The Real Estate Syndication Show

WS1944 What You Need To Know About Asset Management | Jens Nielsen

February 16, 2024 Whitney Sewell
The Real Estate Syndication Show
WS1944 What You Need To Know About Asset Management | Jens Nielsen
Show Notes Transcript

Join us as we welcome back Jens Nielsen, co-founder and managing partner of Incrementum Equity Partners, for an insightful discussion on mastering asset management in real estate syndications.

From small beginnings to managing a $250 million portfolio in just 5 years, Jens shares his incredible journey and the key strategies that fueled his success. Learn how he leveraged his 25+ years of experience to navigate the post-acquisition phase and ensure maximum value for his investors.

Key Takeaways:

  • Embrace Accountability & Intentionality: Define clear roles and responsibilities from the start for a smooth-running operation.
  • Structure & Discipline with EOS: Discover how the Entrepreneurial Operating System can boost your team's effectiveness.
  • Metrics & Communication are King: Track key performance indicators (KPIs) and prioritize clear, consistent communication with investors.
  • Tools for Efficiency: Explore practical recommendations for task management and financial reporting, like Asana and Google Sheets.
  • Navigating the Market: Gain insights on navigating the current high-interest environment with a long-term refinancing strategy.
  • Bonus: Jens shares his personal productivity tips for staying focused and achieving results.

Connect with Jens:

  • Email: jens@opendoorscapital.com

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Jens Nielsen: Starting out, everybody's super excited that we got a deal, we got to go out there and raise money and close it and all this stuff, right? That's exciting. The next five years, that's not the exciting, that's the hard work. And I think people kind of forget about that when they do a deal. They're just like, oh, it's easy, right? Just hire a property manager, good to go. But that's not the reality.

Whitney Sewell: This is your daily real estate syndication show. I'm your host, Whitney Sewell. Today, we are back with guest Jens Nelson. He's co-founder and managing partner of Incrementum Equity Partners, oversees the company's acquisition analysis, business development, and asset management. He co-directs overall investment strategy, 25-plus years experience in computer system management and organizational leadership. He's formerly the founder and principal of ODC, a private real estate investment firm that has purchased or partnered in over 2,400 doors since 2016 and $250 million in assets under management. A lot of experience there, and we're going to dive into some of that experience around asset management today and some things that I wish I had known many years ago before, say, closing on the first deal or so. And you need to know as well. Jens, welcome back to the show. I'm looking forward to really catching up with you and really helping the audience with a skill set that I know you've become an expert in that I know most of them need at the moment. And I'm looking forward to learning from you myself, because I can use it as well. So Jens, welcome back.

Jens Nielsen: Thanks, Whitney. I'm excited to talk to you again. It's been a little while.

Whitney Sewell: It has been a while. Well, I'm excited about it as well, you know, with your experience in the business and whatnot. I want to dive in and, you know, maybe give us a minute though on your focus right now and if anything's changed and then let's do it.

Jens Nielsen: Yeah, absolutely. I mean, I've been in this business since 2016, when we started buying our own smaller properties, we being me and my wife, and then, you know, expanded into the private equity syndications there in 2019, and have been kind of going since then. I think we've done 33 deals, anything from the smallest ones we did to the largest ones, over 200 units. So right now it's more on the largest syndicated deals that we're focusing on and operating everything that we own as well. So that's pretty much my focus right now.

Whitney Sewell: Yeah, no, well, you know, you're thinking about operating, right? And going into just, I want to dive into the systems asset management piece that you've become so good at, right? Because I know the, like you said, the listeners and myself, and I feel like we can never We've never arrived in that area, right? I mean, it's just this constant improvement. How, you know, what else can we use to improve our efficiency, you know, and just get better and better and better. So, I'm wanting to learn from you. But let's dive in there. You know, and some, either, maybe give us, if you have any examples or any high-level things, ways we can start and how you all handle asset management and some of the systems you use.

