The Rental Renaissance

The Rental Renaissance
On this episode, the #gmm crew talks through all things related to single-family homes and townhomes vs. apartments alongside Roger Daniel, founder and president of DMG Management. In the current real estate landscape, specifically rentals, both the #gmm crew and Roger have noticed the trends of residents gravitating toward rental homes in search of privacy, green spaces, and more. But how has this shifted the way marketers and property owners advertise without traditional amenities? Find out by listening today.

Roger Daniel
Roger Daniel is the founder and President of Daniel Management Group and is responsible for the day-to-day management and leasing of a portfolio consisting of more than 2,000 units around the broader Midwest. Prior to creating DMG, Roger held various positions in multifamily leasing, property management, acquisitions, and brokerage. Learn more about Roger’s expertise and background by listening today.

Transcript

Thomas Demiranda (00:15):

Welcome back to another episode of Good Mood Marketing. I'm Thomas Demiranda, and today I'm here with Katie Degutis and Lauren Goodman. We're all very excited to chat with today's guest. We've been partnering with him the last few years and it's really been a pleasure just working with him on a range of projects and his diverse portfolio of real estate. So please welcome Roger Daniel, the owner of Daniel Management based out of Chicago, Illinois. Welcome, Roger.

Roger Daniel (00:40):

Happy to be here. Thanks for having me.

Thomas Demiranda (00:43):

Awesome. We're so excited. And really I always like to look at the LinkedIn cuz I know we've partnered the last few years, but I actually didn't realize that you started your career as a, a leasing consultant back in the day. And so we'd really love to learn more about your background and, and how you went from site level leasing to now owning your own management company. Can you kind of just walk us through how, you know, how you got into real estate and really what made you stay?

Roger Daniel (01:11):

Well, step one, which is not on my LinkedIn profile was actually dropping outta medical school. So if you, if you wanna get into real estate, you start in med school is what I tell people. And so yeah, I dropped out and had a great conversation with my parents. I was gonna start my $13 an hour job renting apartments. And of course they were super thrilled, <laugh>. And so I had a family friend in the business that, you know, sort of worked his way up in through property management and really emphasized the value of operating the real estate. I think he owned everything he operated and was looking at it through that lens, but I think it was sort of the best advice I'd ever gotten. And so I started leasing for the Habitat company in Chicago and I still remember, you know, I sent out paper resumes that he helped me, you know, put together to get my first job.

Roger Daniel (02:05):

And I sort of worked my way up through property management on one track. And I was also able to get some finance jobs. So, you know, I did some underwriting for Northwestern Mutual. They had a debt and equity portfolio. I was in private equity doing underwriting for really all types of real estate, including multifamily. And I kind of seesaw it a little bit back and forth between those two disciplines. And, you know, ultimately really worked my way up into property management as a property manager regional. I did asset management. And in, in the end I was working for a company managing 3000 units and doing all their acquisitions. And so it was really those two skill sets I feel like separately and then combined that really set me apart and let me kind of own or buy, you know, acquire four owners and then operate real estate.

Roger Daniel (03:06):

And I think that was ultimately the differentiator in the last role I had. I had also started acquiring property through friends and family. So I was sort of while managing these 3000 units, I was also acquiring for myself. And I had built up, I, I was sort of moonlighting. I had built up five or six properties, like 150 units on my own. And the, you know, ultimately I, I went out with, with those apartments and then the portfolio of about 700 units through this original owner that gotten me into real estate. And that was the scale I sort of needed to start. And so I hired a property accountant and the two of us just sort of started, you know, managing that portfolio and, you know, real estate has gotten very expensive even just since I started. And what I realized is, you know, the management side really helps you.

