March 8, 2022

JF2744: Raising Rent? Here’s 4 Ways to Keep Tenants Happy ft. Sia Senior

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What’s the best way to navigate raising rents with your current tenants? Sia Senior, Principal and asset manager at Arrowhead Capital, shares with us the best ways to work with tenants during rent raises to avoid turnover and sour relationships among the community.

Sian Senior | Real Estate Background

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Slocomb Reed: Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Slocomb Reed and I’m here with Sia Senior. Sia is joining us from Upper Marlboro, Maryland, one of the Maryland suburbs of DC. She is the principal and asset manager at Arrowhead Capital, which acquires multifamily assets in the mid-Atlantic and the Southeast. She is an LP on 134 units, she self-manages over 20 single-family and small multifamily units, and she has a smaller asset acquired through a JV partnership. She came to real estate investing as a high school math teacher. Sia, can you start us off with a little bit more of your background and what you’re currently focused on?

Sia Senior: Sure. Thanks for having me. I really appreciate it, Slocomb. As you said, I am a former high school math teacher. I started in real estate in 2003, with the encouragement of my husband. I did that part-time, doing real estate on the weekends in the summer. We got our first long-term rental when we decided to house-hack and move into the house we have now and rent the property that we had when we first got married. So recognizing all the benefits and the nice income that came from that, it didn’t require a lot of work, didn’t require me teaching, we continued to add properties to our portfolio. We did some flips, about eight, in the DC area and Baltimore as well, and just kept adding to our portfolio until we got ready in 2020 to start scaling up and adding multifamily.

So we joined some communities to get a better understanding and education on that, did some networking, and connected with people to be able to take down a 16-unit at the end of 2021. Now we’re focused with Arrowhead Capital, which is our real estate investment firm, where we’re focused on adding more to the portfolio, but also connecting with passive investors and people who don’t know they can be passive investors. We’ve got an educational piece of our real estate firm that wants to inform people who may be not aware of the benefits of real estate investing and may not have the time like we do, managing our own units, that can still benefit from it. Our goal is to get people on board and educated about this, so that they can grow their generational wealth, as we are doing right now.

Slocomb Reed: Awesome. Tell me about the 16-unit that you recently acquired?

Sia Senior: Sure. It’s a 16-unit townhouse asset in Johnson City, Tennessee, connected with a couple of other partners who have found that asset through their networking, brought it to us, and we just thought it was a good asset to start with, particularly because we were really focused on really growing our wealth and connecting with people who have similar values and guidelines that we do. That worked out really well for us, because it’s a smaller unit; right now, we’re managing over 20 ourselves, so it was a great way for us to kind of test the waters and see what skills I have in managing our single-family and our four-unit, what can translate over to that 16-unit, to see how it’s different. Obviously, with 20 units plus, different buildings and that kind of stuff, it should be easier, we would hope, managing a 16-unit, or at least managing the manager. We have a third-party property manager on the 16-unit in Tennessee.

So I’m excited to join, and it was a great opportunity too for us to get out of the two of us being a team, and open ourselves up to other individuals, to get different perspectives, and just unite and connect in that way. That’s how we’ve found that, and it’s been good so far. We’ve got great returns on it so far, we’ve got 100% collection, which is great, we always like that, and we’ve got some great potential for what we plan on doing with the property. It was actually self-managed by the owner who had actually built it in the early 2000s. So we feel that inviting in a third-party managed to kind of improve the efficiencies of it, that that can be really beneficial for us. We’re excited about all the potential with that.

Slocomb Reed: How big are these townhouses?

Sia Senior: They’re two-bedroom/two-bath, they have a garage, they’re three levels, so they’ve got the two levels up top and the garage on the bottom. They’re really nice, actually. They were kind of overbuilt for the area, which is great for us because the rents are under-market, so we have great potential to just maintain it, taking care of little maintenance here or there, and bringing it up to market rent. That’s what we’re excited about.

Slocomb Reed: Gotcha. So two-bed/two-bath townhouse apartments, with garages, that were built just around or under 20 years ago. Give us an idea of the numbers on this deal. What did you buy it for? Is there any money that you had to put into it? What kinds of returns were you projecting, and what’s happening right now?

Sia Senior: We purchased the asset at 1.5. It is still a finance, lease financing.