Jens Nielsen: Yeah, absolutely. I think it's one of these areas that are not spoken about a lot. But as you know, once you get in and you start owning these properties, if you don't asset manage them, essentially managing the manager, managing the business plan, if you don't do that very well, then suddenly this property may not be operating that well, right? And I think there's a couple aspects to it. It's starting out, everybody's super excited, we got a deal, we got to go out there and raise money and close it and all this stuff, right? That's exciting. The next five years, that's not the exciting, that's the hard work. And I think people kind of forget about that when they do a deal. They're just like, oh, it's easy, right? Just hire a property manager, good to go. But that's not the reality. So what we have started doing is be very intentional and clear before we even close the deal. Who is accountable for what? And I'm big into EOS, the entrepreneurial operating system, and so forth. So we are intentional around who who is accountable for what, who is the lead asset manager, right? Who is the one producing the investor reports? Who is managing the finances and everything else? We've become very clear about that upfront. So it isn't, you know, five people doing the same thing and nobody looks at certain areas. That's always a starting point that we can definitely, you know, dig into that to, you know, how do we then go about using systems to manage all that.

Whitney Sewell: Yeah. Yeah. Why don't you just lay out a few of those things that we should think about? Like who is accountable for these things beforehand? Uh, and yeah, name off a number of those so we can, uh, hopefully if somebody is listening right now and you're about to buy something, you can just ask yourself right now. Okay. Do I know who are doing these things? Yeah, absolutely.

Jens Nielsen: So imagine you're closing a property on March 1 this year. So what you want to think about is, who is the interface with the property manager? Who is getting on the, hopefully, weekly calls with the property manager and managing against the metrics? What metrics are we talking about here? Occupancy, of course, delinquencies, or collections, rent growth, what are the target rents. Basically, when you do the underwriting, you say, hey, these are the targets we have. The property manager needs to know that so they know what they are moving towards. Managing the property manager is probably one of the most important things, be on top of that. Then, of course, if you have some sort of value-add plan, are you turning a bunch of units? Are you upgrading them? Are you putting a bunch of capital into that? That may be a separate general contractor that's doing that. So you have to manage that contractor against, hey, what's the schedule? What's the amount of money you have for every unit? Are you on track and so forth? So who's managing the rehab project? Then, of course, you have to manage the finances. You get the monthly financial reporting from the property management company. Make sure you look over that and compare that to your budget. Is your income in line? Are your expenses in line? When you start having variances that that are too far off, you need to start controlling that. Yeah, we all know that insurance has gone up by 20%, 30%, 40% last year. So that's suddenly a hit that you have to take a look at that. Can you mitigate some of that? Are expenses out of control? And all these things. So digging into line item by line item, super important on the income and expense side. Then there's keeping the investors updated. You want to send either monthly or quarterly updates to your investors, good and bad, and so forth, to see what's happening there. And then there's all the compliance stuff, annual tax returns, and finding new insurance, and any kind of reporting you need to do to various government entities and so forth. So those are some of the high-level ones. I'm sure I left something out, but at least those are what I think about who's responsible and accountable to each of those areas.

Whitney Sewell: For sure. Those are some very important pieces to the operations puzzle. And I agree, it could be so exciting, right? You getting to that closing table and then the next day being crushing. You know, wait a minute, we didn't think about this thing, right? Or we just assumed property management company was going to be able to do that, right? Or, oh my goodness. And so, you know, it just, you know, finances as well. I was thinking about, you know, you're talking about, you know, somebody comparing the budget and reviewing the finances. You talked about line by line. And, you know, if you're not, somewhat versed in some financial documents or P&Ls, things like that. Man, that can be overwhelming as well, right? I'm like, where do I even start? And so I just love to think about who's got the expertise. right, to even do that? And do we have that person? Jens, you all, you know, how would you all look at that, you know, as far as, you know, if you don't have that expertise right now, you know, would you get some training? Would you try to find a partner or somebody that does have that expertise?

Jens Nielsen: Yeah. So, I mean, in terms of the P&L, right, hopefully as part of your underwriting, you've gone through the seller's P&L and had a good understanding of it. But, you know, You know how these different people with different backgrounds come together to do a deal. Hopefully, you have somebody that has some sort of financial wherewithal. If you don't, I mean, you may need to work with a CPA or an accountant or somebody like that to maybe help you a little bit. I don't think that looking at a profit and loss statement is not that complicated. But you have to know, if you start seeing these buckets that are large buckets of repairs and maintenance, hundreds of thousands of dollars, and you don't know what's going into it, you probably need to really start digging into it and say, hey, are we hiring out third-party contractors? Are we overpaying for materials? Really start digging into it. I think that's really up to the property management company. They may be managing thousands of units, and your property is one in the mix. So really holding them accountable to providing the data you need is incredibly important as well. And I've seen some companies that are really good at providing and others are absolutely terrible. And that's always a huge challenge too.

