Pump Up Your NOI with this Utility Solution with Kevin Gardner

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Kevin Gardner  0:00  

mean, we actually dug and dug and dug and we found a, an agreement from 1976. That was still an auto renew term. This is

Taylor   0:10  

passive wealth strategies for busy professionals and today our guest is Kevin Gardner from multifamily Utility Solutions. Today you are going to learn about an awesome revenue stream that you're probably not tapping into as a multifamily investor. We're going to get deeper into the details of how you can turn your residents, internet cable and telephone service into another revenue stream for your property. You can simplify the utility process and all of that for you for your tenants. 

I mean, anybody out there that that pays a cable bill knows how big of a pain in the neck it is to deal with the internet company so you can really simplify that process for them and bring in a nice revenue stream for Your business. Kevin's also going to tell us about a case study and example where one of his clients used some of that income to improve the property for their tenants. 

So just something for you to listen for and look out for in your own properties. If you're not a multifamily investor yet, just listen in and you're going to get a bunch of great ideas from this discussion with Kevin Gardner from Multifamily Utility solutions. If you want to reach out to him say Hi, Kevin at multifamily utility Solutions com. But for now, here's the interview with Kevin from multifamily utility solutions. Kevin, thank you for joining us today.

Kevin Gardner  1:39  

Taylor, Thanks for the invite. I'm glad to be here.

Taylor   1:42  

Happy to be talking with you. We talked to a couple of years ago about your service and happy to reconnect about about what you do at multi family utility solutions. Can you give us a kind of a high level overview of your business and what you offer to multifamily investors

Kevin Gardner  2:00  

Taylor, we specialize in all utilities either through partnerships with other companies or through our own efforts. But first and foremost, we deal with cable and internet access right agreements for property owners, there's a significant incremental revenue stream here that many owners just aren't aware of, or don't take advantage of. So that's where that's our wheelhouse.

Taylor   2:26  

All right. Great. And you know, everybody's talking about it when you get into the multifamily investing world. Everybody talks about Rob's look and see if you can implement Rob's to bring in some kind of additional revenue, increase your noi and increase the value of your building. 

Is this a rub situation? And are we in the same territory as Rob's and we were talking about maybe splitting a water bill across a property or is this a distinct type of revenue stream?

Kevin Gardner  2:58  

Yeah, this is this is didn't Different than rubs. So there are with cable companies, there's two different ways that your residents can get service. One is what's called bulk billing, which means that you as the owner are paying for and taking on the obligation for cable and internet service, the cable company sending you one bill for all your units. And that is is the one you can then try and make back your investment either through higher rents or amenity fees or things like that, and this has become popular. 

The cable companies really like it because then they're not running trucks out to the property, it's cheaper for them to administer. They're sending one bill chances are pretty good that you're going to pay that bill whereas if they're sending out individual bills to the residents, they've You know, they're taking on that liability as well. So, so they're very bullish on it and in some cases, I you know, I've been That it's a it's a great solution for incremental revenue. The other thing we do though, is we negotiate right of access agreements, which simply means that the cable company, you're giving them access to be on your property, to serve your residents through individually builds it build accounts, but because you are, you're kind of the gatekeeper. 

In this situation, so the cable company through their franchise with the municipality, they have the right to be in the public easements. They serve the customer through the service agreement, but you own the land that they need to be on to serve your resident. And that has value and we try and represent the owner and make sure that they get the appropriate value for for granting that access to the cable company.

Taylor   4:53  

You know, there's there's a lot of there's a lot of things in there and I wonder about this right of access. I mean, how do you make it known For example, that maybe you put out an agreement or you have an agreement with Comcast, how do you make it known to Verizon or vice versa? That we have this agreement with Comcast and Verizon you're not you're not allowed on the property to you know, drill holes in our walls and all that lovely stuff those guys like to do?

Kevin Gardner  5:19  

Yeah, well, if there is no agreement in place with Verizon, then then they can't be there. You know, wireless is different. So wireless, they're not using your property. They're using the public airwaves. So there's nothing you can really do about that. But as far as wiring where they have to actually place wires on your property, you're the gatekeeper there you if you don't want horizon there, you don't have to let them on the on the property. But you could have both, you could have both. 

