The Overlooked Side of Property Management Financial Compliance and Innovation With Taylor Hou

In this episode of The Same Day Podcast, Mat Zalk and Taylor Hou, Founder and Chief Happiness Officer at APM Help, discuss the critical yet often neglected role of financial compliance in property management. They dive into why everyday reconciliations matter, common mistakes property managers make with trust accounts, and how APM Help ensures clients’ books remain clean and compliant. Taylor also shares his vision for industry innovation and how APM Help is transforming property management accounting.

The Overlooked Side of Property Management Financial Compliance and Innovation

Taylor Hou is the Founder and Chief Happiness Officer at APM Help, a company providing specialized consulting, bookkeeping, and trust compliance services for property management businesses. With a background in property management accounting and years of experience supporting companies nationwide, Taylor built APM Help to address complex financial compliance needs in the industry. His team assists clients with daily reconciliations, auditing, and resolving trust accounting challenges, ensuring accuracy and regulatory compliance across their portfolios.

Here’s a glimpse of what you’ll learn:

• [5:04] Taylor Hou shares how early experiences helping his property manager father and CPA mother shaped his understanding of the industry
• [12:31] Why Taylor was fired from his first job
• [17:22] The complexities of property management trust compliance
• [20:56] Trust compliance overdraft protection for property managers
• [23:23] The suite of services that APM Help provides
• [26:51] How APM Help moved from consulting to full-service bookkeeping
• [29:25] Why over 90% of property managers fail trust audits
• [33:47] APM Help’s rigorous training for accounting excellence
• [38:33] Most common bookkeeping mistakes property management companies make
• [47:04] Who are APM Help’s clients?
• [50:53] The hidden challenges of scaling property management businesses

In this episode…

Handling property management finances goes far beyond collecting rent and balancing budgets. The complexities of trust compliance, meticulous bookkeeping, and accurate financial reporting are essential yet often overlooked pillars of property management. How do successful companies ensure financial accuracy while avoiding common compliance pitfalls?

According to Taylor Hou, a seasoned financial strategist, the key is consistent, reliable bookkeeping. He highlights that maintaining compliance is particularly challenging given the frequent transactions, tenant chargebacks, and trust account regulations property managers face daily. Minor accounting errors or lapses in transparency can escalate quickly, potentially risking both client trust and business licensing. Taylor explains that handling these challenges requires not only technical know-how but also a proactive approach to auditing and adjusting processes to ensure financial stability and regulatory alignment.

Resources mentioned in this episode:

• Mat Zalk on LinkedIn
• Yonatan Schmidt on LinkedIn
• Walter Bowser on LinkedIn
• Keyrenter Property Management
• Keyrenter Property Management in Tulsa | Oklahoma City | Arkansas
• Keyrenter Property Management email address: [email protected]
• Taylor Hou: LinkedIn | Email
• APM Help

Special Mentions

• AppFolio
• Oklahoma Real Estate Commission
• Buildium
• Rent Manager
• Tenant Turner
• PURE Property Management 
• Poplar Homes
• Mynd
• Propertyware
• Rentvine

Related Episodes

• “Renting to Own: The Advantages of a Contract for Deed” with Brook Reutter on The Same Day Podcast
• “Closing the Deal With Real Estate Investors” Scott Reeves on The Same Day Podcast

Quotable Moments

• “I literally grew up in it. My dad was a realtor property manager. My mom was a CPA accountant.”
• “I was always an enterprising kind of guy. I was always starting some business.”
• “I had the perfect resume to go be a doctor. And then I got arrested and spent a night in jail.”
• “Just because you use it for 10 years, you haven’t seen all the weird ways other people will use it.”
• “We’re experts when it comes to property management accounting, accounting in AppFolio, Buildium, Property Manager, and other softwares.”

Action Steps

1. Prioritize regular reconciliation: Schedule consistent reconciliation of your financial accounts, ideally on a daily basis. This ensures that your records are accurate and up-to-date, preventing any discrepancies that could lead to compliance issues.
2. Leverage technology: Utilize property management software like Appfolio, Buildium, or Rent Manager to automate and streamline accounting processes. These tools help manage complex transactions and maintain trust compliance, addressing the challenge of manual errors and inefficiencies.
3. Train and upskill continuously: Invest in training your accounting staff thoroughly in the specific property management software you use. Proper training can prevent common mistakes and ensure your team is equipped to handle complex bookkeeping tasks.
4. Implement a trust compliance check: Develop a system for regular trust compliance checks to ensure all funds are appropriately managed and accounted for. This proactive approach addresses the risk of falling out of compliance and facing potential penalties, a critical point discussed in the podcast.
5. Outsource to experts: Consider outsourcing your bookkeeping to specialized firms like APM Help, especially if your company lacks the resources to maintain internal expertise. This can provide peace of mind, guaranteeing that trust compliance is managed by experienced professionals.

Sponsor for this episode…

Keyrenter Property Management:

This episode is brought to you by Keyrenter Property Management.

Keyrenter Property Management is a full-service property management company that helps clients buy, renovate, and operate real estate assets.

The team helps clients build wealth while taking the headache out of property management.

That’s why, no matter what rental you have — single-family homes, condos, townhomes, or apartments — they can give you the management solutions you need.

To learn more about their services, go to https://keyrenterpmc.com/ or send them an email at [email protected].

Episode Transcript

Intro 0:05

Welcome to The Same Day Podcast where we discuss driving incremental business growth and other topics related to real estate, property management and entrepreneurship. Now to the show at hand.

Mat Zalk 00:20

Mat Zalk here. I’m the host of The Same Day Podcast, where I connect with top business experts and real estate leaders. Past guests on our show include Brook Reutter talking about contract for deed versus lease to own options, and Scott Reeves of the First National Bank of Coweta, talking about commercial banking options. Today’s episode is brought to you by Keyrenter Property Management. At Keyrenter, we are a full service property management company helping our clients buy, renovate and operate real estate assets. We help our clients build wealth while taking the headache out of property management. As you’ll hear today, that is no small task. One of the big things that we do is keep your books. Keeping your books is not easy. You’re going to hear all about it today, especially when you’re a company at scale. But you don’t care about that because you’re just the owner of a single family property. What you do care about is that your starting balance is matched, that all the numbers are there, that the ins and outs are well accounted for, and that nobody is using the money from your tenants and your money outside of any thing that they should be using it for paying vendors, refunding you as the owner with a security deposit for damage that was done, etc. So, you’re going to hear all about that today from Taylor Hou. Taylor is born the son of a property manager and a CPA, and somehow he became the literal product of his parents, where his company, APM Help primarily provides consulting, accounting, bookkeeping and trust compliance audit help to property managers nationwide. You’re going to hear all about that entrepreneurial journey, the journey that got him there from AppFolio, where he started to building his own business. And there’s a great story there. At APM Help, our experts in AppFolio building and property, where rent manager and rent and help manage over 300,000 single family residences today by providing bookkeeping services with a trust, compliance, and guarantee, and many other solutions to help keep your books clean while making you better as a property manager. If that’s what you do. You’ll hear that Taylor and I are wrapping a little bit before we started recording, and we kind of jump right into it, so enjoy. Let’s then let’s talk about the kids.

Taylor Hou 02:18

Yeah, we talk about kids.

Mat Zalk 02:19

Oh my God. It’s a total blessing. I never thought I wanted to have kids, but it’s a total absolute blessing to have four kids. 4 may be a lot for some people, but.

Taylor Hou 02:28

Yeah, I was a part. Not only me, I had. I had one sister, so it was just two of us. But growing up, I went back. My dad was the youngest of 11. Oh my God. Yeah. Like and the crazy thing there and the crazy story here, he tells me is he at the time, at the time when he was born, he was only like two months younger than his parents. Oldest child’s first son.