Slocomb Reed: Nice.

Sia Senior: Very nice. They did a good job negotiating that 1 million, so we had to come with the rest as a group. The projected return – so right now we’re projecting an equity multiple and a seven-year hold, so we’re like 2.3 is the goal. And we’re pretty much considering that the properties were really under-market in the beginning; we’ve been able to re-lease, resign, renew some of the tenants, increasing some of the rents. We are actually responsible landlords, which I enjoy, and owners in that, because we could significantly raise the rents and be at market. But we recognize and see that humanity in our tenants and recognize that this could be a shock for them, so we’re working to do it responsibly. If it’s not a place where they’re able to stay because of the rents, working with them with the property management that’s there to facilitate a good way of working together to get to everybody’s goal, where they have some place to live that they can afford and we can also still improve the asset and get it running in a performance peak that we like. That’s kind of what we’re doing right now with it.

Slocomb Reed: Gotcha. It sounds like especially with your experience as an owner-operator with the single-families and small multifamilies that you were buying before you started looking at larger deals, it sounds like you have a lot of experience in hands-on property management. I’m an owner-operator too, so I am the management company. I’m in too much of the nitty-gritty right now. Question for you, for our owner-operator listeners, but also for our listeners who are planning value-add business plans that they need to execute on… When you acquire an asset like this, when you know that you’re going to raise rents on the tenants who are currently there, how do you go about that? How do you make sure that the good tenants you want to stay in their townhomes will want to stay after the rent goes up?

Sia Senior: Right. It is a challenge to have the asset perform at peak performance while also recognizing the humanity and the fact that really, real estate is about people. There are people that live in the property, we want to recognize that they need shelter, just like anyone else. So what we’ve worked with – at least on the 16-unit asset, and now I’ll talk about what we do with our personal portfolio… Like I said before, we’re really working on performing them. The truth of the matter is that if you’re under-market, it’s not like people can’t really afford it, they just haven’t had the benefit of having to pay less rent. But if the markets are increasing, that’s also because people can afford to pay a little bit more. So you kind of find that balance where you inform, you educate, you give them time to either decide, “Yeah, I’m willing to pay more, because I see this as a great deal, and increasing my rent is still worth it for me to stay here.” Or if not, giving them two to three months renewal, two to three months to manage and look for other places to live. That’s kind of what we’re doing with the 16-unit.

As it pertains to our single-families and small portfolio that we have, the same idea. When you self-manage, sometimes you get your [unintelligible [00:10:41].20] and you try to work with the tenants. But what we learned, especially coming into the multifamily space, is that that is great, but also, you can do well by doing good as well. We have increased our rents with our tenants, but recognize that we try to balance what they can afford when we look at in terms of their income coming in, getting a good idea about that, and what makes sense. So we try to balance us being profitable with them also having a place to live that they can afford, that works for everybody. If that’s not the case, we give them enough time. Sometimes we give them resources on other locations that might better fit them in terms of what they’re willing to pay for. Sometimes they just don’t want to pay more, and that’s okay. We’ve worked with them to get them transitioning to a new place and giving them the time they need to do that, while also recognizing that we are also in this for making a profit. We want everyone to have a win-win situation.

So that’s going to be it for us – the key for us is really communicating with the tenants. We’ve had great relationships with all of our tenants from before the pandemic happened. We had a very little turnover; in fact, we only have one that we had to evict, because she just refused to pay. But everyone else, we were able to work with them, we got them the assistance that came through.

I credit our relationship with them and working with them before the pandemic and recognizing that this is a relationship to get us to where we are right now. We’ve been fortunate in that sense. So they don’t mind when you raise the rent, especially if it hasn’t been a while and they recognize that you’ve given them value. Addressing all their needs appropriately, in an adequate amount of time, and just communicating with them, so they know you’re not just this figurehead, but you’re a human being too that has kids and has regular issues that they have. We’ve been fortunate in that sense.