I mean, that's why we add value is because we know all different scenarios that you can have, you can have bulk agreements, you can have right of entry agreements, you can you can grant exclusive marketing rights, you can grant exclusive wire use of wiring rights. You know, there's there's just so many different variables that we try and find out as much as we can from our clients at first about what their business goals are. And then we help them craft the agreement in such a manner that it meets their business goals, but it also gives the cable company what they're looking for we choose incremental revenue and the ability to access the residence on the property.

Taylor   6:40  

Okay, so it sounds like there are a lot of creative solutions here creative options, and we're not just necessarily we're not signing necessarily an exclusivity agreement with one particular ISP or whatever service provider you're talking about. There are a lot of options out there and You know, before we get into some of the more detailed options, could you quantify for us? 

Like, how big of an impact can this have? on our bottom line on our noi? You know, however, you can put numbers on it how big of a deal? Is this in terms of dollar figures?

Kevin Gardner  7:19  

Well it varies on a lot of things. And I don't want to not answer your question here. But you know, it's just kind of like assessing the value of a property in Roanoke versus the value of a property in Cleveland what they may both be 50 units, but you may be willing to pay more for the one in Roanoke than the one in Cleveland. I don't know I mean, so we have to assess a lot of different things. And so for that reason, it's difficult to give you any specific answer, but you can get what's called a door fee for a signing bonus, which is a one time fee paid up front. You know, in, in, in exchange for signing the agreement. 

Or you can get what's called revenue share, which is an ongoing payment based on the revenue that the company is making from your property, or what's become more even more popular as a hybrid where you get a little bit of both. So and that's where it kind of comes down to what's the owner what what's the owner looking for? You know, I had an owner several years ago that was just getting into the business. They knew that they were buying a property where the rent was below market, they wanted to raise the rent immediately but they also knew that they would be a backlash if they just did that without showing a you know, a tangible you know that they're putting money into it. 

So, we actually took the door money that we got from the cable contract, and the owner invested in upgrading their pool area, they put in a new pool deck and things like that. And this you know, this was in a place that pool decks were important Not in an area wasn't in Alaska or anything like that, but you know, it was down south and you know, it was something that was going to be used more often. So they did that and they didn't have to come out of pocket anymore after having bought the property to be able to do that. So, but that was a goal of theirs and that's one of the things that we like to find out early on is what are your goals? 

How can we help you? You know, we're always looking for Win Win situations. And in that case, it truly was the cable company got the deal that they wanted, the property owner got the compensation they wanted, and you know, debatable whether or not the residents got what they wanted, but because it came with higher rent, but at least they got something that was tangible.

Taylor   9:47  

Yeah, yeah, absolutely. And I think you know, that's that example helps us kind of bracket the or maybe put

Taylor   9:56  

A rough figure on the scale of this opportunity in terms of the dollar figure and you know, just trying to get a rough idea of how big of a deal Can this be for us? Are we talking about, okay, I could do this, but I'm going to put $20 in my pocket and $20 in each of my investors pockets, and that's fine. 

But there are higher priorities, or is this one of the things that should be a higher priority for us to get done? Because there's so much opportunity? It's a bigger scale opportunity?

Kevin Gardner  10:31  

Yeah, um, well, we do a lot of the heavy lifting. We don't we don't and we make it as turnkey as possible for you. So there's not a lot of work needed on the owners. You know, it's not a big burden of time for them. You know, so that that's one of the things you know, you're going to get a higher door fee if you're negotiating for a property where you've got 200 units and 180 of them have cable service already. 

As opposed to if you're in a deep property where you've got 20 people that have are subscribing to cable service. So that that's why there's there's such a range. And it really depends on the door fee depends on the kind of the class of property, the size of the property, how many customers are in there, the revenue share is typically a sliding scale, it's usually paid out quarterly, and that's going to be impacted by you know, how well you help them get more customers. 

So by by you know, using that same example, you're going to get more revenue share from the a class property but sometimes quite frankly, B class properties are kind of the sweet spot for for revenue share. These are people that maybe don't have as much money to go out and maybe have sporting events or you know, see tickets to the theater or whatever else so they're not home as much You know, are their home more to be than than the A might be?

