Mastering Property Management with Duke Kimhan

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Interview Transcription

ADRIENNE: 
Welcome back, and thanks for listening to the Team Lally real estate show, home of the guaranteed sold program, we’ll buy it. I’m Adrienne and I’m still Attilio. And if you have any questions, you can give us a call at 7999596, or check us out online at Team lally.com our

ATTILIO: 
guest, it is the owner and principal broker of the Hawaii Pacific Property Management probably, probably born and raised in Honolulu’s Manoa Valley before making his mark in real estate, he built a successful career as a restauranteur, honing the leadership and business skills he’s known for today

ADRIENNE: 
armed with multiple real estate designations, he’s dedicated to ongoing education and delivering exceptional service. His expertise spans investment properties, condos, military relocations, 1031, exchanges and commercial real estate, please welcome back our guest, Duke. Kimhan, hey, Duke.

DUKE: 
Hey, who is that guy, you guys,

ATTILIO: 
you know what also, I remember one time he was at one Christmas party at my house. This is like, sheesh, gotta be like, 10 years ago, and you showed me a picture where you were completely jacked because you were a bodybuilder. We forgot. No. Duke was a bodybuilder.

DUKE: 
I don’t even remember

ATTILIO: 
that. Yeah, I know he’s like, past life for sure. Yeah, cuz one time I was at a consultation with Duke and dudes like, oh, so in the management agreement those, I will pop you up. So do what we got.

DUKE: 
You know what? Yeah, the restaurant business certainly has led me to the real estate business. And the property management business has so many intricacies, yeah, that you have to be good at Yeah. And so one of them is a county. So being in the restaurant business, restaurants, chain restaurants, account for money really well. They have computer systems and they have training systems, and they have, you know, food systems, and they have controls everywhere, yeah. So it was, it was not hard to look at a situation when you have a brokerage, because there’s a lot of outlays of money, yeah? And you have to track that money, and you have to train correctly, because, as you know, if you don’t train someone to take your place, yeah? And when you’re you got to be there all the time. I mean, it’s

ATTILIO: 
impossible, yeah, you can’t know every so when, yeah, everything all the time. You gotta have good people,

DUKE: 
yeah? And when you set up a business in Hawaii, yeah, it’s really, if you don’t live here or grow up here, it’s hard to manage the people that are here, yeah, because they they talk a different language, have different values, and having all that, and being in the mainland, working for a chain, coming back home to Hawaii, it was perfect, yeah. So, you know, with property management, the thing I saw was that everybody was paying salary. Yes, all the property manager owners and brokers are paying salary. So sooner or later, their agents see what the other agents are making, and it’s more than they’re making. Yes, and there’s, there’s a cap on what somebody can earn. Whenever you cap somebody on what they can earn, the when they hit that cap, their attention span is very short.

ATTILIO: 
Well, you’re, you’re tapping their happiness, and they get not happy anymore, and they leave. Well,

DUKE:
you’ve kept in their potential, yeah, to earn and we’ve all been there, yeah, where we go to work one day and we say, Man, I can make this much money doing this job or that job. Yeah, and my friend just offered me a job that he’s going to match my pay, but there I had the potential of making more money. Yeah? So you know, it’s, it didn’t take long to figure out that you have to come up with a compensation system for property managers, yeah, that they can make unlimited money. So they try Pacific, my folks can make unlimited money.

ADRIENNE: 
Nice. Are you hiring right now? Duke? Are you looking for more property managers? Property

ATTILIO: 
Managers right now, I need to go. We are not. And they’re like,

DUKE: 
till the next 100 properties, somebody will max out, and then we’ll start looking again. But yeah, with this real estate market so difficult right now, yeah, it’s gonna bring out people, and they call me. They’re like me. You’re wondering if you know I can, I can do pm for a while. I go wait a minute for a while, while. No, yeah, no, you gotta be

ADRIENNE: 
committed, correct?

DUKE: 
And so that means, by the time you build your business, and you’re making pretty good money, spending money, yeah, the sales side will turn around and we’ll be back on again. Lower interest rates. The housing market will be booming again, yeah. And then, I mean, that’s good for us, too. Pm gets it when it’s slow and when it’s busy, yeah. So you know, these people will go back to pm to sales. And then I said, Hey, you’re going to give me, you don’t get a residual? What? You leave, yeah, that’s it. So, yeah, the property management side, very, very different from any other aspect of the real estate business, and so is the short term rental market. We don’t specialize in that. And then you have property management. And then you have, you know, people that that do services that are licensed. There are not realtors.

ATTILIO: 
Well, I learned the Duke what you’re sharing with me, I’ve learned two things. There’s riches in the niches and snitches get stitches.

