Tony caught the real estate bug at a young age, he started investing in multifamily buildings while working full time at a software company. Now he’s the head and founder of a large (2000+ doors UM) property management company in Canada. He likes to take a more broad approach to managing properties, branching into more revenue streams with more services offered than your typical company. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“By having additional services, you can make your management company stronger” – Tony LeBlanc
Tony LeBlanc Real Estate Background:
- Entrepreneur and owner/manager of Ground Floor Property Management, one of the largest property management companies on Canada’s East Coast
- Author of The Doorpreneur: Property Management Beyond the Rent Roll
- Speaks to investors about why you should be cultivating rich and engaged partnerships with your property managers
- Based in New Brunswick, Canada
- Say hi to him at https://doorpreneur.com/
The Best Ever Conference is approaching quickly and you could earn your ticket for free.
Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.
Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.
Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of the fluffy stuff, what to stay. Tony LeBlanc, how are you doing, Tony?
Tony LeBlanc: I am doing great, Joe. Thanks for having me.
Joe Fairless: Well, I’m glad to hear that and my pleasure. A little bit about Tony – he’s an entrepreneur and owner-manager of Ground Floor Property Management, one of the largest property management companies on Canada’s East Coast. Author of Doorpreneur: Property Management Beyond the Rent Roll. With that being said, Tony, do you want to give the Best Ever listeners a little bit more about your background and your current focus?
Tony LeBlanc: Absolutely. So I come from a property management background, second generation. My mother managed the world of multifamily throughout her 35-year career. I was fortunate enough to have a place in that, early on in life, where I used to help her in the building that we lived in. We were resident managers, so I did a lot of the cleaning and various other activities to help her out. So I was very fortunate that I got the real estate bug actually quite early. Learning from the owners of her company put that in my mind as I went into college, although real estate and property management wasn’t my first career – I did a 15-year stint as a software engineer at IBM.
Luckily enough, early in that career I started investing in multifamily, quite young. I bought my first building when I was 23; I bought a triplex. I continued to invest, and then about 10 years later the traveling at IBM started to become problematic for the family situation… So I went back to my roots and started my own management company. Fast forward 10 years, we now have an amazing property management company that spans three provinces here in Atlantic Canada, with close to 2,000 doors that we currently take care of.
From that portfolio, we’ve been able to spin off around six other service businesses that complement the management business. I’ve taken that, what we’ve done, and put it into a book, The Doorpreneur, where I hope to provide some context and perhaps some new visions for other property managers out there that are looking to grow beyond just adding doors.
Joe Fairless: Yes, let’s talk about that. What are the six lines of business?
Tony LeBlanc: We currently have landscaping, snow removal, residential cleaning, commercial cleaning, mortgage sales, and we’re looking at two others – appliance repair and roofing.
Joe Fairless: Okay, and… I type as quick as I can while trying to be quiet, so that the Best Ever listeners don’t get annoyed by my quiet keyboard that I’ve purchased, because it was annoying before. So I wasn’t able to get all that. So landscaping, snow removal, mortgage sales, appliance repair, roofing… What else?
Tony LeBlanc: Commercial cleaning and residential cleaning, and the most important – maintenance services, handyman services. That was by far our biggest opportunity and our biggest workload for sure.
Joe Fairless: Okay. You said you’re looking into appliance repair and roofing. So does that mean we shouldn’t really talk about that for this conversation, because you’re not– okay, all right. So that’s two things you’re looking into. So let’s talk about the stuff you are doing. Maintenance repair, you said that’s the biggest opportunity. Is that currently the one that makes you the most profit?
Tony LeBlanc: I would say there’s definitely a financial reward to it. There are great opportunities in that space. Probably more importantly, from the property management perspective, is having control over that maintenance from a quality coordination, and all that, to be able to control that in-house. We’ve had the experience to where you work with different trades… When your unit count gets pretty high up, it just becomes more efficient to have your own staff take care of those things.