Roger Daniel (04:03):

It's more cash based, you know, it's fee based and you can charge, you know, get fees that way and then sort of operate and buy with that money. And that was sort of the model I used. You know, at this point we're actually a majority third party property manager and I like having, you know, both and, and I like, you know, managing for a bunch of different groups because each one prioritizes things differently. And if you can really satisfy all of them, you know, ultimately it sort of sharpens your sword as a management company. And so we really went out on our own only in 2016. I mean, not that long ago in the grand scheme of things. And so it's been just sort of a referral based business and I think people have seen what we're doing and you know, we're sort of meeting people that way. And then, you know, in the end it's sort of a relationship business. You know, we produce and we come with different ideas, think outside the box and we've been able to grow that way.

Thomas Demiranda (05:06):

Yeah. I guess as a follow up, cuz this is more of a sales business type of thing and, and that my ears kind of, you know, perked as listening to you <laugh>. So when you did get into, you know, which 2016 or 2017 is when you, you guys started?

Roger Daniel (05:21):

Yeah, so I started buying in 2013 while, while as an employee of a different company and ultimately went out on my own fully in 2016. You know, I formed DMG in 2013, but by 2016 I was just operating myself, you know, my, my own property and for, for others on my own.

Thomas Demiranda (05:39):

So did you go down your Rolodex and start just calling people that you knew of? Like, hey, I'm, I'm starting this, this new business. You, you know, you've known me for a while. Like how did, how did that start? Like, I mean that's like a startup kind of thing to me it's exciting but really would like to learn, like what were your first steps?

Roger Daniel (05:57):

You know, in the beginning I was so happy to be out on my own and just, you know, doing, you know, I had this one portfolio with a, with a mentor, a you know, a family friend and a mentor who really gave me this opportunity plus my own stuff. I was so happy I didn't even look for to grow. I was like, this is great. And then I was like, you know, I, you know, could it, it would be nice to have more, be able to offer more as a platform. And I started thinking about it that way and then people sort of started coming to me because, you know they needed help. They knew I had that experience and they were people I knew, but it's really, our growth has, has been almost exclusively either through people I know or people of people I know.

Roger Daniel (06:40):

It's that type of business I've learned at least for us so far. And, you know, with of course the advent of like a social media you know, you can get with, with a few thousand followers, you can get your message out pretty quickly around certainly Chicago, the broader Midwest, you know, and from there. So, but it really started with just doing a good job performing and, and having people sort of see what we did and, and produce. And that's sort of how the business grew. But it wasn't that, you know, programmatic in terms of just like, where can I get my next deal? It was, do a good job, build a good company, hire the right people, execute and let let the chips fall where they may. And honestly, that's still how we do things. I mean, it's very hard to predict who's gonna need a property management company next and who thinks you're the right fit. You just have to, you know, stay. I think, you know, when I look back and I think about what, what was the differentiator in addition to just gaining a broad set of skills, it was really just grit. You know, showing up to work every day, doing a good job executing and letting the chips fall where they may. And that's really still how we approach things.

Katie Degutis (07:49):

And I think too, like just knowing that you are an owner, that that's so reassuring to people that are coming to you because there's this trust, like especially in kind of smaller developments and things like that, it's, it's something that they've poured a lot of money, a lot of sweat and tears into probably it's something that isn't easy to just hand off. So being able to trust that you're going to treat it similar to your own properties mm-hmm. <Affirmative> and things like with a lot of care, I think has a lot of value to people.

Roger Daniel (08:15):

And that that is our approach. And I do think there is something different about being an owner and having to face the same issues our, our clients are facing. I mean we're right there with them with expense increases or changes in law and stuff like that. I mean we're, we're right there, you know, working through those same I issues. And I think that is I think that is comforting to owners and a re another reason we've had good growth.

Katie Degutis (08:40):

Yeah, definitely. I've worked at a property management company prior to Catalyst that was very similar to DMGs setup and it was always nice because it, there's this trust of they're going to do the best thing for me cuz they're also doing it for themselves. I think one of the things that's been really unique about working with you for the last couple of years is just kind of the diverse portfolio that you have and it sounds like a lot of that is from your own acquisitions as well as from these kind of friends or friends of friends that are coming to you. So wanted to kind of get your opinion with the rise of both of new rental developments the past few years being a little less traditional high in Midrise, we're seeing a lot more single family homes. Yeah. Town homes, things like that. Mm-Hmm. <affirmative>, what are you seeing in terms of demand for this style and how do you, how do they differ from traditional midrise or high rise communities?

