Growing a Property Management Company to 300 Doors in 5 Years | John Scribante's Story

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Transcript

Stephen Fox
John, thank you so much for joining me today. To kick things off, could you tell everybody a little bit about your background and your experience in property management?

John Scribante 
Yeah, sure. And Stephen, thanks for having us on here today. It's been an exciting journey working with you guys over the years. my background really in property management started back in college. I didn't know what I was doing and I needed to earn a few bucks and a buddy of mine came to me and he said that his uncle had some apartments that he needed somebody to manage.

I said, yeah, sure. Why not? How hard could that be? And so he handed me a ring of keys, you know, back in the day you had the big ring and, you know, 40, 50 keys on it. And these were three worn out tenement buildings, you know, the kind of apartments that had the bathrooms down the hall. And it just, quality of the tennis quality of the building was just in shambles. And, and he, the owner said,

because he was collecting a lot of housing assistance on it. And he said, look, collect what you can, get whatever rent you can, pay this bill, these bills, and keep whatever else you get. it was just, and in college, back in those days, all you had was a pager. And so you'd be out with your friends, shooting darts, playing pool or something.

on a Friday evening and you know, the pager, you know, so you had to go run and deal with some nonsense. And it just, that was my first, you know, exposure to property management 30 years ago. and then I made even a bigger mistake. I bought my fraternity house and wound up being the property manager of a college fraternity house. And I'm not sure which one was more chaotic, but.

So, you know, throughout over the years, my career, you know, went on to other things and had some other ventures. And but I always had rental properties along the way. And I always had my, you know, one foot in real estate. No matter where my career was, I had a software company and an industrial lighting company, few other things along the way. And but I always had real estate. I always had rental properties and about

John Scribante
Seven years ago, eight years ago, I left the public company. I was a CEO of a public company and I found myself sitting on some real estate and not a whole lot to do. And I was looking for property managers, somebody that I felt that would focus on what I was trying to focus on, which was wealth creation. And I had a really hard time finding anybody. And I talked to a lot of property managers, a lot of...

people that could certainly collect the rent, the drains and the appliances and that. But nobody who really saw real estate as having a mission to create wealth. And so I struggled through a long period of time looking for that person. then I said, you know what? To hell with it. I'll just create my own business.

with my own mission and with the vision of helping people create wealth through real estate. And by doing that, I started this business. We grew it from, you know, my handful of three or four properties to, you know, over 300 today and did that in about five years. And so that the mission of

creating wealth and helping people do that through real estate, I attribute a lot of our success to because if all you're doing is fixing pipes and collecting rent, you'll be reduced to what's your fee and why should I do business with you versus somebody else. So I guess that's a little bit about me and how I got started and my background.


Stephen Fox 
Awesome. I mean, 300 doors in five years, it's impressive, so hats off to you. You decided to go the franchise route. So you joined the Real Proc Imagine franchise. What is it that made you go that route rather than, let's say, starting up independently?

John Scribante 
Well, I guess I just, you know, I didn't know what I didn't know early on. And one thing that, you know, the great benefit of the franchise is a lot of, you know, there's 500 locations around the U.S. and Canada, and having those best practices, having that peer group to draw upon,

when there's questions or if you're thinking of a new strategy and having that network of people to bounce ideas off of. You know, I've always been a very collaborative person and like I get energy out of working with other people. And so going it alone, I probably could have stumbled through it. But I think the franchise saved me a lot of time and energy and money in avoiding mistakes.

They also provide, you know, that network of best practices, but then also some branding nationwide. You know, we may, we manage properties for people that have come to us that worked with other RPM locations throughout the U S and they say, Hey, we, you know, we're familiar with your brand, your company. And so there's a little cross. And in fact, I have some real estate down in Tennessee that I have another RPM office down there manage that. So it, provides a.

a platform of 90,000 houses under management with local operation. They don't really tell me how to run my business. They support me with marketing, they support me with best practices, but in terms of running the business, I get the best of both worlds. get national discounts, I get national strength.

But then I get local control and local operations, local decision making.

Stephen Fox 
Understood. So you're now, let's go back five years ago. You basically have your three or four rental properties. I assume you just joined the real property management franchise. And what do you do now? Cause I, obviously you've gotten to 300 doors in five years. What was the growth strategy when you first started to get to, let's say your first hundred doors?