Mat Zalk 02:55

His parent’s oldest child’s first son. I don’t follow.

Taylor Hou 03:00

So essentially he.

Mat Zalk 03:02

Was when he was born. He was two months older than his parents. Then his parents. When they become great. When they became grandkids.

Taylor Hou 03:09

Yes, exactly. Yeah. So his parents were still fucking when the oldest child of the parents were. So, you know, so.

Mat Zalk 03:19

My wife’s grandmother grew up in a quasi twin relationship because she was born at the same time that her grandmother. Yeah. Also pregnant. And so her uncle, my wife’s great uncle Joe. Yeah. Was her actual uncle. But they grew up like brother and sister.

Taylor Hou 03:39

Yeah. I mean, that was essentially like my dad. Yeah. Like, my dad essentially grew up. Yeah. Like. Yeah. Like brothers with again. Like the uncle. Exactly. Yeah.

Mat Zalk 03:48

That’s awesome. Yeah. That’s awesome. Taylor Hou! Welcome to the show. It’s good to have you on. Yeah. I’m excited. I’ve been excited to talk to you. And I’ve been excited to say a massive, massive thank you for the work that your team did, cleaning up the books of a company that we acquired recently. It was a significant push. I didn’t know if it was going to get done, but it was great to have APM Help’s help pushing that thing across the finish line just for anybody listening who doesn’t have any context. We, we we had our eyes on an acquisition target when we dug under the hood a little bit. We just found that it was it was not at a position at a place in their in the kind of trust accounting everything with the trust accounting world that we could actually bring it over. Books have to be super, super, super clean for them to come over into our system, super clean so that owners money transfers over with a hard stop and with a concrete number. And it just wasn’t we weren’t able to do that. So Taylor’s team came in. You guys mustered a lot of resource To work through a lot of different properties and go back years and getting everything, everything done. Let’s let’s start let’s start with you first. How in the heck did you get into this world?

Taylor Hou 05:04

You know what’s what’s I tell this story and it’s it’s it’s funny now, I guess, or you laugh about it, but I fucking grew up in this world. Excuse my French, but, you know, we I literally grew up in it. My dad was a realtor, is a realtor, property manager. My mom was a CPA accountant. Right. I literally remember yeah, well.

Mat Zalk 05:28

They work in the same company. They work in the same company.

Taylor Hou 05:29

No no no no no no no no. Separately. Separately separately. But but but but like you know I, I remember, you know helping my mom at during nights like, like literally on the number pad. I’m super fast on the number pad because those guys I was I was not the one that not.

Mat Zalk 05:44

The one that spits out the paper.

Taylor Hou 05:45

Yeah.

Mat Zalk 05:46

Was it.

Taylor Hou 05:47

No no no no, it was on a computer already at that time. But like, I.

Mat Zalk 05:50

Remember my dad using.

Taylor Hou 05:51

Those, you know, like, I was like nonstop doing this. And I was like, what am I doing? And now I realize I was reconciling. I was entering transactions so she could reconcile. That’s funny. And then, you know, back in the day. Right? I don’t know if property managers these days remember, maybe some remember, but like, you had to go around, knock on doors to collect rent. Yeah, right. I used to sit in my dad’s Ford or not. Ford. Toyota pickup. Right. We would drive around, he would knock on doors and collect rent. Right. I’d be sitting there and I, you know, I don’t, you know, I was a kid. I didn’t really know what was going on, you know. And then. Yeah. And then, you know, when, when I entered my teenage years. Right. I started, you know, getting a little bit more muscular, let’s say, right, than, like, a kid. Kid. And so what did my dad have me do? We would climb up into attics in the summers in Houston, which attics in Houston in the summer, like 150 plus. Okay. And we’d replace hot water heaters. Right? In my dad’s rental properties. Wow. Right. That he manages. Right. Like, my dad was essentially the, like, catchall handyman. Right. Essentially the maintenance guy. Yeah. For, you know, a small portfolio, but, like a 50 units that he would manage for friends and family and stuff like that. Right. And who else is going to do that? Right. And so back then, like I remember, you know, we would, you know, take hoses and connect them to the, the bathtub in the upstairs bathtub, drain it, drain the tank as much as you can, because trying to haul that thing down the attic where like, the ladder is yay wide. And the tank, you got it. Like you got to twist it a certain way to actually get it to fit down.

Mat Zalk 07:27

And the hinges, they don’t seem that sturdy. Those attics.

Taylor Hou 07:30

Oh, yeah. Yeah. Exactly right. All those ladders back then were, you know, made out of wood and you’re, you know, you’re coming down with like, £200 metal tank. Right. Like, oh, man, I remember those days. Right? Like, so you’re born into this world. I quite literally was born into this world. I grew up in it. Look, I never I don’t think my parents wanted me to ever be in this world, right? Like, look, I’m a typical Asian, you know? You know, child, like, they wanted me to go be a doctor, right? And don’t get me wrong, like, first couple years in college, I had for. Oh, I was on the pre-med path. I did, you know, global medical training in Nicaragua. Like I did stem cell research at UT Houston for a summer. Like I had the perfect resume to go be a doctor. And then I got arrested and spent a night in jail, and my whole life changed. Done over. But outside of that, no. I realized actually pretty quickly after the the internship that I did for the stem cell research, whatever. Like the guy there, like the main guy was like, look, you know, you seem like an enterprising guy, right? Like, this job is not what you think it is, right? Surgeons or, you know, he called them glorified bricklayers. Right? Like and the research side, all he did every day was just filling out government grants, like writing proposals and hoping and praying that someone would give him money. Right. To then go do the stuff he actually loved. And even then, like, you know, when you’re running a lab or whatever it is, or doing research like you’re not actually the one doing the work either. So like, he, you know, he definitely was disillusioned from the medical field. And so, you know, that plus, like I was always an enterprising kind of guy. I was always starting some business. Like my hustle during college was I sold international edition textbooks. Right. Like I’d make $20,000 every semester.

Mat Zalk 09:20

How’d that work? So you’re not. You’re, like, buying them from somewhere else and you’re importing. Yeah.

Taylor Hou 09:24

Essentially, you buy them from, like, there’s distributors, wholesalers in, like, Singapore or Hong Kong or wherever. These books are all exactly the same. They’re just softcover and they have on the back printed, not for sale in the US or Canada. Yeah, but if you actually do any kind of research, the first sale doctrine effectively says once it’s sold, you can do whatever the heck you want with it. Yeah, right. And so I kind of did that. There was like a amazing, you know, like dropshipping. Long story short, I’d make like $20,000 in two weeks, you know, at the beginning. First half of every semester, I hustled. Right. That was my college hustle. You know, came out, you know, and I was supply chain growing in in college, right? So it was a business major focusing on supply chain. I’m in Texas. Houston’s close here. Typically, all the people like my wife, for example, who come out as a supply chain graduate. Where do you go? You go to oil and gas, right? Or you go to, like, you know, the big companies with actual logistical problems, right? Yeah. Well, in the very first interview or one of the interviews that I did that my wife ended up at this company, but the interviewer was telling my wife, you know, there’s this one kid who, like, did our interview and he actually said, you know, he didn’t want to, you know, sit behind a desk and, like, be in Excel spreadsheets all day long. Right. And like and that like that’s the job. That’s what we do, you know. And like I can’t have this job. Yeah. And like I said, like I don’t want to be behind a desk like, you know, in a spreadsheet and like, creating slideshows and stuff, like, that’s not what that’s not the job I want. And so, you know, what’s interesting is the first job out of college happened to be for at a pretty small company at the time called none other than AppFolio, who. Yeah. So, I mean.