ADRIENNE: 
Well, I think Duke’s given a very you know, just a great example of focus. He

ATTILIO: 
identified that in the property management industry, that the PMs are just moving all over the place,

ADRIENNE: 
and the ones that focus on just Property Management do very well. And that’s what Duke has done over the many years. He said, I’m gonna just focus. And all of my people just have to focus on the property management

ATTILIO: 
Duke. What is you guys always doing this survey of the owners. Why tell talk about that and why y’all do that? Where did you get that from?

DUKE: 
So we survey the owners, yeah, and the tenants, yes. So each property manager, let’s just say they have 100 properties. That means they got 100 owners and they got 100 tenants. Yeah. So I give a bonus to my support staff for every time they complete a survey got to be five owners. Yeah, five tenants, five owner side tenants and so, yeah, it’s a really good snapshot of where the property managers attention is. Yeah, if they are detail oriented, if they’re communicative, if they’re they’re following up with maintenance issues and stuff like that. So they call five random owners, five random tenants. They ask them five questions each, you know, are for the owner side. They’re like, Do you have any maintenance in the last 30 days? And are you up on the maintenance? Yeah, is there anything that you want to talk to the owner about me that you can’t tell your property manager, sometimes no, but sometimes it’s yes, and then I call them up. I’m like, Hey, what’s going on? And sometimes, you know, they they’re just doing that so they can have me call them directly, yeah, to tell what a great job. Property Managers nice, right? And so for the tenants, it’s like, did you get a copy of your lease? Did you get property condition form completed? Is there any unattended maintenance that you have noticed in the last couple days? Are you always, is all your maintenance completed in a timely manner? And you know, it just, it really takes a snapshot of the service, and

ADRIENNE: 
then you can address things, you know, if there’s an issue,

DUKE: 
yeah. And you know, if, if a if they get a really low score, because it’s one to five, five being the best, yeah. And there’s always an explanation, like, I’ll go back to the property manager. I’m like, why did that tenant give you a three Yes? And, you know, they they’ll say, Oh yeah, we had a squabble on the the redo of the lease, or he wasn’t happy because we couldn’t do this or that, or we couldn’t give them an extra parking space. There’s, there’s probably a reason. But people, just as a, as a, as a survey, goes, yeah. Only remember the last touch that you had with them, yeah. And they could have great service. And then you disagree with them on one conversation, and then you get a three, yeah, that’s just human nature.

ATTILIO: 
Yeah, you can have an awesome five star meal. They bring out the Baked Alaska, and there’s a frog leg sticking out of it. Doesn’t matter how good the rest of the meal was, all you can thinking about is that frog leg.

ADRIENNE: 
Well, I just, I just love how you it’s like you’re going above and beyond. Well, with this survey, I don’t know, like, how many other property management companies are

ATTILIO: 
seeking feedback versus getting blown up with complaints, getting ahead of things.

DUKE: 
And, you know, it’s very satisfying when 95% of all the surveys we get are all fives, owner and tenant, because a tenant in today’s market is your best friend when they want to move in. You know, pick me. Pick Me. You know, I want this place, but, man, when they move out, they’re your mortal enemy, and they are looking for any way to recoup their security

ADRIENNE: 
deposit. Yeah, well, Atelier, when I ran into we ran into one of the the tenants, and they had nothing but great things to say. I think that their property was either like being sold, or something was happening with the one that they were renting, and they said, You know what, we loved being renters from Hawaii, Pacific property management so much that they specifically were looking for other homes that were being managed by you, because they loved how they were treated, by the

ATTILIO: 
way. How could people do that? Can they go to your website?

DUKE: 
Sure. I. Www.hi, Pacific, pm.com,

ATTILIO: 
you know what I like about it? Yeah, about you guys rentals. You guys have pictures and video. Mm, hmm,

DUKE: 
pictures and video, yeah, and we do that for protection of the owners, yeah, protection of the tenant. So there’s nothing in there that isn’t photographed when they moved in, yeah, because there’s a date stamp there for for them and for us. I,

ATTILIO: 
you know, I’ve seen the other rental pictures, and it’s their iPhone photos. You know how I know it’s an iPhone photo, because I could see the agent holding up their iPhone in the in the mirror in the bathroom.

ADRIENNE:
You guys have a professional,

ATTILIO: 
hired a professional, a professional to market that property.

DUKE: 
And over the years, you know, Tony has been very accommodating, because when he first started this business, used to charge me $50 Yeah, that’s driving. Set up the tripod. Holy cow. What do you call that? The drone? Yeah, go above the house, 50 bucks. Oh, that’s not over the years. You know, he’s probably been with me for 15 years. Yeah. So they got the, they got the 60 bucks and the 70 bucks, yeah, and the 80 bucks and the 90 bucks. Oh, we’re at 100 bucks, 100

ADRIENNE: 
bucks. Now, wait, do the owners? Do they? Do you charge so cheap for all of that, but do you charge

DUKE: 
the owners? We do not. Yeah, do not. That’s cool. Yeah, is there upfront reshoot it?