Roger Daniel (09:25):

I mean, the demand is definitely there. I think what's interesting is it seems to strike the balance in terms of this sort of post covid world we're living in. I mean, you've got millennials who are aging and maybe want more space are going off to start a young family. So you've got this group of folks and then you've got maybe sort of an older generation that may be downsizing outta their apartments. They want less maintenance, you know, sort of maintenance free living. And so you've got two huge subsets of the, of the population that are converging on this product type. And there isn't a ton of it yet. I mean, there's a lot being constructed, but in terms of just supply, there's just not that much there. So you've got huge demand I think for apartments in general, but for this product type specifically, you've got kind of a supply constraint.

Roger Daniel (10:13):

And, and by the way, you know, with interest rates where they are, it's tough to, and, and, and construction costs. It's tough to build new apartments of any style. And so this dynamic I think is probably here for a while. And you know, I think this style, the single family rental with a townhome, they provide more space. They are often outside of kind of an urban core, they provide green space, and they often allow a separate space for working from home. So I, it just feels like the stars are aligned with this niche of product. Of course we manage all types, but I, I do find just personally it resonates as kind of an option for people. You know, I think what's, what's interesting about just sort of operating them is a lot of times you don't just see a hundred townhomes just sitting there, so they tend to be a little bit more boutique and don't often aren't large enough to support kind of a full-time staff.

Roger Daniel (11:15):

And we, we've gotten some specialization in this sort of boutique, high-end niche and, and I think, you know, we rely on our leasing arm, DMG Leasing, to do the leasing there because you don't have, you can't have someone just sitting there waiting for someone to walk in. And so we rely on that and then, you know, you've got a property manager that's remote and a maintenance person that's split up between a bunch of different properties. So you need some ingenuity, you need some scale, you need some strategy to really operate these and not everybody can do it. So I think we've been comfortable in that space. I think partly because, you know, our own acquisitions are, were sort of urban infill in Chicago, boutique, you know, smaller and we just sort of grew from that and knew how to operate them from the beginning.

Katie Degutis (12:03):

That's great. Yeah, I think also even just kind of to your point about working from home, the space, yes. I didn't really think about it until you were saying it, but in an apartment you've got so many more neighbors and noise distractions and things like that, even here at the office. Mm-Hmm. <affirmative>, I, I pulled in today and the landscaping crew was here. I was like, oh gosh, I hope they're done by 10 <laugh>. But things like that that you don't really have to worry about in some of these different styles.

Lauren Goodman (12:26):

Yeah. And as a renter myself, I think what you said about it's sort of these inter this intersection of you, it's the renter that's looking for more space, but still that low maintenance, little bit lower commitment lifestyle. And so yeah, while maybe there is a more boutique like subset right now, I feel, I have a feeling it's gonna explode. Mm-Hmm. <Affirmative> soon. Mm-Hmm. <Affirmative>. Roger, what do you think? Do you think we're like just kind of at the cusp of something like this or?

Roger Daniel (12:53):

It feels like it, I mean there's a lot of reasons that it's, it works for people and I think anytime that that's the case there's, there's people there that are, you know, going to supply it. I also think if you look at, you know, it's not that difficult to construct, you know, a town home or, or a single family rental. I mean, if you're the average home builder right now, you know, it's not like people are, are buying, you know, homes like they're, they're not flying off the shelves based on where interest rates are. So I think there's a, there's a natural pivot for a traditional home builder to to, to create this product. And so to me everything lines up to this just, you know, sort of an explosion of supply in this kind of, this what is now kind of niche space.