Mat Zalk 11:06

Wait, did you go to Santa Barbara?

Taylor Hou 11:08

No, I was, I was, I was, I was the first I was in the first cohort of people they hired in their Richardson office in Dallas.

Mat Zalk 11:15

Got it. I mean, I actually went to school in Santa Barbara and I thought in Goleta, which is Goleta.

Taylor Hou 11:19

Yeah. Goleta.

Mat Zalk 11:19

Yeah. Yeah, yeah, technically Goleta, the schools. And I’m like, maybe I missed an opportunity there to stay in Santa Barbara the most, the nicest place on earth anyways.

Taylor Hou 11:28

Yeah. I mean.

Mat Zalk 11:30

You’re the first guy in Richardson.

Taylor Hou 11:31

Yeah. So I wouldn’t I wasn’t the first, but like, I was the first cohort that was hired into Richardson, you know, and I think the rest is history, right? So I was there. Wow. Actually, most people don’t know this, but, like, you know, I was a customer support entry level, right? But of course, entry level, you become customer support. You learn the product. Right? I was helping thousands. I, I myself closed thousands of tickets. Right. So if you if you were an AppFolio customer in 2011, 2012 and you search for my name. So [email protected], you likely got something from me. You probably have an email from me. Okay. But look, beyond that, you know, I was gainfully fired within seven months. AppFolio. So unfortunately did not hit my one year cliff to get any kind of stock or stock options. But obviously, you know, AppFolio did very, very well.

Mat Zalk 12:24

They they did they did they fire you? Did they fire you as part of a downsizing thing? Or they were like, you just don’t perform or what?

Taylor Hou 12:31

No, no, no. If anything, I was now looking back and they probably have their own internal story about me, but like, I was pretty disruptive, right? Like, look, I was like an entrepreneur. Like, I wanted to change the world. I wanted to do it at AppFolio. And I saw lots of problems. I wanted to fix them. Right. And when you’re a series B company, you know, going from, you know, 1000 to 10,000 customers and you know, you’ve got this like, you know, bulldog or pit bull in customer support, doing things above his pay grade. Like I was literally told by HR, like, stop doing these. Like now. Yeah. Like literally they said like, did you stay in your lane? We just need you to close tickets.

Mat Zalk 13:10

At that time, you were how old when you were fired from AppFolio?

Taylor Hou 13:13

I mean, I was straight out of college.

Mat Zalk 13:15

So you’re 22. 23? Yeah. So that was your first job? I also was fired from my first job and my first, like, real job. Like, you know, I worked at a burrito place. They didn’t fire me, but sure, sure, sure, I was fired from my first job. That did you. Was it hard on your ego, or were you just, like, take it in stride and move on. No, it was like.

Taylor Hou 13:34

It was for me. I was moonlighting anyways.

Mat Zalk 13:37

You’re like one foot out the door. You’re. You’re hustle hustling.

Taylor Hou 13:41

I didn’t. Yeah, I mean, I was moonlighting, I had another company that was paying me a full time salary to work for them, too. So it was. It was easy. It brought me back to Austin, you know, like the kind of abridged version I started a company while I was in Austin, eventually went through 500 startups in the Valley. So I moved to the Valley, raised some money. My claim to fame there was pretty much like any video or like movie or anything that was worth anything around the kind of 20 was this 2013, kind of 2012 to 2014 era. They were using my software to edit, but like to do feedback, like fast iterations on feedback. Wow. So that company at that time was called remark. And unfortunately we we ended up failing. But our direct competitor that was that outraised us but 100% give them credit. They figured out the business model, like how to get paid. Yeah, they eventually sold it to Adobe for a billion. Wow. Right. So yeah, that that was that was what we did. We changed the industry. But like, man, I didn’t know how to sell. I didn’t know how to make money. Like, we were one of the first ones to partner with like Adobe at that time when they, they were still selling box software. Right. And at that time, like, nobody knew how to do API’s and endpoints and things like that. And so every time they would make a change to their API, it would break our integration. And as a small startup, yeah. Like, do you know, like, yeah, what can you do. But also like every time they broke it, that’s like $20,000 to go fix it. Yeah. You know so like that kind of stuff absolutely crushed us as a small company. Right. And yeah. Anyways I learned a ton. Right. And then eventually jumped around or bounced around. I landed at a friend’s company that was called dynasty And they were doing the stock market for real estate. And eventually dynasty pivoted. So what does that mean?

Mat Zalk 15:35

The stock market for real estate. Meaning you can buy a partially partial fraction.

Taylor Hou 15:39

You could buy shares. Yeah. You could do fractional ownership of any rental property. Wow. We proved that we were very successful in doing, like, just proving that we could do it. And that’s actually where I. That’s kind of the start of me coming back into this. Right? But at that time, if you think about it, if you have a bunch of rental properties all over America, you likely can’t support a full time person to manage them. Sure, sure. So what do you have to rely on? Property managers rely on property managers, third party property managers. Wherever your units are, you got to rely on them. Yeah. Well, as a regulated product. Right. Because it’s it’s it’s there’s it’s securitized rental properties. Right. Securitization like we had to get Finra broker dealer license, all this kind of stuff like what are the what do they care about? What are the regulators care about? They care about clean, accurate and timely financials. I’m sorry, but what is the one thing that the third party property managers are really fucking good at?

Mat Zalk 16:38

Yeah.

Taylor Hou 16:39

Yeah. Right. Absolutely. They’re accountants and they’re experts at trust compliance. And like, it’s.

Mat Zalk 16:45

Crazy how much accounting. It’s crazy how much all of the property management softwares are just accounting with. Yeah. Worlds of other things around them.

Taylor Hou 16:56

Yeah. But fundamentally it was you know, it’s a regulated product. And we couldn’t depend on the books that our property managers would give us. Right. And, you know, I don’t know if most property managers understand this, but like when you send an owner’s statement, right. Not on the same day of every month, by the way, like an owner’s statement is not actually calling an owner’s name is not actually a PNL. It’s not an income statement. It’s not a balance sheet. It’s a.

Mat Zalk 17:20

Weird running.

Taylor Hou 17:22

Yeah, it’s a weird running thing of cash in and cash out. Yeah. right. And it’s all mixed. And it’s not like they tell you. Oh, by the way, security clearing. You know, this transaction is actually security deposits being transferred into your account and then. Oh, you know, like, it doesn’t say that. So we realized very quickly. Right. If you wanted to securitize eventually, if there’s a world where rental properties get securitized and there’s liquidity premium, you could do secondary shares. You could buy and sell this stuff. You had I had to figure out how to solve the fundamental problem of property managers. And their books are not clean. Yeah, right. You can’t trust them, unfortunately. Right. And it’s.

Mat Zalk 18:01

Crazy. The crazy thing is, like, the property manager can be us included. You can be 100% above board. You can be doing nothing that is dishonest. And yet, with the way things flow and move outs of properties to your clearing account security deposit trust, then you have to go back and edit a ledger. It messes up everything and the history, the back to, you know, first principles, the history, whatever. The document that you’re using as your truth can be altered, can be altered. Senate owner statement. And the next one you send the next month is different because you went back and edited accounting period. Sure, it can be just crazy. And then it takes everyone hours and hours and hours to dig back through and figure out what in the hell went on here.

Taylor Hou 18:50

And we’re not even talking about, you know, like there there are plenty of examples where a property manager literally is a rock stuck in a hard place, like if some if a tenant, a bad tenant goes back and charges back the rent, right?

Mat Zalk 19:06

Right. Oh my God, you.