Break: [00:12:16][00:14:13]

Slocomb Reed: Communication is absolutely vital for sure. In my experience as an owner-operator, I have a lot more of C-class properties right now. I know you have a third-party property manager there in Johnson City, you’re in Maryland, but you also have your own portfolio in Maryland… As an owner-operator, I do fully agree that good communication and frequent communication, if not over-communication is absolutely vital. In my experience, every issue that a tenant has falls into one of two categories. It’s either maintenance, they need a place to live where everything works, everything functions, there is heat in the winter, there’s cool air in the summer… But the other category – everything is not maintenance, in my experience. If it’s not a maintenance issue, it’s a respect issue. It’s about tenants feeling respected by their neighbors, by their property manager, and by their landlord. I cannot overemphasize the value of communication.

I wish I was buying townhouse apartments built 20 years ago. Unlike the brick bunker, three stories, built in the 1960s or 70s, cramming as many apartments in a building as you possibly could 50 years ago is the stuff that I’ve been buying recently. So we end up having to do probably more value-add than you do. But one of the things that I do is when I take over management, I open with, “We’re the new game in town, and we are making this a better place to live.” Over-communicate, but also make sure that tenants hear from us, that we are improving their home. We do some of the major capital stuff, resurfacing parking lots, replacing windows, adding Wi-Fi, the big stuff, finally having the common areas professionally cleaned… The carpets have been sitting there just soaking in everything for five years… We do that stuff first, while talking about making it a nicer place to live, and then we raise rents.

Sia Senior: Exactly.

Slocomb Reed: Because to your point, Sia… You put this really well – it’s about this business doesn’t work without profit. We’re still in the business of providing a home and treating people with dignity and respect. There’s a balancing act that you referenced there that’s absolutely vital in what we do. For those of our listeners who don’t get involved in the day-to-day operations, I hope what you’re getting from this is that the people who are in your day-to-day operations, your property manager, the people who are creating your business plan, that they have this in mind, treating people with dignity and respect. Absolutely. Sia, the 16-unit in Johnson City is a joint venture. What is your role within the partnership?

Sia Senior: So I’ll be doing a little bit of the asset management with the team. A majority of the people on the team are either former or current military, and so we have a potential for being deployed. There’s a lot of overlap where we kind of cover each other in case that happens. I’ll be using my experience and skills from the asset manager part to kind of play a role there, and just to see. I’m also going to be looking at the finances, because obviously, we need to make sure that financially, the property is doing well, so that when we’re ready to do a refinance, that we can do that and that the property is performing well. So I’ll be looking at the metrics of it and all the finances, looking over it, and then comparing it to see what we can do in terms of exit plan or refinance, if that happens to be the goal. The good thing is that I actually have an MBA in economics and finance, so that will help me in that a little bit, too. So yeah, I’ll be doing that with my main two roles, basically, and helping with that.

Slocomb Reed: That degree sounds very valuable. Mine’s in philosophy in Spanish. I’ll tell you what, the Spanish is coming in clutch right now. It’s a lot easier to get my rehab done with the Spanish. Philosophy is helpful in other ways, but not as directly correlated as your education. Sia, you developed a skill set as an owner-operator and with your portfolio there locally before you started looking at other deals… Which of those skills are proving to be the most valuable now that you are investing at a distance with joint venture partnerships?

Sia Senior: I’ve developed a lot of skills while I’m working with the tenants. I think being a former teacher and just recognizing that they’re different personalities, and knowing how to approach that, whether it be with your tenants, whether it be with your coworkers, your colleagues, whether it be working with maintenance, or the construction crew and trying to get them to work with you, I think that is a skill that I have in terms of trying to relate to people and letting them see the sincerity about how we’re approaching things. I think that’s one great skill, because then they recognize that it’s not me against them, but it’s how can we work together and let’s get our goal together.

I think that’s really important, because if you recognize that you’re all on the same team, then it’s easy to work together to get to the goal. So I try to keep that in mind with the tenants, with my coworkers, with my colleagues, partners, and things like that. And then I think just having experienced so many different units, even though they’re pretty close together… A majority of our units are in Baltimore, but we have some in the DC area as well. Just being able to organize and manage all of that… I’ve used our property management software to help me keep that stuff organized, so that I know the rent’s coming in, I know what’s going out, I know the expenses, and I can have a good handle on that. So I think those are the two main skills that I bring, that can help benefit the teams that I join.

Slocomb Reed: Awesome. What kinds of deals are you guys looking at acquiring now?