Taylor   12:05  

You know? Yeah but there I'm curious you know, I guess you know the A as they get higher that they have like you said they have generally more money for the cable packages and they you know, they're probably getting HBO and Showtime and all these other things where the cable company is raising money and so they're the cable companies more than happy to help split some of the profits with the with you but it sounds like some of the best opportunity is actually more like the BB plus area made it

Kevin Gardner  12:35  

whether A's and B's A's and B's are good. A's and B's are good. But again, it's all about ROI. The cable company isn't going to give you more than it's worth to them. Right so they're trying to protect their revenue. They're trying to protect their market share. By doing these agreements with you. They're trying to grow their market share by giving you revenue share. So when you know if you're under a revenue Share agreement, and somebody new comes in, I gotta believe that the leasing agent is going to be a little bit more focused on telling them about Comcast or spectrum or whoever the agreement is with, then if you don't have a revenue share program in place already, I'm pretty sure the property owner is going to tell them, Hey, we need to focus on helping spectrum grow their business, because we get a commission when we do that. 

Whereas if they didn't get any commission for doing that doesn't matter if they tell him about it or not. Because they've got a ton of things that they're telling them about it at the time of moving,

Taylor   13:38  

it's all about getting those incentives aligned. Now in terms of backing up in our acquisition process and trying to understand our incentive to do this, and also how do we quantify it? Is this something you know, how can we incorporate this into what I'm getting at is how can we incorporate that into our underwriting is it wise to do so can we make a projection, a pro forma projection reasonably about how much revenue opportunity there might be? Or is this like an icing on the cake scenario? What's your experience there?

Kevin Gardner  14:17  

My experiences, it's typically an icing on the cake. It's not factored in, because there are so many unknowns. But it certainly can be done immediately. The other thing I'll tell you is that even though you're doing due diligence, you'd be surprised at how many times when you ask about cable contracts, the owner might say, Oh, we don't have one. And that's fine. I mean, it's not uncommon to not have an existing cable contract and yet still have a cable provider in you know, on your property. 

That's not uncommon at all good time. You know, cable started many years ago. How many owners has that property has How many different cable companies have have acquired the other cable company that used to provide service there? I mean, we actually dug and dug and dug and we found a, a, an agreement from 1976 that was still in auto renew terms, annual auto renew with with no expiration. So we were kind of like, it didn't even talk about the internet, all it talked about was cable. 

So we did that through our due diligence of trying to dig into it. So, even if you're told there isn't a cable contract, it never hurts to call us and say, Can you check this for me? We are happy to do that. You know, because we know the people that are at the cable companies and you know, we want to find out if we want to find out for you, is there an opportunity for us to work together in a mutually beneficial situation where we both can Money.

Taylor   16:03  

So you're getting into the process of using multifamily utility solutions as a service. What does that look like for us as property owners? In terms of engaging you guys, when's the best time to you're already alluded to that. But you know, what's a step by step? I mean, you handle things yourself, but what do you need to know from us? How long does it take to get one of these agreements in place? You know, when can I see check rolling in on this?

Kevin Gardner  16:34  

Alright, so I'll take you through, I'll take you through an average one, just an average process, right? So you know, we have an introductory call, I find out more about your properties. I share with you a little bit more about our service. And what usually happens on that call is we tell you that look, the first thing you need to do is send us a list of your properties. Just the name any former name, if the name of changed in the last three years, the primary address the number of units are locks because we mobile home parks are our this is is applicable to them as well. And the legal entity, we will investigate and see if there's an opportunity.

If we are able to find that there is no contract, then we will come to you and say, Look, there is no contract, we are going to at the point now where we are going to ask for a proposal from the cable operator. That's typically when we do an agreement with you. Because if there's no opportunity, there's no point in us doing an agreement if all we're going to do is find out, hey, there's no opportunity here for us to do anything. If there is then we sent, I got a brief agreement, it's two pages long. 

If you want to change it make it longer, you're more than welcome to no big deal. It's pretty normal and it's not necessary to do anything more than that in my mind. And it basically says you're giving me the right to represent you but not the right to commit on your behalf to anything We never have the authority to sign anything on your behalf. The agreement will be between the property owner and the cable company. And if we are able to get money for you, then we get a commission. We present the proposal if you walk away from the proposal and say it's not good enough, and we say that's the best we can do. That's fine, too. we part ways and hopefully have the opportunity to do business in a future time.

Taylor   18:28  

Wow. Well, hopefully it's good enough to go for. I'm curious about and you don't need to tell us all your inside secrets. But I'm curious to know, how do you do that contract search to find out whether or not there is a contract on the property with you know, some random ISP out there?