Taylor Hou 19:07

Literally can’t do anything. Yeah, the bank comes and takes the money. Yeah. You’re now instantly no longer in compliance. Yeah, but like, whose money did they just take?

Mat Zalk 19:18

Yeah, they took trust. They took trust funds. They took something in there in the rental trust account. That is. Yeah, that puts you out of compliance. That’s a really good point. So what do you do? What is so if the real estate commission comes in in that moment and audits your account, what do you tell you’re screwed.

Taylor Hou 19:33

Well, I mean they understand. Thank goodness they’re people. They understand this. But like, technically speaking, if you look at the literal basis, you’re no longer in compliance. Yeah, right. Like that owner or that property is now negative. Who is fronting or covering that negative, your other owners or your security deposits or you know, in the best case scenario, the management company realizes this and they deposit their own money.

Mat Zalk 19:57

But you’re not even some some, like the Oklahoma Real Estate Commission, says that you can only have your money in a trust account up to the fees associated with the banking and the transactions of that thing. So I can’t just put in 1000 to cover it.

Taylor Hou 20:10

Technically speaking, no no no no, technically, in that scenario you can because it’s no longer your money. Technically, what’s happening is you’re lending the money Okay. To the property. So it now becomes the property’s money and the property has a liability on it. Okay. Right. And so it, you know, from a technical accounting bookkeeping standpoint, that’s how we would do it. Where again, it’s no longer your money. Right. But again, like there’s a lot of there’s a lot of like CYA. Like technically you have to have in your management agreement. You have to have the ability to do so all this kind of stuff and blah, blah, blah. Right. And so speaking on this. Right. Like we’re actually coming out with a product very soon, likely before the end of this year where we’re calling it trust compliance. Overdraft protection. Wow.

Mat Zalk 20:54

Okay. What does that mean?

Taylor Hou 20:56

It literally means anytime you’re out of compliance. Now, obviously within reason. Okay. Like, you can’t withdraw half $1 million and expect us to cover it. Okay. But we’re essentially issuing or going to be issuing working capital to property managers and out of that line, kind of like a credit card covering, you know, a checking account. But out of that line, if we detect that there’s a compliance issue, we will automatically fund it. Exactly. We’ll automatically fund your trust account so it’s no longer negative. We do the bookkeeping, we do everything for you. And of course, your job is the property manager to do your job. Go collect it. Go.

Mat Zalk 21:28

Will you take so there’s $1,000 out of compliance. It automatically goes in. It’s at a seven, eight, 9% interest. Whatever your line of credit interest rate would be. Wow.

Taylor Hou 21:37

Well 3% just to draw it. So it’s 3% for 30 days. So really you know.

Mat Zalk 21:41

Yeah. Great. Yeah. Yeah. So do you automatically apply that 3% fee to the, to the property because the property the who’s liable there. I mean the, the property owners like I’m not out of compliance. Well you did I didn’t know that you were lending me money. Who’s who’s.

Taylor Hou 21:56

Well so and that that that’s kind of where the rubber meets the road. We’re we’re working with early adopters to figure out fundamentally like, you have to update your management agreement to then be able to charge your owners saying, hey, technically you’re the one who like the money is from you, right? Like you got the money you need to return the money because your tenant ultimately, like, charged it back. Yeah, right. But that’s where we have to work with the industry as a whole to be like, okay, the owner needs to cover this.

Mat Zalk 22:24

I mean, I hate that they can just take money out of your account because they do it all the time for application fees. And applicants come through, they see and they sign. They they acknowledge that we are not guaranteeing them the home that we accept applications on a first come, first serve basis. We give them on a first come, first serve basis for approved applicants that you have to meet these standards, these criteria three times rent and your income or whatever else. And then they charge back the thing and it’s like 40, 40, 50 bucks, 40, 50 bucks.

Taylor Hou 22:51

I have to fight them.

Mat Zalk 22:52

Or do I want to fight them? Do I want to build a ledger and send them to collections? What do you do? And ultimately, the credit card company always sides with a tenant who’s acknowledged on multiple occasions that they that they owe this money and they they come out of it. It sucks.

Taylor Hou 23:08

And unfortunately, that’s the cost of doing business as a property manager.

Mat Zalk 23:12

Yeah. Okay, let’s take one. Let’s take one step back. APM Help. I understand this new product. Let’s tell everyone what are the. What’s the suite of services that APM Help does?

Taylor Hou 23:23

Sure. Well, I’ll start with our core fundamentals. Right. And actually, you know, our mission as a company right after coming. Oh, and by the way, that that small company that that I was talking about the stock market, real estate, they eventually pivoted. They did leasing automation and they were acquired by none other than.

Mat Zalk 23:41

That for.

Taylor Hou 23:42

You. AppFolio. Wow. Right. So again, wow. Yeah. Full circle brought me back. Right. Granted.

Mat Zalk 23:50

You were working you were working with them when the acquisition happened.

Taylor Hou 23:52

No no no no. So are you like backing?

Mat Zalk 23:54

You’re like, I’m back.

Taylor Hou 23:55

I’m back. No, it was almost like that. But no, like, timing just happened. Yeah. Like the timing had it where my wife was telling me also like, hey, this is early 2017. She was like, hey, we’re pregnant with our first kid, right? Like, stop fucking around in the valley. Like you need to move back to Houston, Texas, right? Because, like, and put actual money on the table. Like, she. She’s my sugar mama. She’s my. Yeah, she she was fronting, paying for everything. And so anyways, my time is over. Yeah. That time is over. Yeah. Playtime is over. Make, you know, make real money, you know? And so I came back and I was like, all right, well, there’s clearly a problem here. Yeah, it’s a big industry. Nobody knows AppFolio, right? Like, I know Appfolio, right. And I also had a lot of people who remembered my name. They looked me up on LinkedIn or Facebook and they’d reach out and be like, hey, we have these problems. Can you fix them? Right? We’ll pay you consulting. And, you know, look, our rates are not what they were back then, right? Lots of inflation. Blah blah. But like, I started it, you know, and eventually I was like, you know, I really don’t like doing this. And so when you really don’t like doing it for.

Mat Zalk 24:58

Some of the money, I’m willing to do, I’m willing.

Taylor Hou 25:00

To, you know, so I just kept raising the rates. Yeah. Right. And people kept saying yes. And so eventually I got to the point where, you know, I was making more money at that time, quite frankly. And I am today. Right. But I had no overhead. I had no team. It was just me doing work.

But that’s also as a consultant, like you’re always chasing the next project. Sure. It’s just very difficult. And so I was very lucky, very fortunate. I had a couple clients come back to me. This was bad for business, but they came back to me like, hey, we spent a lot of money. You trained our people, you cleaned up our books. Everything’s good. But then now guess what? Those people that you trained, they’ve sold themselves to someone else, right? There’s always a bigger fish. Sure. Right. And so now we’re back to square one, right? We can’t keep doing this. It’s a revolving door, right?

Mat Zalk 25:45

I mean, this is this is the fundamental problem of a of a of an open labor market. And you don’t want to go the France route, but you can you do all the R&D you, you, you train people and you, you know, fundamentally they’re just not upskilled to go get more money somewhere else. That’s a quintessential large American business problem. But yeah. Sorry.

Taylor Hou 26:03

Yeah. And and so because of that. Right. They’re like, look, Taylor, we can’t keep doing this. What if we just pay you to do our books? Right? And that was kind of like a mini light bulb moment. It was like, that’s interesting. Like, don’t get me wrong, I didn’t go to college. I didn’t I didn’t go to, you know, I didn’t grow. I didn’t I don’t want to be a property manager as glorified bookkeeper. Yeah, but when they told me how much, then I was like, oh, well, you know, why don’t I give this a try? Because. Because now I’m thinking, wait, but this is every month or every month you’re paying me this, right? Look, I was very fortunate that my first two clients was 7004 thousand a month. So just in two clients alone, I was at, you know, I was at six figures a year. Yeah, right. And so, remember, I also had my wife behind the scenes being like, put money on the table, you know, like. And so I was like, well, here’s six figures.