Joe Fairless: Absolutely. That makes a lot of sense. From a profitability standpoint – just to make sure I’m understanding correctly – out of those six, does maintenance services generate the most profit?
Tony LeBlanc: Yes.
Joe Fairless: Okay. How does it stack up against your profit from managing the 2,000 or so doors?
Tony LeBlanc: I’d say, probably from a margin perspective, maintenance is a little bit lower. I would say the management side is a bit higher. But 2019 has been an interesting year that our maintenance division has actually grown bigger than our management company. That’s really when we knew we had something really cool that we want to share and put it out there, because a lot of property managers and even investors– it’s all about door count, door count, door count, and just “How can I accumulate more doors?”, when the reality is, from a property management perspective, there is a ton of things that you can do with one door before you go searching for door number two. We’ve done a lot of work in that and try to extract everything that we can with a single door before we start moving on.
Joe Fairless: When you say bigger than the management–
Tony LeBlanc: Revenue, general revenues.
Joe Fairless: Revenue, okay. So maintenance services has more revenue, but lower margins than management. It makes a lot of sense. I’ve never had my own property management company, but I’m thinking about if I did, the challenge I would have with having these other services is, I’d say, “Tony, there’s a lot of opportunity, you’re right, but I want to focus on what I’m good at, and that’s managing properties. And I want to hire the experts who are trained in the other areas.” So what’s your response to that?
Tony LeBlanc: I also had that mentality, probably for the first five years of running our management company, where we weren’t so much into the other things. But what I’ve learned over the last five years is – the second half of our company – is that by having these internal services, they’ve actually made our property management company ten times stronger, better and more profitable, because of the life cycle and the relationships that we’re able to build with our investors, and the reusability of the staff within the environment.
So property management, and I’m sure you can attest to, is a difficult industry; tough things about it. And growing in door count, continuously striving for more doors, more doors and more doors, and worrying about a churn rate – the amount of doors that are going out and you’ve gotta replace every year… By having additional services, in my opinion, you can make your management company stronger, and your churn rate is going to go down because you’re not having to go after as many properties… Because essentially, you don’t have to continuously grow in door count when you’re building the other businesses.
Joe Fairless: Well, does the churn rate go down or does it just become not as relevant?
Tony LeBlanc: It becomes not as relevant, and essentially, it has gone down tremendously.
Joe Fairless: Okay. Why do you have a lower churn rate by having these services?
Tony LeBlanc: Because you’re attracting a better quality owner and investor and partner. I’d say, over the last two years, that the quality of people that are with us now are much different than probably, seven or eight years ago. Now we’re working with investors that are financially okay, we’re dealing less with accidental landlords that are coming into situations where they really can’t do a whole lot with a property when situations may or may not come up… And we’ve been able to connect with different investors and entrepreneurs that have that mindset. They love what we’re doing, and they want to be part of it. It’s worked out really well.
Joe Fairless: I’d love to hear that for your business. I guess the question I have is, “How does having a higher quality of investors relate to having different lines of business?” It seems like that could be more just the result of you all being more intentional about who you bring on, and the evolution of your company getting more established… But help me understand that connection.
Tony LeBlanc: Quality of service is a big one and also costs. We’re lucky we’re being put in a position, or we are in a position to where, I would say, 99.9% of the time we can do things at a lower cost than outside trades. Oftentimes, we believe that we can do it much more efficiently and better, just because we have more control, everything. So probably the biggest bonus or benefit to our owners is from a cost perspective. We give them amazing deals. Now, the beauty about what we’ve done here is it’s important to note that these service companies – they handle our internal portfolio, but they’re also outside, facing businesses as well. So there’s a lot of clients from the outside. So our own internal portfolios are obviously priorities, and the pricing is pretty phenomenal. So we built it out intentionally.
Joe Fairless: So now let’s pretend that you have to remove one of your lines of business. Which one do you remove and why?