Sia Senior: Two types of deals. In particular, we want to still do joint ventures, and we’re looking in the Baltimore area because it’s in our backyard. But we’re also looking at places like North South Carolina, Indiana, and Ohio, because we like the cash flow that is a potential there. For me, I’m focused on those types of deals that we could keep in our portfolio with other partners and help us grow wealth-wise generationally, for our family, our friends, and kids.

But we’re also looking at deals that have nice upside, that more kind of syndication plays, larger units. Particularly, because I feel like there are a number of people in our community that doesn’t really have access to those types of deals. So we are looking at deals that can bring them that potential, where we could syndicate and bring in partners who didn’t really even know about this, as we didn’t years ago, and provide them opportunities to invest in these types of deals, whether it be a 506C, 506B, or maybe even a title III, which we’re also looking at joining. That will allow people who may not have those accredited qualifications, but still want to invest and have funds, want to learn, and be able to develop and increase their wealth as well. We’re open to all of those.

Slocomb Reed: Awesome. Well, Sia, are you ready for the Best Ever lightning round?

Sia Senior: Yes.

Slocomb Reed: Sia, what is the Best Ever book you’ve recently read?

Sia Senior: I have two. The first one is The ONE Thing by Gary Keller, and the other one is The Millionaire Real Estate Investor. I think they go hand in hand, particularly because The ONE Thing helps me focus on my goals and make sure I have the priorities straight, so that I can be a little bit more productive. The way we built our current portfolio was based on the Millionaire Real Estate Investor. So getting the goals, making a plan, and then acting on it. Those two I think went hand-in-hand in really helping us. I like to review them even though I’ve read them before, just to kind of solidify and keep me on task. Those are my two good ones.

Slocomb Reed:  The ONE Thing is fabulous. The Millionaire Real Estate Investor was the first book I read that gave a proper 30,000-foot view of everything that real estate investing can be, and figuring out how to invest in real estate in a way that will help you achieve your own goals. It’s also the only book I’ve ever read that includes the metric return on equity. Especially when we’re experiencing as much appreciation as we have the last two years – this is being recorded in February 2022 – return on equity is a vital metric that I had never even heard of until I read that book. So those are both great. Sia, what’s your Best Ever way to give back,

Sia Senior: My husband I tithe to our church, and we give to charity, which is part of who we are and our value system. We also like to give our time. In terms of real estate investing, I’ve done a couple of webinars with family, friends, and people that are familiar with me to inform them about real estate. I’ve also started a Facebook group that is called Sage & Steward Real Estate Investing, that talks about the wisdom and wise types of investing, along with stewardship and taking responsibility and managing the assets and the people in the assets in a responsible manner. Those are two ways that I like to give back.

Slocomb Reed: Awesome. What’s the Best Ever lesson you’ve learned while investing in real estate?

Sia Senior: The Best Ever lesson… I think, for me, having been in this for a long time, the best lesson is to be consistent with what you’re doing and stay persistent. It’s really just being focused and recognizing that wealth is not built overnight, and that it takes some time to work on, but you can do it. There are times when we’ve had some interesting times with tenants that we’ve had to work through, but in the end, we end up working it out. And it’s because we’ve been consistent with what we do, and trying to add to our portfolio each time, meeting the needs of the tenants, and growing in that manner, so that we even get referrals now. That’s probably my best lesson.

Slocomb Reed: Gotcha. What’s your Best Ever advice?

Sia Senior: My best advice is, I think the things that I learned from the two books, which is to set a goal for yourself, make a plan, and then just take that first step forward. I talked about the two books – they’ve really helped me to really move forward. It’s not easy, but it’s simple, and if you keep that in mind that you’ve got a goal, you make your plans to attack those goals, and then you take a step in moving towards the actions, then that’s going to be really helpful to you.

Slocomb Reed: Awesome. Sia, where can people get in touch with you?

Sia Senior: You can find me on LinkedIn. I try to do a post every once in a while. As I said, I mentioned the Facebook group that I have, Sage & Steward Real Estate Investing, so you can find that there. You can also reach me at

Slocomb Reed: Great. Well, Best Ever listeners, thank you for tuning in. If you’ve gotten value from this episode, please subscribe to our podcast, leave us a five-star review, and please share this episode and this conversation with Sia Senior with a friend, so that they can receive value from our podcast, too. Thank you and have a Best Ever day.

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