Mat Zalk 26:47

So you’re there, right. You’re there reconciling their 5000 transactions in that volume.

Taylor Hou 26:51

Oh no, I mean I’m there entering it. I’m there doing everything right. I was their accounting department effectively. Right. Yeah. And of course, don’t get me wrong, like very quickly I was like, oh, because I know AppFolio so well, it only takes me a couple hours a week to, to do what an entire team would do, right? And so that was like, okay, well, how do I scale this? Well, so that that was my my first two hires were in the Philippines and I got very, very lucky. Right. I personally trained them. One of them actually ended up staying with me all the way to 150 people on our Filipino side. Wow. Right. She helped us scale it all the way there. So again, I was very, very, very, very fortunate. Right. But fundamentally that was where we started. So what is our mission as a company? We’re here to clean up the industry and hopefully make it better. Right. When we say clean up we primarily mean the accounting. Okay. We don’t mean literal shit on the fan. Right? Like we mean your books. Yeah, that’s somebody else’s job. Like, our job is we’re experts when it comes to property management, accounting, accounting in AppFolio Buildium. You know, obviously we’ve expanded now into Buildium property manager, other softwares. Right. But then the other thing that we realized was there is an existential crisis for a company. You could be clean. Exactly what we said. You could can be clean, you can be operate your very profitable, all this kind of stuff. But if for whatever reason you’re not in compliance, your license can be revoked. Yeah, right. And so we’re like and of course, like the story goes, right. It’s like, of course we had some clients back in the day who got hit by audits. Right. And I’m not talking an IRS audit. I’m talking about a Department of real Estate. Yeah. They’re called different things. Real estate commission in Washington. It’s the Department of Licensing, but some kind of regulatory audit specifically around trust compliance or trust account audits okay. And what this really means is as a property management company, the money you hold is not yours. It’s somebody else’s. It’s either an owner’s technically vendors if they don’t cash their checks, but then also security deposits, which are consumer money, by the way. Okay. That’s the most dangerous. Yeah. Like you have to understand that’s not that. That’s not your personal piggy bank that you can do whatever you want with. Right. And I have this saying, I don’t know if this is good for this podcast, but, like, we call it hookers and blow. Okay? You can’t go buy hookers and blow with trust money. Yeah, okay. You can do it with management fee income. Sure. Right. Like that’s yours. It’s yours. That’s yours. Do whatever the heck you want. But when it’s when we’re talking about security deposits, rent somebody else’s money, that’s somebody else’s money. Don’t don’t mess with it. Right.

Mat Zalk 29:17

They had to avoid getting a lot of hookers and blow to put that security deposit with you. So do not mess with that money. Yeah. No. Exactly. Scrimp and save. Yeah.

Taylor Hou 29:25

Yeah, they did scrimp and save. Exactly right. So. But here’s the thing. I mean, the reality is. And the reality is horrible. But we would say greater than 90% of the industry will not pass today. Wow. If someone were to walk in today, they’re not passing, right. And I’m not saying they’re not passing with like, half a million missing. Right. I’m talking about like, look, technically speaking, even if a dollar is missing. Yeah. Right. You’re still no longer in compliance.

Well, then.

Mat Zalk 29:54

100%. Because on a daily basis, the fluctuations in and out of of an account, I mean, we moved to end of month accounting. I don’t know, years ago because when that scenario hits where the rent from last month was clawed back, you still have this month covering it. Technically speaking. Now if the rent. You know, I don’t know if we’ve already pulled a management fee out. If rent. A thousand bucks and we’ve taken $100. I’ve now got $900 in an account, but $1,000 was taken out. It becomes really complicated, really fast. I mean, 90% would be in that scenario where there’s daily fluctuations and there’s hundreds of daily fluctuations. It becomes really, really, really hard to stay in technical, full time compliance.

Taylor Hou 30:30

Yeah. And so, you know, anyways, you know, like that that’s fundamentally what is APM Help. Do we do consulting projects to get people clean, catch you up. Yeah. If and I, I really despise. I really it’s not that I despise when when property management company owners when we ask them, have you been doing your bank recs and they’re overly confident like, oh yeah, absolutely. Like, no question. Like my accountant over here, they’re doing bankrupts, right? Anytime I talk to anyone who’s overly confident about Bancorex, I know immediately they’re dirty as shit. Yeah. Okay. Maybe not intentionally. Okay. But when you’re overly confident. Right? Like, it’s not a good sign. Yeah. Right. Because if you actually are doing them, you know how hard it is to actually be clean, right? So from that standpoint, you know, like, so we clean people up, right? Like, look, some people will ask me like, you know, what’s the worst that you’ve seen kind of thing, right? Like, look, we’ve seen plenty. They’ve never reconciled ever. And they’ve been in business for over ten years. How do you how.

Mat Zalk 31:35

Do you how can.

Taylor Hou 31:36

You.

Mat Zalk 31:37

Possibly do that, though? How do you know? Stale and I don’t know how do you how are you paying people their owners distributions. How are you doing that? How does your account not bounce? That’s insanity.

Taylor Hou 31:49

Well no no no. So I mean so a lot of times keep in mind. Right. You always have security deposits.

Mat Zalk 31:54

Well they’re not they’re not mixed in with your with your rent trust.

Taylor Hou 31:57

Oh, there’s a lot of times they are in California, for example. You can it can all be in one trust account. Oh my God. Right. Okay. And then there’s other places where the wild wild West, for example. Actually, I should probably I shouldn’t say this state.

Mat Zalk 32:09

Kansas, Kansas, for example. Yeah.

Taylor Hou 32:11

There’s not even a a license required.

Mat Zalk 32:12

We have our broker’s license because it’s like this is a profession. We are professionals. We’re going to be licensed even if the real estate Commission does not oversee us. But my God, you don’t need trust accounts, I guess, in Kansas.

Taylor Hou 32:25

Yeah. That’s insane. So I wasn’t going to say the state, but you said it like in Kansas. It’s the wild, wild West. You literally.

Mat Zalk 32:31

Is that the only state that you know of?

Taylor Hou 32:33

No. There’s some other states too. But but look, there’s also plenty of states that have rules and regs on the books, but they don’t have enough auditors or investigators to do anything about it too.

Mat Zalk 32:43

Right. So what’s what’s. The worst punishment you’ve seen for, for I mean, obviously you can you can pull somebody’s accreditation.

Taylor Hou 32:47

Oh yeah. Yeah, yeah, I’ve actually seen unfortunately a client and granted they already were under license suspension anyways before they became a client. But like, you know, like they got their license completely revoked. And so that, you know, the second that the primary broker’s license is revoked, the company’s license is revoked. It’s just this, like they had to fire sell. Yeah. Right. Like they it was over, and it was very fast. Like the the state, the attorney general literally gave him three business days to cease literally operating. Yeah. They they were literally, like, in three days. If you don’t shut this down the next visit, the next time you hear from me, it’s going to be with a subpoena or a lawsuit. Like it’s over. Right. And so again, they’re just like, okay. It’s tough. Yeah.

Mat Zalk 33:32

Let me ask you this. You’ve got hundreds of people in the Philippines. Are you putting them through a three, six, 12 week program to learn AppFolio, Rent Manager, etc.? Or I mean, did you start that way or did you start with people that were industry trained they’d come out of.