Tony LeBlanc: Landscaping. Landscaping – you’ve seen that over the years, it’s kind of a low-hanging-fruit type product. It’s very labor intensive, there’s a lot of overhead involved, and the margins are very, very small. Initially, we got into it because we weren’t happy with a lot of the vendors that we were working with, constant babysitting… So we ventured out into that market. We’ve done a great job, and it continues to provide some dividends for us, but it’s a lot of work.
Joe Fairless: Almost a loss leader.
Tony LeBlanc: Yeah, definitely. We do a lot of landscaping in order to get snow contracts. We love doing year-to-year type engagements to where we take care of everything, indoors and outdoors, for a client, whether if it’s our properties or outside.
Joe Fairless: Why is it that snow removal — because I’ve heard this from every landscaper I’ve spoken to, in places that have snow. They’re like, “I want to get into snow removal, much better margins.” So why is it that snow removal has better margins than cutting grass and planting flowers?
Tony LeBlanc: A lot of times it’s because of the big gear involved, the immediacy of the service. So when it snows, or if it’s ice out, you need somebody there now. It’s not something that can wait. On the snow removal side, the gear is incredibly expensive when you start talking about tractors, loaders, and all this other type of stuff… And one of the most important things is liability aspects. If you got an ice storm and your parking lot is full of ice, or your front walkways of your apartments or your houses are a mess, you’re setting yourself in danger, a lot of risk. So risk-reward in that type of environment — salting is definitely an area to where the margins in it are incredible. Snow removal, there’s a lot of risk in it as well. It’s all dependent on mother nature. We’ve had years where we’ve won tremendously, and we’ve had years where we were ready to pack it up. We were like, “I can’t go through another winter like that.” Or it just snows 30 centimeters every two weeks, and you just can’t get ahead.
Joe Fairless: Well, isn’t that a good thing, because that’s just a lot of business?
Tony LeBlanc: No, not when you have set contracts, set price.
Joe Fairless: Oh, there’s the rub…
Tony LeBlanc: There are some people that go out and they’ll charge an hourly rate for snow removal, but from a client perspective, they find that that’s too much of a risk. So a lot of them will go with fixed contracts. Regardless of how much snow falls – it could be next to none, or we could have a brutal winter, and just crush any snow operator. So you’ve gotta be really careful.
Joe Fairless: I love talking about this. You’ve got all these different lines of business and they’re all related, and it’s really interesting to talk about.
Tony LeBlanc: One of the points you made a while ago, how it rolls back up to the real estate investor – I want to make sure it’s clear that creating these additional businesses and lines of business doesn’t necessarily take our focus away from property management, because we know the game is getting access to the asset, controlling the asset, and then you have options. So without the management component of all this, all of this goes away to nothing.
So we’ve really put a focus to where our management is obviously number one, and then the other businesses that we’re bringing on board, once they’ve [unintelligible [00:13:19].04] a proper point person, a manager is put in charge to run that operation as if it’s its own little business.
Joe Fairless: So with close to 2000 doors, you’ve seen some things, and your team has seen some things, and there have been bad stuff and some great stuff, I’m sure… So let’s talk about a landlord that you worked with that no longer works with you, because they don’t like your company anymore and they went to a competitor. Tell us a story about when that happened.
Tony LeBlanc: I would probably say this will happen quite often with the accidental landlords. So an example of one is somebody that has a house, either they’re getting relocated, they’ve gotta move, or they’ve run into a separation. So we’re stuck with a single family home. They’ll call us out of desperation, “I got a move and I need somebody to take care of this house because I can’t sell it.” So we come into the picture and we start managing the property.