Whitney Sewell: Yeah, and I want to get to the systems, dashboard, some of that stuff. One other follow-up question on this though, as far as the investor updates, you know, how is that normally, or I guess, how many team members are involved in that? Where does that information come from? Is the person that's responsible for that also talking to property management or, you know, how are they informed well enough to be able to create a good report for investors?

Jens Nielsen: Yes, I want to maybe talk a little bit about asset management meetings, right? So if you have a lead asset manager that meets with the property manager regularly, then you also, we tend to have, we have regular asset management meetings where we talk about what we've learned from the property manager, where are we on the project? And at that point, whomever is going to write the investor update is on that call so they can get a feel for what's going on, you know, so they know what's going on with the property. And then we tend to, you know, we then we tend to do kind of a a narrative and say, hey, here are the income. We are 95% occupied. Here's the income compared to last month. Here are the expenses. And here's the NOI. And so we kind of go through a narrative. And here's some of the positive we experienced. Here's some of the challenges we've had. And this is what's looking forward. I like to do a narrative that kind of explains what's going on. Because I've seen other updates that are just nice graphics and stuff like that. But in reality, does it really show what's going on? So we tend to write more of a a narrative about what's happening. The frequency there, it varies. Some we do a monthly, depending on the investors, some quarterly. I think that in a stabilized property, a quarterly update is frequently enough, because it doesn't change month over month, but some more regularly there.

Whitney Sewell: Yeah. I know that we do, we do monthly updates and every month it can be like, it's just really not a whole lot has happened. Right. Then what do we talk about, you know, but we still want to add that value to investors or them to know what's going on. But it's like, aren't we just kind of saying the same thing sometimes, you know, but it's kind of, that's what happened, you know? Uh, so I, I agree completely. Well, let's jump into some of the systems that you use or dashboards or any, any tech too, that that's, you know, simplified some of this for you or helped you to do it, be more efficient.

Jens Nielsen: Yeah, I mean, I think, you know, the starting point is the portal that when we raise capital, right, we have a portal where all investors are in, and that's where we send out updates through. So the investors can go in there and see, you know, what's the latest update, how much return have they gotten on their investment and so forth. In terms of other systems, I mean, we tend to use Asana to just track our tasks. And then we tend to pull, you know, the data into various dashboards. So, you know, we may have an overall like Google Sheet where we pull it in and show graphs. I wouldn't say that we are, of course, there's a property management software, but that's on the property management side. From the asset management, we haven't implemented a ton of really sophisticated softwares in addition to just Asana or Monday and some stuff to track our task and Google Sheets and so forth. And we may have Slack to communicate and so forth. And also, we have to be careful that we just use tools that people are comfortable with and want to use versus a bunch of fancy stuff that nobody uses. So it's kind of been my experience.

Whitney Sewell: We've made that mistake probably more than once.

Jens Nielsen: The shiny optics software, right? Nobody uses it.

Whitney Sewell: Yeah, for sure. You know, even if it's a Google sheet, you know, or are there ways that you have found that, or even a system behind that, that where you all kind of come together to make sure things are operating, you know, the way you want them to, or things that are crucial that you see on your, you know, on there to know that things are going like you want.

Jens Nielsen: Yeah, I think it's just really staying on top of the income, driving the top line income, driving that, and then having a know, in our financials that we get, having a budget and see if we have a variance against our budget, right? Because if we start slipping on the income, then very quickly, rapidly does that deteriorate the NOI. So really staying on top of that, you know, delinquencies and occupancy and everything else. And then, of course, you know, so we just kind of To get them the monthly financials and we track that against our budget and see you know where we off right and dialing in or digging into areas where we are. Where we are off on that and then the expenses again right where we know what control boy expenses do we have and how can we. get better track of that. But I think just a monthly budget and a monthly balance sheet is helpful as well, just to kind of see where we stand.

Whitney Sewell: For sure. Are there other ways maybe you all have formed some accountability? Or I know one thing you're big on is the EOS system. And maybe you can highlight how you all have implemented some of that. I know most of the listeners are going to be familiar with what that is to some degree. But maybe you can speak to, how that's been beneficial for you all.