Taylor Hou 33:47

Oh no. No, we we had to train everybody. Yeah. We trained everyone. We we don’t even do three, six, 12 weeks. We do three, six, 12, nine, 12 month. Right? So for us, our bookkeepers that come in, it doesn’t even matter if it’s Filipino, Latin American, or even American. We go through three months or 90 days of a probation period. No matter what. They’ve got to pass our training and tests to be able to even touch a client’s books at the very basic level.

Mat Zalk 34:12

And so do you have an AppFolio instance or Rent Manager instance? That’s just like a test instance that you start messing around with. And then you go to the diagnostic page and you see that everything’s out of whack and you’re like, whoa, whoa, whoa, whoa. Let’s go back to square one. You got to do that. You’ve messed things up somewhere here or there, whatever. They have to pass tests basically. Yeah.

Taylor Hou 34:26

Effectively. Yeah. I wouldn’t say it’s literally, but yes, in a sense, like there’s there’s kind of like written kind of stuff as well as, like you have to show me, like we give you the example, you have to set it up and then you have to actually fix it as well. Right. So like we’re going through a lot of stuff because look, I know there’s tons of people out there who’d be like, oh, I’ve been using Buildium for five years. Like, I’m an expert. I’m sorry. Until you’ve done until you’ve used the software. You’ve supported it across multiple companies. Yeah. And ultimately you’ve had to support it with like, random weird workarounds and stuff like. Like, I’m sorry, you don’t actually know the software to the level of someone like us. Like our consultants are all ex software. Right. The reason is because I’m ex software. I was the consultant. I knew the like the knowledge gap or disparity between me and someone who’s been using it for ten years. Right. Just because you use it for ten years, you haven’t seen like all the weird ways other people will use it, right? Like, and a lot of times, like, you know, you don’t know any better, right? You think you know how to do it, but in reality, there’s probably a better way. It’s just because that’s how you were taught. And that was it. Yeah. Right.

Mat Zalk 35:39

Yeah. I mean, I mean. I’m, I’m a I’m an AppFolio power user. I should say I’m on the accounting side. I’m not I mean, I know Appfolio pretty well. I went through the I was doing something the other day and I went through the Appfolio help steps, and there was a there were four steps. I did the four steps. My diagnostic page was still out of whack. And it was because there’s a fifth step that’s not part of the help menu that is apply to credit. I was like, God, what is going on? Oh yeah. Yeah. Apply credit. Why is that not in. That’s a basic basic step. And it’s not in the I mean it’s like the the then one of the.

Taylor Hou 36:07

Credit was not it wasn’t a thing. So the knowledge base article you were probably reading was written. Probably. Yeah. It’s too old. Apply credits is a newer feature right. Back then it was called a $0 receipt. Yeah. You entered a receipt and did $0 and then zero zero. You know, like they washed zero. Yeah. Well, now they have applied credits, which effectively is $0 receipt. Right. But like, yeah, you know, so so things like that. Look I mean the software’s are changing. Granted the fundamentals at least with accounting aren’t changing that much. Yeah. Right. I will say I’ll follow up outside of consulting. Right. So cleaning people up, catching them up, getting them to present day and compliant. We then of course, it’s like, you know, your team. How did you get into this position in the first place? Right? Do you want after it’s clean. Do you trust that they’re going to keep it clean? Right. Like probably not. So then we essentially have a per unit pricing model on. We can either do just bank recs, we do it every day or we’ll actually do full service everything in your software the dollar sign. So really it’s like property based like bookkeeping. Right. And we effectively at this point now become, you know, like the accounting department or bookkeeping department behind the scenes of PPM companies, you know, enables you as a PPM to focus on the things that matter, right? Like, you know, the people that communicate with us or the owners of the PPM companies, or they’re the property managers themselves, they’re out in the field doing whatever it is.

Mat Zalk 37:28

What happens when when there’s, you know, I don’t know, just weird stuff on the on the, on the owner’s ledger, on the owner’s statement. And the PPM doesn’t have an internal resource. They don’t know it well enough themselves to answer why. There’s some weird thing they call us. They call you?

Taylor Hou 37:45

Yeah. When you’re full service with us, you. You quite literally can chat us. You can text us, you can call. I mean, you have a dedicated account manager, and they’re there to make sure you’re successful. Yeah. Right. So whenever that happens, like obviously we obviously ask just for our sanity purposes. Like like write, write down the problem. Right. Send it to us. We will typically write up or give you enough or train you or explain it to you to the point where you can then either forward, write or copy, paste and send it back, or you can explain it back to your owner very knowledgeably with proof of here’s, you know, here’s this statement. Here’s the PNL. Like everything. Yeah.

Mat Zalk 38:23

Yeah. What are the most what are the most common bookkeeping mistakes that people that property management companies are making when they come to you? Let’s forget for a moment that they haven’t reconciled in five years. But what are the I.

Taylor Hou 38:33

Would say that’s the most common first off, right. They’re just not reconciling at all. Or or they’re reconciling, but they’re not doing it in balance. Right. So it’s one thing to click reconcile, right? You can reconcile, but you can force reconcile like you can fake them. Yeah, right. And a lot of people don’t understand that. Like bookkeepers will, like play around and be like, oh, well, let me enter a bank adjustment. And like, whatever the difference is, let me just adjust it and then like, I’ll hit reconcile and we’re good. No. But like that, that a bank adjustment is called a bank adjustment for a reason. Right. It’s not your standard thing to do. Another thing that you asked this question, right. Journal entries. If you’re using Appfolio and you’re regularly having to enter journal entries, there is a problem. Appfolio is not designed for you to be entering journal entries, right? Journal entries should be used in like really just two scenarios in Appfolio. And it’s very, very rare, right? It’s either non-cash transactions. So you’re reallocating which again Appfolio gives you other options to do that anyways or two. Like like it’s it’s a beginning balance like one time thing I’m bringing something in or new property in. I got a load the balance. Fine. Right? But if you’re using journal entries on a day to day basis, it’s not right. I can tell you right now I see.

Mat Zalk 39:49

Journal entries come through for tenant. Tenant pays rent plus their insurance cost plus this. And then they. And then it bounces. And you’ve got to give that. You got to move money back around where you’ve already allocated the insurance costs. And there’s a journal entry that kind of re that puts that money back from trust to the rent from sorry, from our management fee, from our what we call 0147. What is that our, our standard our our account to the rent trust. And then the money gets moved in the bank to actually do that.

Taylor Hou 40:20

Sure. So so that’s effectively. Yeah. So that’s that’s another receipt. You can use a journal entry to do that because another receipt isn’t tying to anything. Right. You just type in some rent. So sure again in very like acute scenarios you can use journal entries. But even in that situation I’d tell you don’t use a journal entry for it, like you should be entering it as an other receipt, right? Because in other receipts, effects are the same thing. But at least there’s a little more context on the receipt versus a journal entry.

Mat Zalk 40:47

Yeah. That’s pretty that’s pretty nuanced. Okay. So most common most common mistakes that property management companies not reconciling not.

Taylor Hou 40:55

Reconciling first.

Mat Zalk 40:55

Correctly.

Taylor Hou 40:56

Yeah. Reconciling incorrectly. So just just closing your books in general. They’re not just they’re just not doing it right. That’s a huge problem because everything is based on your books. Yeah. Right. So if you’re not doing that, how can you again, like you said, like how could you be how could you trust to be giving owners the right money or, you know, whatever, like. Yeah. It’s insane. Look, I’d say after that, the number one overarching problem is security deposits, move ins and move outs. Right? Stuff to do with security deposits, because most of the time it’s that held in separate accounts. Right. And there’s a disconnect between what happens in the software..

Mat Zalk 41:35

And what happens in real life.