The tenant turns over, so it comes back up for rent, and the house is a mess. It needs a new paint job, it needs this, it needs that. Oftentimes, the owners are not in a position to financially be able to do the things that we’re requesting to have done. That has caused many relationships to be broken up. Just we’re not on the same wavelength in terms of what we think is rent-ready versus what they think is rent-ready… Especially when they’ve lived in the house and it used to be their personal home – there’s a lot of personal feelings involved, and it gets a little dicey. Multifamily apartment buildings, God love them, no emotions around them, it’s just numbers; and you don’t get that same attachment as you would a single family home. So that’s been a popular one.
Joe Fairless: That makes a lot of sense. It’s a black hole if you allow a new resident to live in there without it being rent-ready, according to you all… Because then they’re not going to be as qualified, and then you have to evict them, and then it’s a downward spiral; that’s what I should have said – not a black hole, but a downward spiral.
Tony LeBlanc: It’s a reputation thing. Nowadays with social media, if I don’t provide a house or an apartment that is spotless, that has hopefully a fresh coat of paint, that maintenance-wise it’s all intact, light bulbs are all in, light switches work, things that people expect, it all comes back falling on us. They are two minutes away from going to Facebook and telling the world that company XYZ sucks, when the reality is they don’t know the challenges that we face in the back end, nor should they. So that’s why we’ve learned over the years, over a lot of painful mistakes like that, that we go through a great amount of work to choose who we’re working with now, and to make sure that those types of things don’t come into the picture.
Joe Fairless: Yeah, I like that you mentioned that. One thing that comes to mind is — I’ll talk to owners who are looking at potential properties to buy, and they’re also looking at property management companies to manage them… So they’ll go drive by a property, they’ll see that the property — and I’m talking like a 20-unit, or a 30-unit apartment building… They’ll see the apartment building looks run down, and then they’ll immediately assume that the property management company is not good. But in reality, the property management company can only do so much, because they’re handcuffed by the money that’s available from the owner. They might be in the process of firing the owner, or they might be talking to the owner like, “Hey, let’s get this money into the property.” So there’s always two sides to the story. Now, it very well could be that the owner’s giving them the money but the property management company’s dropping the ball, but it shouldn’t be an immediate assumption.
Tony LeBlanc: Yep, absolutely. And unfortunately, it is, because we’re the face of most of the properties that we’re dealing with. So nobody knows the owners; they’re in the background, and that’s how it should be. We accept full responsibility when we take over a project, and that’s the way we like it… So we just got to make sure that everybody’s in line, everybody’s got the same core principles and guidelines in how they want to run a building. Maintenance is the number one topic that you’ve gotta get out of the way and you’ve got to be on the same wavelength.
Joe Fairless: What’s something challenging you’ve come across with a landlord or tenant outside of the accidental landlord component or dynamic? Either a particular tenant was complaining about something and you’re like, “Wait, how do we solve this?”, or you all were working with the landlord on a particular deal and it just took a lot of effort on your team’s behalf, and then you turned it around… Just anything like that.
Tony LeBlanc: So this has happened to us unfortunately quite a bit in the last, I would say, two years. So we get the management of a property; everything goes well, we get the tenant, everything’s going great. Then the owner decides to put the property up for sale. Trying to sell a property with a tenant living there is a nightmare. Apartment buildings are fine, it’s definitely a lot easier. The tenant is not expecting to get kicked out.
From a residential perspective, whether it’s a single-family or a duplex, kind of a smaller type property, specifically single family, it’s very, very tough for the tenant to be able to deal with those types of situations. So constant showings, constant interruptions, and the fact that they don’t know when they’re going to be kicked out.
So that’s a very tough situation for a property manager to be in, because we want to help support the investor in selling his assets and helping them do what’s best for them, but we also have to empathize with the side of the tenant, to say “Okay, how are we going to make this situation as painless as it can be?”
Sometimes it gets a little messy, in terms of they get a get a quick sale, the tenant is on a year lease, we’re supposed to give them this amount of time to get out, but the deal has gotta close in 30 days… Then you kind of get put in that awkward — you’re doing things that you necessarily don’t want to be doing, trying to kick the tenants out. It can get a little frustrating and a little hairy at times.