Jens Nielsen: Yeah, absolutely. So I mean, with my, my partnership, you know, my partner, Jason peril, he, he is the property manager on quite a few of our deals. So I've been very involved in the property management side as well. And it was a little bit chaotic a few years ago. So we went ahead and so I'm not part of that. I don't, I'm not part of property management company, but I came as a little bit of an outside consultant and help them implement EOS, right, going through that process. And this helped a lot. I mean, now they have dashboards and KPIs with their individual PMs, because, you know, if they have 20 individual property managers working for them, they want to keep track of everyone and their occupancy and collections and all these things. I've seen that and that's been tremendous. Same thing on the way they hold meetings and so forth. They run the proper L10 meeting instead of just going down rabbit holes and all these things. I don't think a lot of people, EOS is not super complicated. It's just a set of systems that if you follow them and you're disciplined around, it's super helpful. But it does create that accountability. It does create just some clarity of direction and what everybody is accountable for. So I really love it. And it's something that I wish everybody, every entrepreneurial company would implement.

Whitney Sewell: Yeah. What would you say is the most helpful piece of EOS? You know, if you could say this meeting or this thing or

Jens Nielsen: I think the number one is accountability chart. Who is accountable for what? Super important, because if you don't have that, you don't know where does the buck stop, essentially. I think that's number one, and I think probably number Two is running good meetings and having defined outcomes. And then maybe number three are the KPIs. So I think, or you swap the KPIs in the meetings. I don't know. But those are probably number two and three on the list there. It's not, I mean, as I said, it's not complicated, but it takes a lot of discipline to implement it and run it and stay on top of it. And, you know, so every three months we meet and say, you guys on track, right? What are the next rocks you have to work on and all that, but that's super important.

Whitney Sewell: For sure. No, we do a version of EOS as well internally. And I think a number of those things have helped us as well. I mean, it's not rocket science. I mean, some of it's just like, okay, this just makes sense. We should be doing this, you know, or we should have this documented in this way, or just like you said, so there's more accountability or that people know what they're pushing towards, right? I mean, it's, you know, through those KPIs And every meeting is maybe not always as productive as we would prefer, but I think they're getting better, right? It's a process for us. And while we're talking about that with your experience, any tips on even a productive meeting? Because that, my goodness, it can be. I was part of the federal government for a long time. And man, we were the best at having a three or four-day meeting that could have been done in 30 minutes. I mean, it's like.

Jens Nielsen: Yeah, yeah. I think you have to have somebody on your team who's pretty organized and show up, what's the intention with this meeting? What are we trying to do here? So show up with intention, show up with, a schedule. And if you talk about the DL10 meeting, the level 10 meeting, you just do a review of your ROCs, your KPIs, your to-dos, and then anything that is off track, you call it, you drop it down. So instead of having, when you start looking at a KPI, oh my God, this one is off, and everybody jumps down the rabbit hole of this, you say, okay, our occupancy is off. let's drop it down and figure it out, right? So that way you go through the high level stuff and then you say, okay, we got 10 things to discuss. We've got an hour left. What's the most important topic? You go through that one and you do the IDS, you do the identify the problem. Hey, occupancy is low. We discussed blah, blah, blah. Oh, we don't have good enough advertising. So the solution is let's bump up our advertising so we can get more leads. And then you go to the next one. So you make sure we could… A scene is where often a lot of discussion doesn't have any conclusion. They're just a lot of words and there's no action item. You have to end with action items. In the end, somebody has to keep track and say, hey, Whitney, you have these three action items by next week and so forth. But it does require somebody who is disciplined and can pull people back out from the rabbit holes that they inevitably drop into.

Whitney Sewell: Yeah, no doubt that's going to happen. Yeah. Anything else around, let's say, asset management specifically, or how you all stay organized that you'd leave us with before we move to a few final questions?

Jens Nielsen: Now, just think about if anybody has project management skills, they are typically good asset managers, right? Because it's about being organized and driving towards certain outcomes. So anybody who has had a project management background, I would love to have those on my team as an asset manager.

Whitney Sewell: That's good to know as we, you know, look to hire for that position, right? Or think through who that partner needs to be. So, Jens, you know, what about, and I ask everybody that, especially in your shoes or just experience and operators and, you know, as far as your prediction, right, over the next 6, 12, 18 months, anything that you're watching or anything that's, you know, what I always say is that, you know, none of us know exactly what's going to happen, right, in the future. However, what we believe is going to happen affects what we're doing, right? You know, whether we're buying or selling. So any thoughts that you would have for, you know, what you're looking towards over the next little bit?