Taylor Hou 41:35

Right? The easiest example is tenant moves in, pays first month’s rent and security deposit in one form of payment. One check. Right? Like in real life. What do you do? Right? Like, you go to the bank, you deposit in one account and you move, and you have to remember to move it. Yeah, right. But it’s not like. I mean, some banks will do this, but very few will be like, oh, when I’m doing this, by the way, I need you to move this portion to this account right here, right now. Like, no, just go online and do it.

Mat Zalk 42:03

And the real life example of this is that when they use when they use the barcode at Walmart that goes into our rent trust and we have to it goes to the rent trust. Yeah.

Taylor Hou 42:10

But but again when it goes to the rent trust and it does it automatically, it’s not like there’s some notification that says hey, hey, hey, by the way you have to you got to remember to move the $1,000 security deposit into security deposit account. Yeah, right. Like, they don’t do that. Right. Yeah. Technically, if you know where to look, fine, there’s always going to show up on your diagnostic report. But most people, I’d say like over half of the appfolio users we talked to, we mentioned the diagnostics. diagnostic. We show them that they’re like, I didn’t know that.

Mat Zalk 42:35

That’s a diagnostic.

Taylor Hou 42:36

Yeah, they’re like, what is that? Right. And a lot of times they don’t even know, oh.

Mat Zalk 42:38

My God, I see it. Robert, who you met, he lives in the diagnostics page and he just he’s always yelling at people that their diagnostic page is off. It’s like. It’s like that’s who sits right here to my left is just like. That’s our constant conversation is diagnostic. Okay. Yeah.

Taylor Hou 42:51

And I mean, for good reason. Right. Because it it it’s good. Like I follow diagnostics page. It covers like 90% of the issues that have to do with trust compliance. Yeah. Right. And you know, like in that situation. Right. Like you come back, you move the money in your bank, but then you forget to move it in that folio or you forget to hit complete bank transfer. Yeah. Or like and today we have bank transfers. Back in the day, it was security clearing. Right. It was these weird transfer funds between cash accounts option that created two journal entries that use clearing as the as the like.

Mat Zalk 43:23

That still exists. That still exists. No, it still exists.

Taylor Hou 43:25

But like now they they they opt for hit bank transfer instead.

Mat Zalk 43:28

Yeah yeah yeah.

Taylor Hou 43:29

Right. You know, so so like that was stuff where like, you know, that caused a lot of problems and a lot of people are like, what? What the heck is a security clearance?

Mat Zalk 43:36

Because when you do that, when you do that transaction and it puts four entries in or whatever, like you go, what? And then you, you remove one of the credits or you delete one of the.

Taylor Hou 43:45

If you delete one, the other one is still there.

Mat Zalk 43:46

Like it throws everything out of whack..

Taylor Hou 43:47

Yeah yeah, yeah. Then you have non-zero security clearing balances or issues. Like it just gets all out of whack. Exactly. Yeah. Right. You know, beyond that, I think honestly mistakes they make. But the complaints we hear all have to do with suppressed fees. Yes. Suppression is a nightmare. Yeah. Especially if, again, you’re not staying on top of your books. Right. But also just from an SOP standpoint, like the.

Mat Zalk 44:12

Suppressed fee for the insurance is a good example. Oh, yeah. Yeah yeah, yeah. Great example. I’ve got I’ve got to refund that money that I collected for.

Taylor Hou 44:18

Because you already collected it.

Mat Zalk 44:18

Exactly. Right.

Taylor Hou 44:20

Yeah. And we’re not even talking about like, you know, if you, if you collect it, but then pay it out the month after that. AppFolio suppression is weird. Like, it can only really suppress in and out in the same month. Got it. And that’s where you get the complaints from owners like, hey, my beginning balance and ending balance. Don’t, don’t they don’t match. How is this possible? Right. All has to do with suppression.

Mat Zalk 44:40

Yeah. Right. And so what is a client of APM Help expect at the end of the month? There’s no issues with suppression. There’s no issues getting balance. It’s just 100% clean. They don’t have to think about it. If they have a question from an owner, they send a text message. They call, they forward it.

Taylor Hou 44:55

Yeah.

Mat Zalk 44:55

And it’s and it’s all handled.

Taylor Hou 44:57

I mean quite, quite frankly we are your expert AppFolio, you know, replace anything with any software accountants that not only have your back from a trust compliance standpoint or a regulatory standpoint, but.

Mat Zalk 45:08

Is there some sort of is there some sort of guarantee like a I don’t know, CPA says, look, I signed off on your account on your on your I mean.

Taylor Hou 45:13

Look, we we guarantee trust compliance. Yeah. Understand I don’t want to say this is a marketing gimmick. We guarantee it, but we can’t move money. Sure. Right. So our guarantee is it’s only as good as if the client actually does what we say. Yeah, right. But if you do what we say, which, by the way, because we’re doing bankrupts every day, right? And we have our own audit tool that’s checking for trust compliance every day. Like we will tell you, Mat, you need to move this money because you forgot about it, right? And again, if you don’t do it, that’s on you. Right. But again like we’re absolutely. And this is where like the new products are coming in right. Where it’s like we’re trying to take this a step further by saying, you know, at a certain point, we’re not necessarily, quite frankly, moving money, but we’re willing to actually deposit money to make sure you’re in compliance at the end of the month. Yeah. Right. And one thing just so everyone understands that listens, right. Trust compliance can really only be regulated according to the bank statement. So interim month stuff that happens, right. Like it’s just not feasible. I’m not saying it’s not important, but it’s just like it’s not feasible for anyone to actually do anything about it.

Mat Zalk 46:24

You got to just clear it up by the end of the month. Yeah. It’s negative. And exactly.

Taylor Hou 46:28

So realistically, if your trust compliant on the day of the statement. Right. Like pretty much every state is their Gucci. You’re fine. Yeah. Now that doesn’t mean in between the month you steal, you steal.

Mat Zalk 46:41

A little bit from the security deposit from the first and you return on the 30th.

Taylor Hou 46:44

Yeah. Don’t go do that. Because I mean, they they’ll, you know, just remember. Right. Like, if they subpoena you, you got to give those records, right. Like. Yeah. But realistically speaking, trust compliance is done tied at the end of the month to a statement.

Mat Zalk 46:58

So who’s your who’s your best client. A small mom and pop or a company that has 5000 properties under management.

Taylor Hou 47:04

All of our clients 99% of our clients are sub 1000 units. Wow. Like, we actually don’t like bigger clients. Or actually, I’d say they don’t like us. Because inevitably, at a certain size, most business owners get to the point where they’re like, man, this is really important. I really should have a handle on this. Yeah. And it’s a principal thing of like, I don’t know if I really like having such an important aspect, because once you get to a certain size, you realize like, holy shit, accounting is actually very important. Yeah. Like my differentiator to my clients is the fact that I’m on top of the accounting.

Mat Zalk 47:38

I know exactly, I didn’t send you a spreadsheet at the end of the month with the ins and outs. I actually have a direct from appfolio accounting of your of your ins and outs. Yeah, that’s a big I hear that a lot. Like, oh they just they, they didn’t go through Appfolio which is a software that they use. They just send a spreadsheet. Oh no. Yeah. No that’s insane.

Taylor Hou 47:56

That. Yeah yeah yeah. No. So you’re right. So like that that’s where again like look our our our average customer profile right. Average customer is around like 300 units. Yeah. Right.