John Scribante 
Well, you know, I don't know if I had a real thought out strategy other than I knew what I was doing of having that mission of creating wealth through real estate is was going to be attractive to many people. And so, you know, I did a lot of the usual pay per click advertising and, and did a little networking, but it really came down to when I'd get somebody on the phone and I start talking about the mission and I start talking about how creating value in real estate and how you have to look at a seven to 10 year view, you're gonna be disappointed if you look at your real estate portfolio in a slice of one year. You either had too much expense, your rents weren't good, you had a turnover.

There's always something in a given year. But if you look at things over, you know, seven to 10 years, then you then you start to see the value in it, you can see how that wealth creation really comes about. telling my story, you know, attracted some early adopters, people that I didn't know I didn't have any pre existing relationship, but they just felt comfortable. I still have those early clients, my very first client, I still have and she's brought on some other properties along the way. It's just, you you have to, in my opinion, you have to have a mission and you have to believe in that mission. And if you're selling people on that mission, they don't really care what your price is. They don't really care what, you know, how you handle certain things. Cause if they want to go on that same journey with you, you're the only one out there that they can trust because you're the only one talking about that mission, that journey.

Stephen Fox
And naturally though, they still have to find you somewhere. So were you like going out and networking? Was it, you mentioned PPC. Like what did that look like for you at first?

John Scribante 
Yeah, it really was was just pay per click. We just focused on that we focused on getting reviews to bolster that we you know, and then you know, did you know, my my attorney at the time had a rental property. And so he came on and he gave me a review and you know, I just keep building off of it. But the the networking was not where my strength was. 

My strength was more in when I got somebody on the phone, know, there was no really debate around, you know, well, you're too expensive, whatever, because I was very, I was just focusing on how I could help them achieve their objectives. You know, what are you trying to achieve? You know, you've got college funding coming up in 10 years or five years, you've got weddings, know, so how can I help you get there with your real estate? And I had a lot of really early successes because people are like, yeah, you're the one I want to work with because you get it. You understand what I'm trying to do. And so when it came around to price, they're like, yeah, that's fine. Whatever. It seems reasonable to me. I mean, there was a little networking through the broker. You know, I'm a broker now, I'm a dual broker now. But at the time, I was not. I had my license with a different brokerage and so that provided a little networking activity as well. for the most part, it was a lot of just phone time.

Stephen Fox
Fair. It sounds like in your early days you had experience with, we'll call it some questionable properties. Did that continue when you first started? Like were you just willing to take any type of property or do you focus in on a specific type of property? What does that look like for you?

John Scribante 
You know, I like to think that we were very selective from the very start, but I also know that we've made some mistakes along the way. You know, I, when I set out, I wanted to be in the upper half of the rental market. I wanted to focus on the higher dollar properties. We have a lot of lake properties around here. We have, you know, rental property. I currently have rental properties as high as $12,000 a month. 

And we have an executive management service to cater to those. That's a very expensive plan, but believe it or not, people will pay for it because that peace of mind on those high dollar properties. But there were there are times where we took on some properties and said, boy, that probably wasn't wasn't our best move. And, know, at the next opportunity, we, you know, we exited out of those. You know, and so you have to be selective because

If you're not selective with your owner, your owner has to be financially and mentally stable to provide you a quality property. And if the property isn't quality, then your residents that you attract are going to be reflective of a poor quality property because they're okay with poor quality property and that's not the tenant that you want.

That cycle of just continuing to, you know, not get the rents you want, not get the quality, you know, that just is not a model for us. And so we've gotten much better today at setting expectations for our owner clients to ensure that, you know, they're prepared financially to absorb a failed furnace or a vacancy or if we want new flooring or painting that we're not going to get the pushback because, you know, if they understand our strategy to get A plus residents, then they shouldn't have a problem coughing up the money to, you know, produce that quality of a property. When we get the pushback, that's when we start to look for an exit because it just goes downhill if people aren't willing to do the proper quality work on a turtle.

Stephen Fox
One thing I know about your company is you operate extremely profitably. I'd love for you to touch on that a little bit. What is it that's allowed you to achieve what I'd call basically above average profit margins?

