Byron Thompson from Monument Real Estate Management is joining The Property Management Show to talk about a subject we’ve never addressed on this podcast: urban real estate markets.
Byron has been a listener for a long time, and we’re happy to have him in the guest seat today to talk about the unique challenges and opportunities for both investors and property managers who work in urban markets such as Cleveland, where his company is based.
Introducing Byron and Monument
Byron owns and operates Monument Real Estate Management in Cleveland, Ohio. They manage properties and portfolios in Columbus as well and recently, they’ve begun expanding into the Carolinas. There’s a strong growth mindset in his business operations, and he’s always looking for new opportunities.
What’s unique about Cleveland is that it has a strong urban market that he talks about in his book: Your Guide to Investing in the Urban Real Estate Market.
The urban market doesn’t get a lot of attention from influencers in our industry and speakers at
conferences. No one has been talking about it, so we asked Byron how he found himself in this niche.
Discovering and Exploring Urban Real Estate Markets
His journey began in 2016, when he got his Realtor license and immediately started working with investors who had good portfolios. Many of these investors had been buying properties all around the country and finally landed in Cleveland.
While he worked with them to locate and purchase properties, he learned a lot about real estate
investing. They were buying 15 or 20 or 30 houses a month. This was a big education, both in real estate and property management. The investors asked him to manage the homes for them when they became rentals. At first, he said no. But, he soon realized the opportunities this could provide.
That’s how Monument Real Estate Management began, and it didn’t take long to realize how different the urban market of Cleveland was from other real estate markets.
How We Define an Urban Market
According to Byron, there are three conditions that must be present in order for a market to be
considered an urban market:
1. The overall economic conditions of the city. It’s usually poor. Crime rates are likely to be higher.
Available housing and employment rates are likely to be lower.
2. The assets investors buy are going to need more maintenance for asset. Most of these homes will be older; potentially 100 years old, even.
3. There’s heavy government compliance to the management that’s requirements in an urban
market. There are more Section 8 homes. There are more inspections. You’ll have more
transient tenants and potentially more evictions.
Byron has identified and researched similar markets in cities like Birmingham, Memphis, and Detroit. There are a lot of similarities there, but also unique challenges in each urban market when it comes to investing and managing.
Urban markets will generally focus on C and D class properties. These are high risk and high reward, versus other markets that provide a slower yield. They’re generally safer. They focus on A and B class properties, which provide less risk and fewer headaches.
If you’re going to specialize in the urban market like Byron does, you have to know what makes them lucrative for property managers and investors.
For property managers, it’s all about volume of business. The number of rental homes in urban
markets is high. They need management because these markets are heavily impacted by
investments. Most of the investors are out of state or even out of the country.
For investors to make money, they must have the appetite for high risk and high reward. There’s
an opportunity for heavy cash flow and these can be cash-positive investments.
You need to know the risks, as a property manager, and you need to gain the trust of your investors.
Managing Investment Properties in Urban Markets
Property managers need to help investors earn their returns.
It’s also a property manager’s job to educate investors who may not know the market. Sometimes, an agent will sell you a property and you’ll never see them again. At Monument, that won’t work. They find that in an urban market, you have to be there for the long term. You have to support your investors on their entire real estate journey. Educating them and making sure expectations are understood are important qualities in a property manager serving this market.
Urban markets generally have lower purchase prices. That’s going to attract a lot of investors who want to make money. You need to help them understand what they’re getting into, and what will be required in order for that money to be made.
Byron says it’s important to keep investors informed. He provides quarterly assessment reports that show them what they need to know about their asset. These reports commonly highlight the deferred maintenance that’s often found in an urban investment. Often, investors won’t do their due diligence before buying, and you want to make sure they understand both their asset and the market.
It’s important to dive deeper into asset management. Property management is collecting rent and scheduling work orders. Property managers in an urban market have to go further and talk about how the asset will perform for five years or more. They’ll have to talk about the neighborhood and any surrounding areas that may be up and coming.
Choosing the Owners You Work With
We’re not sure there’s a property manager who hasn’t had to let go of a client.