Mat Zalk 48:07

So like there there comes a time when it’s like I need this to be in house. It’s it’s less expensive. I’ve got the scale to do it. But anybody that’s smaller doesn’t have the need for a full time person. I will say also, the dollar per door, which is a model that I hate, is the only. You guys are the only one that it makes sense because the as you grow. Yeah. As you grow with Tenant Turner, they’re not adding another rack of storage space every time you add a door. So like for them to charge you another dollar 40 or whatever it is is really annoying. They’re not adding another technician. They’re not adding more code every time. It’s a scalable product. You guys are actually, every time you add a door, you’re adding more know like we we actually have.

Taylor Hou 48:46

Yeah. Like we actually have more work. And we we calculated this on average right. Per unit. There’s about like between 3 to 8 transactions that will happen every month. So average about five transactions. That happens right. If you actually break it down our cost is between 2 to $3 per transaction okay. Each transaction on average takes a typical person like 5 to 10 minutes to complete. Now it takes us like 2 to 3 minutes to complete, right? So like that, that’s how it all kind of susses out and breaks down. Right. And again, like, you know, as any, any business owner, right. But any property manager like you typically you’re going to go in these like these roller coaster waves, you’re going to feel one day like, oh man, we feel very we’re very profitable. We’re feeling really good. Right? And that’s typically the peak. That’s just because you missed a bill.

Mat Zalk 49:38

From last month that you didn’t pay.

Taylor Hou 49:40

Well that or or it’s like your people are like very fully utilized. Like 90% utilized. Right. Everything’s humming along. And then you have a client because guess what? Guess what Mat’s going to be doing. Mat’s going out and saying, oh my God, we feel we’re doing great, right? Our clients love us. We let’s go sell. So now you go sell and you bring in 100 unit client. Now your staff are overworked, right? They’re banging down your door saying, Mat, you need to go hire another bookkeeper or another maintenance or another head of headcount. But that headcount can’t. Like they have way more capacity than just 100 units at 100, right? They’re not fully utilized. So you literally go profitable to no longer profitable to a profitable. And like that, we haven’t even thrown in turnover and all this kind of stuff.

Mat Zalk 50:25

It’s especially it’s especially prominent in new markets where you’ve got a I mean, to manage 120 doors, you need a maintenance tech. You need a property manager, you need a sales person. So like, you all of a sudden are not profitable for many, many months. And then you get enough properties that you that you are profitable, then you need to hire another property manager. It’s the same cycle over and over. And then.

Taylor Hou 50:46

When you’re the same cycle.

Mat Zalk 50:47

At a thousand doors, all of a sudden you have the variability is is small because one. No but but but what’s what’s what’s interesting.

Taylor Hou 50:53

Yeah. What’s interesting is that that once you have a certain point then you introduce middle management. Yes. The second you introduce a middle management, your margins, you go from a top like very very good PM company I’ve seen can do 25, 35% like net margins. The second you need a middle manager it’s gone. Yeah. Yeah. Because you need competent people.

Mat Zalk 51:15

People that can lead other people?

Taylor Hou 51:17

No, I mean. Any any competent person. That’s a manager, like a director, regional, whatever you want to call them. Or GM for office 100 K a year. Yeah, right. Minimum. Right. Like, yeah. You know, like Hunter K if if most PM companies barely make 100 K a year. Yeah. Right. And we can run we can run the math on this. But like 100 K out of a 300 000 unit PM or 300 unit PM is all of their profit. Yeah. Yeah. Right. So yeah. Like it’s. Yeah. And look, I think, I think if you, if you look at like the PUREs, the Poplars, the, the Mynds of the world, you know, they may not have as many cash flow challenges, but man, I guarantee they got people challenges, personnel. Right personnel in the end. Yeah. It’s a people business. Business? You got personnel issues? Yeah, I mean, you you’re you have market issues, right? Like just you have problems up the wazoo. Yeah. And the second you drop from having, you know, enough units to support a team, now you’re in, like, detrimental status. Yeah. Right. Like, because now people are losing money.

Mat Zalk 52:29

It’s so it’s such a challenge because we’re in a, we’re in this weird balancing act as it as an industry, we want to keep our owners happy. Keeping our owners happy can mean that our tenants aren’t happy. If our tenants are happy, that means that our owners aren’t happy. And we’re always in this weird thing and everybody hates us. If you if you’ve got a reasonable expectation for maintenance from a tenant, the owner doesn’t want to hear it. They don’t want to pay. They just did this. They just remodeled the house. Sir, I didn’t do the remodel. And I didn’t tell you not to scope the sewer line that’s now blocked with tree roots. Yeah. I didn’t tell you to buy the property. I didn’t. Like, all we need to do is get this person the sewage line that works. What do you want from me? And I can’t do it fast enough for the tenant to actually be happy. And now both of you are mad at me. So it’s a high stress, high pressure industry. And so personnel, it’s all about personnel. And look. Yeah. Sorry. No.

Taylor Hou 53:15

Go ahead. No no no no no. Go ahead.

Mat Zalk 53:17

I was going to say, how do people that need APM Help’s help. How do they what’s the best way for them to reach out? Obviously they can go to the website and they just yeah, look, you.

Taylor Hou 53:27

Can go to the website. But honestly if you hear if you hear from this podcast, right, don’t hesitate to reach out to me directly. Right. My email is just [email protected].

Mat Zalk 53:37

You know you’re a boss when your email is just Taylor at APM helpdesk.

Taylor Hou 53:42

Well, I mean yeah sure. But yeah. Look, you can welcome to email me directly or give me a little context, obviously. Tell me you heard from this podcast. That way I can tell whoever like, hey, my time on this podcast actually has is returning a positive investment, you know, blah blah blah. But like, look, just reach out, right? I’m obviously a master delegator, right? It’s unlikely that I’m going to be your consultant. Right? You know, but I can get you the, you know, the best people, quite frankly, on my team to take care of you. You know, and quite frankly. Look. First 30 minutes is on us anyways. It’s free. There’s no obligations.

Mat Zalk 54:16

So love it. I love it, and I appreciate the help you had on our recent acquisition too. I want to say that one more time.

Taylor Hou 54:22

No, absolutely.

Mat Zalk 54:23

Taylor was born the son of a property manager and a CPA, which is an unlikely but beautiful combination, and he became the literal product of his parents. His company APM Help primarily provides consulting, accounting, bookkeeping, trust, compliance, audit help to property managers nationwide. And now they’re doing a new product that is enhanced trust compliance with the line of credit to.

Taylor Hou 54:46

Line of credit. Working capital. I mean, look, we’re doing a ton of other things as well. We’re I’m back to innovating, right. We’ve got I receptionists. Right. We talked about these people problems. We got I after we got so many things coming down the pipeline. I’m excited. I’m supercharged. Right. The next five years I think is going to be fantastic for our industry. What’s not are is kind of what you had already mentioned, right? Like, we’re doing a job that pretty much no one wants, right?

Mat Zalk 55:15

But you know what? You know, it’s a really profitable business. Trash roots. Trash roots. Sure. Sometimes the things that are the least sexy are the most profitable.

Taylor Hou 55:23

Absolutely.

Mat Zalk 55:24

And people need that. People need it.

Taylor Hou 55:26

Well, anyone want to do it?

Mat Zalk 55:27

APM Help is there experts in AppFolio, Buildium, Propertyware, Rent Manager, Rentvine and they help manage over 300,000 single family residences today by providing property bookkeeping with the Trust Compliance guarantee and many other solutions to keep your books clean while making you better as a property manager. Reach out to APM Help if you need any of those services. Taylor, it’s been awesome to have you on the show. Great rapping with you.

Taylor Hou 55:50

I appreciate it. Thanks for the time.

Mat Zalk 55:52

See ya. Cheers.

Outro 55:57

Thanks for listening to The Same Day Podcast. Tune in to a new show each week and be sure to subscribe to get future episodes.