Kevin Gardner  18:48  

Oh, well, we asked the cable companies. You know, we get a letter of authorization from you that says you're at we're asking on your behalf and we just know the shortcuts because we know who Talk to in each of these markets, whereas if you're starting it on your own, because people ask us why we wouldn't have you do it, right? Well, we know we know the process we've we've represented thousands of units. I personally signed contracts for a cable operator, probably representing over hundreds of thousands of units. So we know the process, we know who to talk to, we know what to ask for, and we know what's reasonable and what's not. We do all the heavy lifting. And in exchange for that, if we're able to get you what you consider an acceptable proposal and agreement,

Kevin Gardner  19:35  

then we get paid.

Taylor   19:38  

Nice. So you're the answer to that being Why shouldn't I just do this myself is you've got all the`experience, you've got all the contacts, and you're better at this than we would be just kind of fumbling, fumbling through the whole process, trying to figure it out.

Kevin Gardner  19:54  

See, it's kind of the same reason, but you know, why shouldn't you work on your own car, I know I couldn't work on my own. Alright, take it to somebody that knows that you know how to work on their car could I? Yeah, I'd probably take longer and it would take a lot of my time and I probably would not you know benefit me in the long run I probably cause more problems than then you know, I would I would solve

Taylor   20:18  

yeah and I don't know if I've made mistakes in car repair myself before and that would have just been easier to do it the easy way in the first place and have somebody else do it so

Kevin Gardner  20:27  

yeah, cars, electricity, health and and plumbing are things I don't mess with.

Taylor   20:34  

Now that those are all good things to look out for. So the end to get the professionals for now, are there any other utilities that we might not be thinking about? I mean, cable, internet, I guess phone Are there any Is there anything else in here that I'm not thinking of any satellite, maybe?

Kevin Gardner  20:57  

Well, phone, phones, part of the other satellite they're they're not using your property they're using the airways. So there's really not as much opportunity there. You mentioned rubs and we strongly encourage you to use the rub system for for any water. electric and gas. There are certain states where electric and gas is deregulated. 

And we have a broker that works for us. But that's more limited. See, we can do cable and internet and phone, any of the 50 states. You know, and that applies to all properties, over 20 units, I mean, anything less than 20 units, not as as much of an opportunity, but electric and gas really comes down to are you in a state that has deregulation on one of those services, or both of those services and what's your usage, so you know, in a situation where you've got 100 units and the laundry facilities are in each of the units and the individual record It pays for those services directly with the electric company and you have a small common area and onsite office and and that's about it, probably not as much of an opportunity as there might be if you're in a 200 unit property, where you've got large laundry rooms you're heating common areas, like you know, maybe you've got not exterior entrances to the, to the units, but interior ones where you've got hallways, your heating and things like that. So it all comes down to usage. And in certain states, we do have the opportunity to at least broker thing you know, have our broker look into the rates and see if there's an opportunity to save money there. I'll be honest with you and tell you that you know, less than 10% of our revenue comes from that is not as much of an opportunity as the cable side of things and always So I've got a colleague that I refer people to related to trash removal. But again, that is an opportunity, but it's usually only an opportunity if you have a significant number of properties you kind of need to have at least six to 10 properties of significant size and for him to really take be able to create some savings for you there.

Taylor   23:26  

Okay, so we’re talking about 1000 unit portfolio. 500 100. What do you mean? Yeah,

Kevin Gardner  23:32  

probably more closer to 1000. Okay, closer to 1000. Yeah. I don't know. So and I'm willing to admit I'm I it was funny, because I started talking, he sends me business, I sent him business. He's the waste guy. He's the trash guy. He understands that piece of the business. I'm the Cable Guy. I understand that could I learn that side of it? Probably. But would it detract from my you know, wheelhouse, which is cable? Yeah. So why not just you know, refer people back and forth this subject matter experts who are already subject matter experts.

Taylor   24:05  

Yeah, absolutely stick to what you're good at, stick to what you know, and get better at that. And but the think the underlying lesson here as well is just this is a very network heavy business that we're in the real estate, people know people talk. So you might as well you know, ask for recommendations.

Kevin Gardner  24:27  

Absolutely. In fact, we actually have a referral program as well, where if somebody refers business to us, we are willing to pay them a referral fee, should that result in new business

Taylor   24:40  

and keeps getting better and better.