John Scribante
Well, so, you know, nothing has value until you create the value and create obvious value, meaning that there's value where people are attracted to it, not that you're, you know, sometimes salespeople, you know, have taken average product and then they oversell why it's so great. And the buyers sitting there saying, yeah, I don't know, it's still just a dishwasher or still just a, you know, whatever it is, but, you know,

If you create something that people are like, wow, yeah, no, that makes sense. I'd pay for that. That's where you want to be. You've got to elevate yourself to that. So I'd mentioned on our lake properties. many of these are furnished rentals and we charge a very high amount of monthly to cover our expenses on managing those properties.

But at the same time, we're not just collecting rent, we're collecting the rent, but we're also doing monthly visits to the property. imagine you got a $4 million house on the lake, maybe $5 million, and your manager's going inside the property once a month, putting eyes on it, making sure that it's cared for, that has value, that gives peace of mind. We also do window washing twice a year, at no additional cost. We have our own window washing systems.

And so we just send our guys over on one of those monthly visits. We do spider web removal because around the lakes, there's always spiders. So they get the brush out and they do the spiders. We do the filter changes, the salt top-offs. We have pest control that we include in that. So we're giving this owner this white glove, top of the line service, and we're charging them a lot for that. 

On a $10,000 rental, if they're paying me $1,000, $1,500, $1,300 a month, I mean, they don't care because it has more to do with the peace of mind than it is the cost at all. And so that's a great example of where we've taken a market that, again, our market has a lot of lake homes in Minneapolis and Minnesota.

So that, you know, you have to find that whatever that is in your market where people are willing to pay for the peace of mind. That's one example. I think the other side of the profitability is to create an environment where you can give exceptional service and not only to the residents, but also to the owners, you know, answering the phones, you know, live answer, having proactive checks on vacant properties, proactive maintenance services. We have a couple of different maintenance programs that if I went and say did a dryer vent cleaning for an owner and sent them the bill, you'd get a phone call saying why'd you clean my dryer vent?

And even though it needed it, it was clogged up, whatever, there's pushback because you've, you've surprised them with something that they weren't expecting. But so what we do is at the beginning of the year, we have a checklist of about 40 different things that an owner could request. Dryer vent cleaning, gutter cleaning, sump inspections, driveway seal coating, power washing, you know, just go, go on down the list of all the preventative things that you could possibly have on a house, know, trimming the bushes, washing the windows, whatever it is. And now, because we survey them upfront, they're actually ordering more services than they ever would have agreed to had you come to them on a one-off, number one. But that also gives us the opportunity to now bulk purchase. So if I get 45 dryer vent cleanings, I can go to a vendor and say, I have 45 dryer vents, and you can get them done sometime now in the next 90 days and use it as fill work. Now, instead of whatever, $175, maybe I'm buying it at $75, the owner's sharing in that, and they're more willing to pay for it because it was their idea. 

And so I think that drives more maintenance revenue and maintenance profit to your question, but it does it in a way where the owner's happy to pay that, and sees the value in paying for that because it's caring for their property more so than they weren't expecting it. It wasn't in their budget and now your $175 blew their annual budget somehow. you know, thinking through how to create value and how to do it in a way where it's attractive to the owner, you know, is a great example of how we do that.

Stephen Fox
I would think that also probably helps keep owner churn down because you're being proactive with their property. They see you're being proactive with it and you have to communicate with them to get them to fill out this checklist. So there's regular touch points which both will help reduce the owner churn. Do you find that as an impact?

John Scribante
Well, yeah, of course. then it's also the big ticket items as well. And so, you know, in our market, it's furnaces, air conditioners, and water heaters. And those things are going to fail at some point. And so last year, we replaced 14 furnaces. I think there may have been a boiler in there as well, but 14 furnaces and

What we do is we negotiate our furnaces, our air conditioners and our water heaters off season. So because we inventory at the start of a relationship, know, the BTU, the age, the serial number, you know, of all the equipment, I can go to my vendors and in August or September negotiate furnaces for the winter. Because if in January you go to replace a furnace, your costs are going to be higher just because they're too busy. Number one, number two, getting parts delays, things of that nature. So negotiating in the off season, instead of 5,000 for a high efficiency furnace, you know, maybe we're getting it at 4,200, 4,100. Another way to show value to your owner, even though you're making a profit on that transaction, you're making a profit in a very organized way and in a way that your owner sees value in it. 

