Garret Wong on rental property management

Adrian:

I'm joined today by Garret Wong, who is the President of Upper Edge Property Management, as well as the current president of our association, which is the PPMA. What is that short for?

Garret:

Hi, Adrian. Yeah, the PPMA stands for the professional property managers Association of Manitoba.

Adrian:

Now Garret has a long time history in the property management industry here in Winnipeg. I've known him, I think, for about a decade, at least acquainted with him. And I'm so pleased to have you on the show today. Thanks Garret for joining me.

Garret:

Well, thanks for having me Adrian. And it's an honor, I'm glad to be reconnected for sure.

Adrian:

Let's start with the basics or perhaps the most important things. Can you tell our listeners a little bit about yourself and your company?

Garret:

Sure. I always say I'm an ex science geek, so everybody has different stories of how they ended up in real estate and mine is a little unusual. I was actually a scientist working at the virology lab. I've got actually a master's degree in molecular biology. And then in 1997, I bought my first rental property and kind of took from there, started buying rental properties, was still working at the lab, opened up my own property management company in 1999. Kind of single operator like most entrepreneurs start. And yeah, kind of start expanding that in 2007, bought out my business partner in 2017 and rebranded to Upper Edge Property Management, the company that you see today.

Garret:

We're a little bit different. We do specialize in single family home and smaller buildings like duplexes, triplexes, some small apartment blocks, but we really, we're different than, I guess, an apartment block manager simply because it's different. I mean, you can't have a caretaker in a single family home. Single family home management is a lot of hands on, boots on the ground, people in the field type of thing, which you can't really do with the apartment block model. So we decided to go fully invest in the smaller stuff and staff it for it accordingly.

Adrian:

Your story and my story are somewhat alike. We both started investing in residential real estate about the same time. We also both became, if I may use the word accidental landlords, we both started property management companies at similar times. But as you noted, you specialize in that single family, duplex, fourplex, perhaps small apartment blocks. And I chose to specialize with imperial properties in condominium management, which is very different from rental property management. Important. What makes your company unique in the property management industry?

Garret:

Oh boy, I think this is where my science background comes in. I also worked for a few years at a pharmaceutical company, writing standard operating procedures, and processes, and I'm also a self professed geek. Computer geek, always have been. So I think our uniqueness in the industry is really our commitment to technology. And when I think Commitment, I mean, that's commitment with a capital C. I mean, property management is a really ... It's an older industry and it's difficult to try and bring new things. It's hard to bring in change to people and because it's so varied and it's really hard to systematize, property management, you find the companies that perform well are performing well because of the people. But as you know, people don't stick around and that's fine.

Garret:

I mean, there's lots of young people who want to move around, different career choices, different companies, but it seems like everybody you talk to right now, you call a company and there's a different person answering the phone. So I wanted to basically future proof ourselves. And the answer for that is technology. So we use technology and systems to bring that consistency, efficiency, where I guess it's inevitable. So I'm accepting that people are going to move around, my staff, but I don't want my clients to be thinking where's my data? Does the new person I'm speaking to know my property? All of those different things. And we have that all covered through technology.

Adrian:

Now, what are some of the biggest challenges that a rental property owner may experience?

Garret:

I think the number one thing that I find is they're too nice. They're too nice. The average person that comes to me to solve their problem, because people don't need a property manager if everybody's okay and they're paying the rent on time, but they're being too nice and now they're five months behind in rent, or they let a situation get out of hand, and now there's 10 people living in the property. Maybe not knowing proper rental values. So you're now undervaluing yourself. You're barely making cashflow. Or as you know, in the commercial space or even appraisal lies, if you don't have the proper rental value, your building is actually worth less. So not knowing the proper rental values over renovating, there's nobody to tell them, hey, you know what? You only need to go to this certain amount. And anything after that, you're not going to get your rental value out of it.