Kevin Gardner  24:42  

You know, I just like Win Win situations, right? I mean, you I'm sure you've been in these situations where one person's getting over on the other person. It's It's never a good situation, and it's not sustainable in my opinion. My opinion is, the more people you help the more people you're going to have the opportunity to help you know, if you treat people fair, they're going to treat you fair. So we're always looking for Win Win situations.

Taylor   25:07  

Nice. I like that. We're going to take a quick break for our sponsor. All right, Kevin, we got three questions we ask everyone at the end of the show, let's get into it. The first one, what is the best investment that you ever made?

Kevin Gardner  25:23  

I would have to say relationships. I have some extremely valuable relationships and go to people that when I'm stuck, or I'm facing a challenge, they helped me through it. And I try and do the same for them.

Taylor   25:40  

Hmm, yeah. And like How do you think about it in terms of you don't want to waste your time or you don't want to you want to make a bad investment in a relationship in a certain way you don't want to go down a road that's not going to benefit anybody. I mean, how do you look at the relationship for automation and building and maintenance process getting out there and making sure you're focusing on meeting the right people. I mean, how do you how do you do that? Is it just talk to anybody and everybody, maybe? Um,

Kevin Gardner  26:13  

you know, it's funny, I used to do that. And I was I was I was more willing to kind of give everybody the benefit of the doubt. But you know, there's a saying fish where the fish are biting, right? So if I know people that I have a valuable relationship with, and they know people that I don't, and they value their relationship with those people, I try and meet those people, because chances are that that's going to be a really solid person to get to know.

Taylor   26:43  

Nice, nice. Yeah, I like that. Keep building the network on the other side of that, what is the worst investment that you've ever made?

Kevin Gardner  26:52  

I gotta tell you, it's actually a tie. It's a dead heat between my beer can collection and my baseball card collection that I I had when I was a kid, I thought, you know what, save these things they're going to pay off later in life and you know what, nothing, nothing.

Taylor   27:13  

Yeah, I think that's an important lesson and you know the difference between inherent value and you know, speculative value, I suppose.

Kevin Gardner  27:22  

You know what the lesson I learned from that, though, was that they would have been valuable if I would have been willing to part with them when the value was high. I hung on too long. Yeah so I guess the message there is the lesson learned is no one to sell.

Taylor   27:38  

You got to know when to fold up to keep it keep the card thing going. Exactly. My favorite question here at the end of the show, is what is the most important lesson that you've learned in business and investing?

Kevin Gardner  27:54  

It is look for the learning because success leaves clues. And I think I kind of combined two different sayings there, but I like them joined because I do believe that if you you know, and we were talking about this earlier how much reading has has become a part of my life and just learning and looking at people who are successful in learning from them, because there's lessons to be learned. And I do believe that success leaves clues.

Taylor   28:26  

Nice. I love that mentality, that that, that saying that phrase, whatever you want to call it, and just that thought process of looking around you to figure out who has been successful and then you know, emulating them in a certain way and learning what made them successful. So that's awesome. This is a great opportunity. Your service is a great opportunity for multifamily investors to bring in some more revenue. I like that the case that you gave us with the client of yours who redid the the deck They're cool. It's a great idea, great way to give back to the tenants and then also keep them keep them happy while you raise the rents and you know, do you execute the rest of your business plan? So Kevin, where can people get in touch with you if they're interested in you know, having you take a look at their multifamily properties?

Kevin Gardner  29:19  

Yeah, our website is multifamilyutilitysoluctions.com and my email Easy enough is Kevin at multifamily utility solutions, com, my phone numbers on there other contact information on there as well. So always, always happy to just discuss things and find out more. And hopefully we have an opportunity to do business and if not now, maybe later.

Taylor   29:44  

Great. Just everybody out there is going to know that they're stepping into a win win situation. If anything's going to happen, it's going to be Win win. So I like that and thank you for joining us today. Thank you for all the great lessons.

Kevin Gardner  29:56  

Thank you Taylor really enjoyed it. 

Taylor   29:59  

It's my pleasure, everybody. out there. Thank you for tuning in. Hope you're enjoying the show. If you are please leave us a rating and review on iTunes is a very big help and help other people learn about the show. If you know anyone that could use a little bit more passive wealth in their lives, please share the show with them and bring them into our little tribe we got going on here. Once again, thank you for tuning in. Hope you're enjoying the show. Have a great rest of your day and a great week and we will talk to you on the next one. Bye bye

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