And so I, you know, every once in a while, an owner or somebody, they're like, well, you know, are you going to mark up my maintenance bills? And the answer is yes, but there's an emphatic, it's in your best interest to have me mark it up because I'm delivering these services promptly you know, expeditiously. But if I don't have an incentive to fix things, you may wind up with more deferred maintenance. And now you got bigger turn problems and vacancies and you can't get the rents and that. So it's in your best interest to pay me a, you know, a reasonable profit on handling maintenance as long as I'm delivering the services, because that that's going to keep your properties filled, keep it in good condition. 

I have a lot of horror stories of competitors who don't charge for maintenance services. I take over their property and it's like, boy, it's no wonder they don't charge because, or a good thing they didn't charge because the work craftsmanship, whatever, was just not there. So, you know, the profitability is the whole picture. It isn't just one piece. It's that total experience that you give the owner in a way that they're willing and interested in paying you.

You know, and I'll give you one, I'll give you one more piece of this that I think is more cultural in our organization is on our website, in our management agreement, even in our lease agreement, the word fee does not exist. We do not use the word fee because fee connotes a charge that you want to avoid. It's like paying bank fees. Nobody knows what they're for, but you just have to pay them. It's like a toll.

But if you charge for services, you've now changed the perspective of the owner to ask him, are you willing to pay me to perform a service? And if I'm going to charge somebody $50 extra to go do a mainline cleaning, it's like, well, what would you charge me if I asked you to come over and do that same work at my house? Would you pay me 50 bucks to do that? Most people would. 

So I think that culture of fees versus services, it may seem a little silly, but it really makes a difference when you're asking your staff members to explain things to owners. If they keep using the word fee, fee, fee, the owner's only going to say, I want to avoid that. I want to avoid that. want to avoid that. Where if you keep talking services... our leasing services, our maintenance services, our renewal services. These are things you should be willing to pay for as long as you're backing it up with some value.

Stephen Fox 
Makes sense. I imagine also you mentioned earlier that because A, you structure it so that you're performing some of the maintenance during the off season, so you get a bit of a break there. And then B, you have volume, so you get them a bit of a discount there. Even with your maintenance markups, they're probably not paying much more than they would be paying if they were doing it themselves anyways. 

John Scribante
Agreed. Early on, you you asked me earlier in the question, what did we do early on to grow? One of the things I did do when we were early and probably at the end of that first year is I hired my first on staff maintenance tech. And so having the vans, two vans now and two full time techs, that also allows us to provide more cost effective services, but also give the resident a much better experience with faster, quicker response time. And even if a furnace does go down and we might have a day or two waiting for the install, our guys can deliver the portable heaters and deliver. All of that is included in that maintenance markup so that these are things that you can do extra.

It really doesn't cost us anything to do, the perceived value on the owner's side, as well as the resident, is very, very high when it's 10 degrees outside and no heat.

Stephen Fox 
Makes sense. So you mentioned maintenance tax but at around 300 doors right now how many people are on your team and what are the rules what does that look like for you?

John Scribante
So I have four full-time people. So two maintenance techs, two property managers. And then I have another person who handles all of our, so independent contractors handling all of our showings. He's got three showing agents. So there's another four showing agents that are contractors. And then I have... six in the philippines.

Stephen Fox
Where did you find the showing agents?


John Scribante 
Those are just realtors, know, are side gigs for realtors. We just reached into some of the local, you know, agency, real estate agencies that, you know, and talk to their people and see who wanted to make a few extra bucks.

Stephen Fox 
Got it, okay. And I guess you right now, what's your typical day look like?

John Scribante 
So I believe it or not, I probably work about four hours a day today. I dedicate myself really to assisting the teams in their jobs and making sure that they're equipped, they have their systems. I do work on a lot of the processes. My last job before here is I ran a manufacturing company.

And so lean manufacturing was very, you know, we had 400 employees and 480 employees and 300,000 square feet of manufacturing space. And so I applied a lot of the theory of constraints and lean manufacturing principles to our workflow to make sure that, you know, everything is running smoothly, turnovers are happening, renovations are happening, know, marketing, everything is happening in a very smooth process. 

If you allow chaos to be created, your team will get burned out and move on. And so, you know, it's, that's a really important piece to me is to make sure that the team is at their peak potential.

Stephen Fox
What are some of the things that you did to implement that into property management? Because obviously manufacturing and property management are a little bit different, but it sounds like you've been able to kind of take the skills from there and apply them to this business.