Garret:

People renovate rental properties, thinking that they're going to be living in it. They need advice to be told this is good enough for that, it's ROI, return on investment. You don't need to be overspending on renovating and other things, more like paperwork. The average landlord doesn't send a lease renewals annually, and that not only gets you in trouble in terms of that lease could now turn into a month to month and you have somebody moving out, New year's Eve. But even the allowable rent increases that you're allowed to take, knowing the Residential Tenancies Act. Whether you can sell the proper amount of notice you have to give. Most people don't even know that you can't cancel a lease. I have a lot of people saying, well, I'm going to be selling, don't renew the lease. And I'm like, I'm sorry. The Residential Tenancies Act stipulates that you have to give a lease renewal for every single tenant.

Adrian:

And would you say that there is a significant cost difference all things considered between managing a rental property yourself versus having it professionally managed by a company like yours?

Garret:

Well, I mean, there definitely is a cost. I mean, when you're doing it yourself, it's free, but what is free really mean? If you're busy, you're traveling, your time is money. The average person would put an ad on Facebook marketplace or Kijiji, and you're getting 10, 15, 20 people calling in a day. Somebody has to answer those phones. Somebody has to go out and physically show the property. So I don't know that it's fair to say that the person who's doing it for free, if they were to pay themselves 20 bucks an hour, then by all means I think the average property manager for a single family home is probably getting paid between 100 and $150, maybe 175. So when you factor all that in, it's definitely almost cheaper to be professionally managed, but there's hidden costs there too, hidden savings.

Garret:

I mean, if you're trying to do it yourself and you leave a unit vacant while you're trying to renovate, maybe if you had gone to professional property management company who had renovators, that could turn it around in a week rather than leaving it, you're doing it every weekend. Well, that's 12, 15, $1,700 of rent that you could have had quicker that, just pay the pro to do it. Or you take a couple of months to find the ideal renter. But meanwhile, like our company, our average to find a renter right now, even in the middle of this pandemic is only one to three weeks because of our marketing. So when you take that 2 months, $1,500 rent, 2 months lost, that's $3,000, that's 250 bucks for a year lease. That's almost double what you could pay for a manager. So there's lots of things there.

Adrian:

One of the most common things, when a tenant leaves and moves out is obviously that you have a vacant unit and that vacant unit has to be made ready again. The industry term being the unit turnover or the make ready process. What should be an average turnover or make ready process timeline?

Garret:

Ideally? Zero. Now, when I say that we try to do everything, what we call a back to back or a move in, move out. So you're a property owner. You've got a year lease, the lease ends June 30th. For our clients, we always start advertising at least six weeks prior because that's two weeks to find somebody, and then they're going to be giving a month's notice where they're currently living. So at least six, seven weeks. So if you start advertising in the middle of May, in that example, you find somebody between, first week of June, your existing tenant is moving out June 30th, your new tenant moves in July 1st back to back. So there's literally no money lost. In terms of maybe it's time to do renovations so you want to leave it empty for a couple of weeks. I mean, if you're using a contractor and you get them going on it and you trust them, there's no reason unless it's a complete gutting down to the studs or something like that, that a turnover shouldn't take more than a week.

Adrian:

Going back for a moment to the self managed versus professionally managed. When you're selecting new tenants, if you're an individual, you may not have access to proper screening tools. Could you share with listeners from a high level perspective, what is a screening process with a company like yours when you're selecting a new tenant?

Garret:

Well, we've been told that we have the toughest criteria out of everybody. Might not be true, but I think when you're comparing to the average homeowner, you hear people saying I'm going to go with my gut. And I would argue, my gut has gotten me into trouble more times than not. I think you have to take the emotion out of real estate and property management. So we use an empirical way of looking at things. I mean, we're going to be looking and doing an interview. I mean, the people don't realize they're being interviewed when they're going through one of our properties, but they are, we're asking questions. Where are you from? How many people do you have coming with you? Oh, why are you leaving your current place? Oh, you're being evicted. Can I ask why? So the obvious ones there, the person to person contact.