Lauren Goodman (13:39):

I agree. And as we've begun to see more of these and market more of these, I'm curious how, how do you think not only the living space, the but the amenities package is beginning to shift to accommodate these different layouts as opposed to like a traditional, you know, garden style apartment complex where your traditional pool, gym, fitness center, clubhouse, clubhouse, cyber cafe, you know, these things that are very common. But like, I think you mentioned before, a lot of green space might be more appealing in an, in a, a product like this.

Roger Daniel (14:13):

Yeah, I mean, I think people are, I think in these developments, they're, they're really focused on this space inside the apartment. You know, and that means a place to work, maybe a place for a, a bedroom for a small child. And I think, you know, a place that accommodates furniture, if you're downsizing their keepsakes, privacy, I mean these are the people, the things people are seeking when they choose this. They don't want noise above them. They don't wanna worry about disturbing the people below them. Traditionally they may have purchased a home, but they're just not in a, don't want to not in a position to do it. They love the attached garage and I think they're focused on those things and they're, they're at, at the moment there, there's a, there's a trade off and they're sort of giving up the more kind of check the box traditional amenities, you know, but the truth is a, a really a higher end renter.

Roger Daniel (15:07):

And I think you know these because of the size and just the nature of the product, they are higher rents. You know, they probably weren't using your, your apartment building's gym anyway. You know, they've got their own trainer they've got their own classes they're doing, they may have their own equipment and you know, maybe the, the ping pong tables downstairs instead of in a, in a, you know, in a big room. They don't need the full size movie screen. So they're giving those things up in order to really satisfy kind of a lifestyle shift with the, the things I mentioned, their apartment and sort of this outdoor green space and outdoor amenities.

Katie Degutis (15:45):

Yeah. I think also there's a unique opportunity for those types of properties to partner with local, maybe it's a local gym or something nearby that's in the area that still creates that sense of community, really strong, but allows them to have like, like you were saying, the privacy, the space, all of those other perks of these different kind of types mm-hmm.

Thomas Demiranda (16:05):

<Affirmative>. And we've even seen like community rewards, like these prop tech companies like mm-hmm. <Affirmative> kind of partner with companies like yours, Roger, where they can offer like, you know, partnerships with coffee shops, gyms, just local, especially like in big metropolitan cities like Houston or New York or LA, Chicago. You know, you need, you need to have some of that cuz you don't have as much, you know, space to operate and have all these amenities. So we've seen that as well. Mm-Hmm.

Lauren Goodman (16:31):

<Affirmative>. Yeah, it definitely forces us to get creative. Right. I think both from like a management side and a marketing side. Yeah. Like even the idea of what elements of a home or a town home can you leverage as an amenity. Yeah. You know, something as simple as like an attached garage or a private front door that can be really appealing to people if you spin it the right way. Mm-Hmm. <affirmative> and kind of reinvented as hey, this is sort of an amenity within itself.

Katie Degutis (16:56):

Yeah. I think something that we'll probably see soon too is like using AI to, for people to kind of customize those spaces. Mm-Hmm. <Affirmative> you don't necessarily have to do as much with public areas. So people can take a picture of an empty room, kind of say the style they're looking for and kind of do their own interior design that I think will let them have some fun with it too.

Lauren Goodman (17:17):

That's cool.

Katie Degutis (17:18):

Not that I've been getting ads for specific AI programs or anything <laugh>.

Roger Daniel (17:23):

And I think, you know, perhaps, you know, there are some developers that are, are choosing away from these amenities, but I don't see why you couldn't also have a clubhouse depending on how many, you know, if it really explodes and you really have a large tract of land and you're doing two or 300 of these because the demand is there no reason you couldn't also have a clubhouse and, and put those amenities in there too. I just think we're sort of in this in between where we're going, you know, through a shift it's not totally been realized and a lot of this construction was planned a year ago or whatever, two years ago. I mean, we're right on the cusp here and I'm sure developers with with scale will start adding amenities or maybe doing kind of a combo where you've got maybe more traditional building with then a significant number of these townhomes or single family rental around it. And, and in that, because of the larger building there, they include amenities. So I don't necessarily think you'll have to choose forever, but for now people are choosing, you know, toward individual apartment amenities and green space.

