeah, I think so. Plus I have OCD. I'm diagnosed OCD, just--
Ash Patel: I love it. Okay, so if you walk into your property manager's office and it looks like my desk, run.
Tim Donofrio: Is your desk bad?
Ash Patel: Oh, God... It's embarrassing. Yeah.
Tim Donofrio: It's a blessing and a curse.
Ash Patel: Yeah, it is. Okay, so that makes sense. OCD, attention to detail is a must for you and your business.
Tim Donofrio: Yeah. One of the biggest things is reading leases and understanding leases. It needs more attention to detail than your leases or purchase agreements.
Ash Patel: Yeah. And I can't tell you how many times we've skimmed over leases and got caught on something; maybe a personal guarantee was taken out during one of the back and forth revisions... And it's cost -- six-figure mistake. Alright, good to know. So Tim, what's the Best Ever way you like to give back?
Tim Donofrio: The partner we brought, in Julie, she's trying to get into the commercial game. She's kind of had the same background as me. She started off in residential and figured out it's not for her... So we get lots of calls about leases that she's reading over, questions about the leases, and [unintelligible 00:35:38.20] is done between brokers and stuff... So I do mentor her pretty heavily. But right now, it's just one. I don't want to take on more than I need to.
Ash Patel: And there's a huge difference between brokers in the residential world and the commercial world. I had a conversation a while back, and this young lady was like, "Wait a minute, you're telling me your commercial brokers don't walk through the inspection with you? They don't walk you through the financing and underwriting?" I'm like, "No, they introduce a deal and stay out of her way. You don't even want to interact with them."
Tim Donofrio: Absolutely.
Ash Patel: "Thanks for the [unintelligible 00:36:12.29] I'll take it from here."
Tim Donofrio: It's not personal. If we're talking about investments here, I'm presenting you an opportunity, and I'm going to help you along the way. But this is an opportunity, it's not your forever home. It's not super-personal like that.
Ash Patel: Yeah, no emotions. I don't care what color the kitchen is, if there is one. We're not first-time buyers where it's the biggest decision of our life. This is what we do for a living. So yeah, you're right, a lot of nuances. And Tim, how can the Best Ever listeners reach out to you?
Tim Donofrio: If they want to find me on Instagram... I don't really do too much Facebook anymore, just because I just get burned out on that. I have listings on Marketplace. I'll get on and read my messages from Marketplaces inquiring about spaces available... But Instagram, it's @timdonofrio. I'm always on there.
Ash Patel: And right now, the market that you manage properties in is Indiana...
Tim Donofrio: Yes.
Ash Patel: Anywhere else?
Tim Donofrio: Not currently. Looking to expand South, down into the [unintelligible 00:37:10.11] area. That hasn't come to fruition yet, but I'm working on it.
Ash Patel: Yeah. And overall, the Midwest - give me your thoughts on how overlooked the Midwest is by investors.
Tim Donofrio: Honestly, that's primarily where we're looking for investment opportunities, is the Midwest. I don't want to get political, but the West Coast is inhospitable, I feel, to investments; primarily California, Oregon, or whatever. And then the East Coast - same thing, with like New York, Philly, Boston... It's not impossible, but I do feel as though there's more competition, less returns; or at least a higher barrier of entry. Whereas Midwest it's a lower barrier of entry, and you're still getting, depending on the deal, depending on cap rate, all that, your returns are still great. I think it's a great spot for people to get their feet wet before they get into the big leagues of major cities.
Ash Patel: Yeah, that's a great point. Deals are accessible, tons of deals under a half a million dollars... And the returns are steady; the cash flow is always good. We don't have the boom and bust cycles that some of the places like Austin, Miami, Phoenix area has. It's always been pretty steady. Good job growth... So very overlooked. Best Ever listeners, reach out to Tim. He'll find you a deal and he'll manage it for you. Tim, again, thanks for sharing all these nuances with commercial real estate.
Tim Donofrio: Ash, I appreciate it. Thank you for having me.
Ash Patel: Awesome. Best Ever listeners, thank you for joining us. If you enjoyed this episode, please leave us a five star review. Share this podcast with someone you think can benefit from it. Also, follow, subscribe and have a Best Ever day.
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