Jens Nielsen: Yeah, I mean, I think right now is, you know, I think most operators are just trying to stabilize their properties and kind of, you know, quote unquote, survive and thrive through these challenging times, right? And You know, I still think that if you can find a deal right now that has a little bit of distress and you may have to buy it at high interest rate, if you can refinance that in a year or two at a hopefully low interest rate, I think you can find some good deals right now. They may not cash flow really well, but if you feel, oh, this is a really good deal. at a higher interest rate, and you just buy it, and you hope for a lower interest rate. I think that's the thing. You have to be incredibly careful. And luckily, we don't have any floating rate debt, so we are blessed not to be there. But hey, I don't know. I think right now, we're in the thick of what it really means to own a multifamily apartment.

Whitney Sewell: What about your best source for meeting new investors right now?

Jens Nielsen: You know, I run, I run like some meetups here locally. I run a small conference in Denver, you know, just getting out there and around people that I still, I still think the referrals, the one-on-ones are really the best, the best way. I don't have a podcast like you, but that does work for me for sure.

Whitney Sewell: What's your best advice for passive investors right now?

Jens Nielsen: Ask how much distress the operator has when any of the deals they currently own, right? That's kind of, you're trying to invest in something new and have patience. I mean, have, you know, hey, we're all doubling our money in two years in 19, you know, 2019, 2020, but that ain't gonna happen for a little bit. So have patience.

Whitney Sewell: Yeah. How much sleep are they getting at night? That'd be a good question. Yeah. What about, you know, and even this, you could relate this to asset management or even something personally, but what are some of the most important metrics that you track?

Jens Nielsen: So I, you know, we talked a lot about asset management with this go personally, right? I make sure that I get enough sleep, I get enough exercise, I spend time with my family, right? Because we have enough stress every single day, but all these other pieces, if we maintain those, you know, we can get through whatever challenges we have. So I think if we pay attention to those, we'll be fine.

Whitney Sewell: Is there a way you track your sleep?

Jens Nielsen: Just the watts, I think. Okay. What's enough? For me, I mean, as I, you know, I'm in my early fifties, I go to bed at nine o'clock now, but I'm up by five. So I got to get, you know, seven and a half, eight hours. Then I feel that's enough for me.

Whitney Sewell: I'm not 50 yet, but that's, that's the hours I like to sleep too. There's something to that. You know, what about any other habits, Jens, that you're disciplined about?

Jens Nielsen: You know, I think the biggest thing that I have learned, right, I was always the guy to just drop out of bed and sit in front of my computer and figure out what to do today, daily planning. And it's so simple now. It's literally just a piece of paper where I write down hour by hour what I'm going to do. And that has really changed because the days I don't do that, I feel lost. The days I've done it, I have much more direction of how to be productive. So that's my best productivity tip today.

Whitney Sewell: That's a good one. And I think sometimes it can seem like so simple that we just think, oh, I don't need to do that. But man, writing it down is something that happens. I heard a quote recently said, successful people think with a pen in their hand. And I think sometimes it's not just the thinking, but it's the document, writing things down like that, like you're talking about, kind of commits your time to it, right? So what's the number one thing that's contributed to your success?

Jens Nielsen: I think just having the discipline around my daily planning, my journaling, and getting up. even though I work from home, being at work and dedicating that time. It's just discipline. Every single day, the little things you do, right? It all accumulates. And how do you like to give back? A couple of ways. So we run a small mastermind where we kind of have a conference that we help newer investors to kind of get into the business. And I host my… Just anything that's exciting to me, I host my real estate meetup and and so forth, right? Donating some money to various charities, but anything that's related to real estate and education, I love that.

Whitney Sewell: Awesome. I'm grateful for you giving back to us today and diving through some asset management tips that would have been helpful for us years ago. I know that. But, you know, it's good, right? So, grateful for your willingness to share and to dive into a number of those things. And even, and I appreciate even like, you know, I felt like, you know, you made it clear that it doesn't have to be this like majorly sophisticated system of technology that we're implementing, right? Like, it's more so about having these key people, I feel like, in the right seats, right? And then having a system of some kind. So you do have the accountability and whatnot. So grateful again for your time. And will you tell the listeners how they can get in touch with you and learn more about you?

Jens Nielsen: Yeah, absolutely. I mean, email is the easiest way. I still use my old email. That's my first name, J-E-N-S at open doors with an S capital dot com. So that's, and I love connecting with people. If anybody wants to jump on and talk about asset management or anything, absolutely.

Whitney Sewell: Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.