Garret:

So we're not just doing it on paper, but we're also going through and checking them on the residential tenancies [inaudible 00:11:08] database. I mean, that's where the average person doesn't have that. I mean, you can certainly go down to the branch [inaudible 00:11:14], but now you have to make an appointment. It's a little inconvenient. So we have access to that. We're doing social media profiling on them. We're going to search them up on Google. We're checking the public justice database. Obviously we're phoning their employer, making sure they can afford it, calling the path landlord, even going to landlords prior because the current one might say anything to get them out if they're being a problem and another person, person rating from our applications department, if they're being difficult to deal with. So we're really going through quite a bit, obviously credit scores, we do a rentability profile on them. And then we only have a senior manager going through and approving the applications.

Garret:

So it's pretty intensive, but we really believe that a proper successful tenancy begins and ends with good screening. And you know what? It's not going to ever [inaudible 00:12:11] you from the person who ... You can't really screen for people who are going to separate or lose their jobs. But if that does happen, at least they're not destroying the property. We're going to try to work out those payments things if we can and come to an amicable solution.

Adrian:

Now, the next question is probably one that most listeners will pay a lot of attention to. So I'm going to recommend that you select your three favorite things. What should rental owners consider when selecting a property management company?

Garret:

I could do it a whole hour on this Adrian.

Adrian:

That'll be a separate episode.

Garret:

All right. Top three things when selecting a property management company. Number one, most people don't know this. You have to be licensed with the Manitoba Securities Commission if you are doing anything with regards to property management here. Unless you have an ownership stake. And that's because we're a regulated industry, that's because money is changing hands. So we have to have a trust account. But more than that, it's written right into the Real Estate Act that somebody who's making investment and property management decisions, even if they're not touching the money also must be licensed. So we have to be licensed in the Manitoba Securities Commission. That's probably the biggest thing.

Garret:

I would say, how long has somebody been in business? Again, there's nothing wrong with the startup, but experience is a pretty big teacher. If you were to ask me, are we a better company now than we were 15 years ago? Absolutely. Because we've learned our lessons. How do you scale? How do you hire employees? What happens when an employee leaves? Are you a single operator? All those things come with experience. Now, a brand new company, you have to ask the questions. You can be brand new, but maybe the principals were working in the industry for 15, 20 years. So I think it's just asking the questions and probably the other, performing maintenance.

Garret:

How are they performing maintenance? I would think that if there's anything bad about our industry, it's that people think they can't get in touch with their property manager, or they're getting ripped off on maintenance. So you want to ask questions like, do you have onsite staff that you hire? And there's nothing wrong with that either. I mean, for example, Upper Edge only uses subcontractors. And we do that on purpose because I personally feel that it's just a better deal for the investors that they're not depending on me to pay my employees, if I were to have maintenance technicians because then I have to, I guess, make sure that they're busy with maintenance. So yeah, maintenance for sure because that's one of the biggest pain points that most owners come to me when they need help.

Adrian:

Most importantly, you're an experienced real estate investor, an experienced property manager and a respected individual in the industry. So I'm curious, what do you love about Winnipeg real estate?

Garret:

Stability, affordability, and just that steady, it's kind of like that little engine that could, it's dependable. Not to say that your bigger centers in Canada aren't good if you can catch the ebbs and flows and the peaks and valleys, but we just keep trucking along here. Something that you bought five years ago, you have pretty good confidence that it's going to be worth more now than it was back then. And it's just great rental areas. Yeah. Steady and stable for sure.

Adrian:

Garret, we're going to have links to all of your contact information in this episode at ilovewinnipegrealestate.ca, but please share with us how can people reach you?

Garret:

Well, I mean, obviously they can go to our website, www.upperedgepm.com. That's PM as in property management. But if somebody wants to reach out to me directly, they can for sure. I'll actually give out my direct line here for my office. It's (204) 415-6269. And then even on email, it's fine, garret.wong@upperedgepm.com. And that's a one T. G-A-R-R-E-T.W-O-N-G.

Adrian:

Spoken with a great level of meticulousness. Thank you, Garret for your time today.