Joe Fairless: What’s a tip or two for someone who comes across that scenario in their management company?
Tony LeBlanc: Well, from a property management perspective, put in a new clause in your management agreements that protects you from this situation. So if an owner decides to put his property up for sale, then he has to provide a certain amount of notice to you, so that you can provide the proper context for the tenant… And the proper lease needs to be put in place. So if I’m signing up a new owner, and he’s wishy-washy about selling in a year or two, then I’m going to protect myself in my management agreement, but I’m also going to protect the tenant in terms of a lease.
So maybe I don’t do a year-to-year, and I do maybe either a month-to-month type lease, to where I went with them and saying, “Listen, this owner has decided to rent this place right now, but that could change. So I’m telling you in advance, there’s a risk here.” Then that way, when the situation – and if it comes up – I’ve covered as many bases as I can to make everybody happy. That works out really well.
Joe Fairless: Taking a step back, based on your experience, what’s your best real estate investing advice ever?
Tony LeBlanc: Property managers and real estate investors can create epic results when partnered properly.
Joe Fairless: Well, I think everyone would agree who’s had a good experience with a property manager that is the case, and I certainly would agree. Real quick, what are two or three questions (at most) that a real estate investor should ask a potential property management company that will manage their residential one to four-unit property?
Tony LeBlanc: Staffing. What does the staffing situation look like? There are a lot of property management companies that are one-man shows. They can have a nice website, they can have a nice this, and they can have a nice that, but you want to know what the staffing situation is, and you want to know the unit count of what you’re getting into.
So if it’s a one-man show and he’s got 250 units, you better be careful… Because in this business there can be days where there’s not a whole lot going on, and then you can be completely underwater the next day. So huge, huge importance is that whole staffing aspect or ratio in terms of how many units they have.
I would also look at, from a community perspective, what is the historical picture of the company, how long they’ve been in business, and what is kind of their primary job. We see a lot of realtors doing management on the side. So it’s really a little bit of a side hustle for them. Again, some of them are absolutely amazing, but it’s just a matter of being aware and okay in that situation.
Personally, if I’m handing over a million-dollar asset to a property manager, I want to make sure that there’s a company behind this and that there’s good insurance policies in place, they’ve got an office, there’s a staff… I want to make sure that it’s something legit in the back-end, and not just, again, somebody that’s just floating around with this on the side. It’s too dangerous and too many bad things can happen quickly.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever lightning round?
Tony LeBlanc: Yeah.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Break: [00:22:20]:04] to [00:22:56]:09]
Joe Fairless: Okay, what’s the best ever resource you couldn’t live without, that you use in your business?
Tony LeBlanc: I would say our property management software.
Joe Fairless: Proprietary software?
Tony LeBlanc: Yes, it is.
Joe Fairless: So proprietary — do you license it out, too?
Tony LeBlanc: Yeah, it’s a third-party software… Buildium is what we use.
Joe Fairless: Buildium? Okay, cool.
Tony LeBlanc: Absolutely could not live without it.
Joe Fairless: Best ever way you’d like to give back to the community.
Tony LeBlanc: We do a lot of lunch and learns, or coffee dates at our buildings. It’s a way for us to be able to get to know our tenants a little bit better. In the same way, we provide these types of boxes where they can make donations. We do a lot of work with the Red Cross when there’s emergencies that come up, like fires and stuff like that. So we’re able to take stuff that tenants give back and that we can give back to the Red Cross.
Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?
Tony LeBlanc: The best place is doorpreneur.com. All my information’s there.
Joe Fairless: Tony, thank you for being on the show, talking to us about your different lines of business as well as your focus on property management, having a discussion on certain lines of business that make more money than others, where opportunity is, and maintenance services, and questions to ask and think about prior to hiring your property management company. So I hope you have a best ever day, I really enjoyed our conversation, and we’ll talk to you again soon.