Byron says the power of saying no is important. You have to learn and know your own value. As a team, Monument has focused on knowing who their ideal client is. They have a good grasp of that, and they’ve developed a detailed onboarding process that ensures they’re working with people who fit their model of service.
A lot of processes have been streamlined. That’s because of the volume of properties being managed. Their model works with their specific systems and processes. It’s a strength.
When he has to accept or deny a client, Byron says it comes down to expectations. He tries to set those upfront so there are no surprises. Every client wants to feel like a VIP. But, their onboarding process is the same for every client: this is what they do, this is how things work, and this is step-by-step what they’ll be doing. They cannot deviate. Byron says they’re professionals and they trust their process. Before he takes on a new client, he wants to be sure they’re aligned with those processes.
Some of their clients have already purchased a property and others are thinking about it.
Byron loves taking the sales calls because he likes that there’s a mix of everything coming in. He likes hearing about where investors are coming from.
For an investor who is new or hasn’t bought a property yet, he’ll help them navigate the process from the beginning. The goal is education. For an investor who is transitioning or working with an occupied property, it becomes less about the investor and more about the asset. He wants to know what they’re getting.
At one point, he would just take everything and anything (like most property managers). Then, he says, you realize you are managing a house without a water tank and there’s a tenant in place.
Now, he decides if he wants to take on the asset. He’ll think about a 30-day, 60-day, and 90-day timeline and decide what can be done and what wouldn’t work.
Defining Wealth in an Urban Market
Here’s another insight from Byron’s book: everyone defines wealth differently.
Most of us think that you need money to make money.
Not necessarily, Byron says.
He believes it all comes down to defining what you want first and knowing yourself and your temperature for things.
Next, you need to build relationships.
Byron has found it’s amazing that as you put things out to the universe, the wealth mindset starts. He believes that anything is possible because there have been plenty of times that he was surprised at how perfectly things worked out. Those things never would have happened if they hadn’t been spoken into existence. He believes in aligning himself with the right people and doing the right things for other people first. Opportunities can and will fall into your lap, and it turns out you don’t have to cut a check for them.
Byron is also a big believer in sweat equity. That’s his secret sauce for the wealth mindset. It’s the way to gain success.
Don’t do everything he does, Byron cautions. If you read the book, you’ll learn that he and his wife began their real estate journey while she was pregnant with their daughter. Byron quit his job, liquidated his 401(k)s and got started acquiring properties. It worked out for the best because he had his wife’s support and a lot of faith and good relationships and they worked hard.
We asked Byron why he wrote “Your Guide to Investing in the Urban Real Estate Market.”
He said it was the culmination of all the pain points and the triumphs he had experienced working in real estate. He was thinking about his own portfolio and the mistakes they made and also how they ultimately found success. He’s had the opportunity to work with people from all over the world. He’s seen where they made mistakes. He’s worked with contractors and tenants. He’s navigated laws and lifestyles and worked with judges and bailiffs.
He said he would have gone crazy if he didn’t get it all out and write the book. And, Byron loved the idea that his experience could help others. It is intended to be read by would-be investors and existing investors who don’t understand what they’re getting into with urban real estate markets.
There’s also a lot of value in this book for property managers.
If you’re a property manager thinking about expanding into urban markets, Byron’s advice is this:
Continue your education.
He says one of the best things he did was to join NARPM. You can only grow when you’re around industry leaders like yourself. He makes a point to invest in education, and also in automation. Everyone knows you have to get the right people on your team, he says, but automation is equally important.
There are a lot of variables in the urban market. Automation keeps things from going off the rails.
Property managers need to think about revenue per door and not just volume of doors.
Three things will make you successful in the urban market:
1. Maximize your profitability per door.
2. Provide excellent service to owners.
3. Provide excellent service to tenants.
Make your management more efficient and effective.
For a copy of the book or to learn more about Byron, visit www.monumentmgt.com. The book is also available on Amazon.
If you have any questions about what we’ve talked about today, please be sure to reach out to us at Fourandhalf.