John Scribante 
Yeah, I mean, it's really just the theory of constraints, which is this principle of, of you want your salespeople to be your constraining element in the business, because you don't want a salesperson to be able to produce more than the back office can absorb. Because now you're, creating, so, so you want the choke point to be at sales. You want your back office staff to be able to take whatever comes their way. so workflow and process improvement, constantly improving the processes. 

We use industry standard workflow process and CRMs. So, the ability to constantly tweak those workflows to make sure that if something failed along the way that we've got a catch in there somewhere to deal with that, to prevent that in the future. that's just been a, that's a constant continuous improvement piece of it. We have, you know, our sales organization is very workflow driven. I have one person that just answers the sales line, does screenings, and it's a virtual assistant. 

And you wouldn't realize it when you're calling in, but she'll just take it down and then schedule on the calendar for our executive property managers who would take that call and then screen the prospect and make sure it's good fit. So that's a very process-driven event. And onboarding clients, I think we have 126 steps onboarding tenants, somewhere about half that, so it's just that constant dedication to tweaking the process.

Stephen Fox 
And you mentioned earlier that you got started in property management because you were investing in real estate yourself. At this point, what are you doing now with your investments? Are you investing them all back into real estate? What are you doing, I guess, outside of the business? What does that look like for you?

John Scribante
Yeah, I have, I am spending more time working on my portfolio, building up the portfolio, adding to that. I have some, a lot of travel that, you know, have some, my parents are, are a little more demanding of my time. And so, you know, I travel more. And so when I travel, I'm looking for investments in those locations, Tennessee, Florida. 

My son's in college at University of Kansas, and so I bought a property down there. So, you know, I'm finding more ways to use real estate and travel so that, you know, those obviously are tax deductible trips then. And so, you know, that's a piece of it. You know, my children are getting to the age where they're pretty independent. it's just, yeah. But, I spend my spare time at racetracks and other fun places as well.

Stephen Fox 
Do you find being in property management has given you more access to deal flow or at least in your local market?

John Scribante
Definitely. Me and other associates in my business have bought properties out of estates, from our client estates or people looking to buy and sell. yeah, there's clear opportunity. It's not in good markets, nobody wants to sell, so it's hard to pick them up. there's always life. Like I said, we've had a couple of states where the children just want to unload properties.

It gives you an opportunity to get ahead of it.

Stephen Fox
So if you could go back in time to when you started this journey, what is the one thing that you would change to help yourself succeed at a faster pace, whatever your definition of success might be?

John Scribante
I think I would have, you know, and this was something that we shifted just recently, but it's what I would have done to your question. So when I was at my most profitable on a per unit basis, however you want to measure it, it was when I was a one man shop. 

And it was because I knew everything that was going on and when a maintenance ticket came in, I was on it. I knew what had to happen. I could judge, you know, is this too expensive? Do I need to get some more pricing? Is this even the right solution? Because I was very involved in every single piece of that puzzle so that when an owner got their bill, they're like, yeah, that's great. Thanks for taking care of it. Well, the bigger we got, the more departmentalized we got.

And by doing that, all of sudden, bills are getting sent to owners that are, you know, maybe not our best work or maybe wasn't as thought through or didn't have enough critical eyes looking at it to say, you know, is this the right solution? And so we moved away from that craftsman to more of an assembly line.

We're now reverting back to that more craftsman approach. So my property managers today have a portfolio and they're the one person that makes all the decisions on that portfolio and nothing goes to an owner, nothing goes to a vendor unless that portfolio manager says, yes, that's what we're going to do. And that way we've regained quality around the owner experience and the tenant experience because there's knowledge there and there's, yeah, on that property, let's do it this way. I would have figured that out earlier to realize that the more departmentalized you get, the less accountability any one person has to that client relationship. so we're now reverting back to that model that made us successful at the start.

Stephen Fox
Awesome. Very cool. John, thank you so much for taking the time to speak with me. Really appreciate it. For anyone that would like to connect with you, what would be the best place for them to reach out?

John Scribante 
Yeah, just go to our website, rpmviking.com. That's short for Real Property Management. There's actually a blue button right on the homepage that if you just click that, you can book a call with me. So I'm very, very, very accessible and very happy to talk to people.

Stephen Fox 
Awesome. Thank you so much,

John Scribante 
You bet. Thanks for having me.