Thomas Demiranda (18:29):

And for Chicago specifically, have you seen like, is it like very different than the rest of the country, especially the southeast where there's just like a boom in construction, but obviously there's also more space here compared to a metropolitan city like Chicago that's been built for years and years, but like in Austin there's still so much space to be built out even though it's becoming more limited, cranes everywhere. You know, in in Denver and and other cities. Do you see like amenities and space, like the way that you view them there're changing because it's so limited?

Roger Daniel (19:05):

So I mean certainly Chicago has that hurdle that some younger cities with more, you know, with, with land may not, I mean one interesting about Chicago versus like a Manhattan is you, you can just sort of spread out for a long ways too. I mean there're there's developments in the suburbs of Chicago that, you know, you could be almost anywhere. They're surrounded by farm, but they're still only an hour away. So I think sh you, you still can sort of do this model in Chicago and I think in that way Chicago is sort of a microcosm for the country, but a lot of these things are at least some of these things. You don't necessarily need single family rental or a town home community to achieve, you know, exposure to natural air and light, you know, balconies a place to work from home. You know, these things you can do anywhere. And I think a progressive developers making sure to include this, this these types of, you know, amenities, you know, when they're building other things are, you know, sort of that door to door keyless access you know, package storage, EV charging stations. These are things that can apply anywhere. And I think our sort of trendy in terms of, you know, amenities that you'd see at new, new construction and new development.

Thomas Demiranda (20:21):

Got it. Got it. Absolutely. Yeah. Well we've taken some of your time and it's been really, really a pleasure and obviously we'll continue to talk here soon. One question we always ask our guests is what has you in a good mood today? And so share with us and we'll go around the table.

Roger Daniel (20:40):

Well, I'm enjoying Chicago's three week summer, so that's got me in a good mood. I find myself living vicariously through my kids who are definitely living their best life. So we're all really excited about camp this summer and I like hearing their stories when they come home.

Thomas Demiranda (20:56):

What's the weather there like?

Roger Daniel (20:57):

I mean, honestly right now it's mid fifties, believe it or not. I mean, at least the le like, there's some leaves and it looks like this summer, but it's actually still cold.

Lauren Goodman (21:05):

That's crazy to me. I know. I can't even imagine. Well, what has me in a good mood is tomorrow we have one of our yearly team meetings with the full catalyst team. Our team is divided up into five different houses based on our values. And so my house is leading this month's meeting. And so I'm just really excited to see everybody and get together and have some good discussion.

Katie Degutis (21:31):

I think we've got actually everyone coming in person too, which is a rare occasion. Yeah. For me, I got word this morning that a friend went into labor. She was due beginning of July, so I'm sure she is very happy that it's already happening. But excited to welcome her daughter coming soon.

Thomas Demiranda (21:49):

Yeah, because Roger here it's a hundred degrees already starting, so

Katie Degutis (21:55):

110 on Sunday.

Thomas Demiranda (21:56):

My good mood is I'm leaving Sunday. Yeah. I'm taking my family to the northeast. We're going to Cape Cod. For Father's Day and spent some time with the family and based on what I've seen on the forecast there, it's, you know, mid seventies and then at night it's like 55. So I'm

Katie Degutis (22:11):

Gonna need you not to brag about that too much.

Thomas Demiranda (22:13):

I'm going to send you photos specifically, so very excited about that, that there is a, you know, a, a good summer vibe there compared to what we're gonna get here. Yeah. That I heard. Even 120's in the next couple weeks. So yeah, not happy about that. But thank you again Roger, really appreciate your time. Cheers everyone.

Katie Degutis (22:33):

Thanks Roger.

Lauren Goodman (22:34):

Bye.

Roger Daniel (22:34):

Thanks guys. Talk soon.

Christy McFerren (22:51):

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