ADRIENNE: 
I have seen no upfront fees. I have seen

ATTILIO: 
for Yeah, for rents on the door of professionally managed rentals. And it’s the generic sign that you get at Home Depot with the magic marker. And it the real because the real estate company is on the in the white space where you use the Magic Marker. No pictures, no pictures, you can see the door. Oh, I wonder what’s behind the door.

DUKE: 
So, you know, we, we had an owner ask us to use, to use our lease. Yeah? And I said, Sir, I’m sorry. Yeah, you’re taking back your place, yeah, to manage it yourself, to save money, yeah? And you want, need a supply. You are lease, yeah? I was like, I am so sorry.

ATTILIO: 
It’s like, you break it up with me and you like me, move out. It’s my

DUKE: 
house. Exactly, not, right?

ATTILIO: 
And you want the car, you want the pets, what you’re the one breaking up with me. Go, no, yeah, and yeah, no, it’s a Come on. Like me, like, here’s what I tell Realtors like Adrienne and I have multiple properties, and we have you manage them, because I the best example I gave. I had a bucket list item I wanted to go to. There’s a beach with my name on it, the Sileo beach in Italy, Mediterranean side. Adrienne took me there, and we got a call from Michael oblon, from Michael obland, hey, the refrigerator went blow up. I said, Well, after you’re done collecting all the pieces in the smoke clears, put a new refrigerator in there. And I just did it via text. And

DUKE: 
then he texted back, done. That was it

ATTILIO: 
around the world. In Italy, I don’t want to be dealing with no blowing up, you know. I want my tenants happy, and I want them their food not to be all rotten. And Michael took care of it. They’re on it. He was on it.

DUKE: 
So, yeah, we appliances. We probably go through about 75 to 100 appliances a year, yeah, so that’s that’s a lot,

ATTILIO: 
and they don’t break down like people weekday in the middle of the day, it’s weekends, evenings not

DUKE:
have steady supply. Yeah,

ATTILIO: 
yep. So I read

DUKE: 
this article. I’m going to change the subject. Yeah, go ahead read this article, because I want to bring it up. Yeah, and it was in a paper on Sunday, and it said in bold, and it’s in the local section, homeowners with tenants might retain a tax break. Oh, so the question was, I am considering taking on a tenant so I can keep my home and have some additional income? Yes, my friend says I could lose my home exemption and have to pay higher property tax. Is this true? Yes. So the answer is not necessarily. If you are renting a room or a portion of your home or your property and still reside in the property as your principal residence, yeah, you are still eligible to receive homeowners exemption at the highest rate, yeah, but you know that they’re putting in a cap now for what the homeowner can earn to get the highest exemption. It just is going to start this year. Yeah. So somebody asked, what is the home owners exemption income cap for taking the full deduction. Yeah, and it says regarding the county property tax credit available to owner occupants with less than $80 annual income on your property, on your income tax less than $80 80,000 80,000 No, 80. 1000 in taxable income in Hawaii is poverty,

ADRIENNE: 
yeah, you’re like low income housing there with the 80,000

ATTILIO: 
80,000 I can’t even afford the full the full size popcorn at the theater. Yeah? No, Lord, 80,000

DUKE: 
you only get $120,000 tax exemption, yeah, which is nothing on a million dollar house, yeah, just a piece of property I saw up on Hawaii lower Ridge was going for just the land, yeah, 1.5 5 million.

ATTILIO: 
You know, we were looking at Adrienne and I were looking at single family homes in koalina. What did we discover?

ADRIENNE: 
Think the lowest price one was like 2.3 million, 2.3 million, plus they got the maintenance fees too, on top of Yeah. So yeah,

DUKE: 
that’s just, that’s crazy funny story, yeah, I was, I was going to own a call in Colina. Yeah? It was a four bedroom, three and a half bath house, walking distance to the beach, nice. Um, yeah. And he was using it as a short term rental. Oh, and I told him, I said, I said, why would you want to rent out this house long term? And he goes, because I’m, I’m tired of all the issues that happened with short term. And I said, if, if I were you, yeah, I would sell this house, yeah, right, because he’s probably gonna get almost $2 million yeah, and I would buy two single family homes in ever couple Yes, and he’d be like what I said. You own them outright. 850 800 slow bra, yeah, cash, 1031, you don’t owe any tax, yes, right, any schools. Why would you do that? I said, because you have two properties now, both of them are going to rent for four or 5000 each. Yeah, that’s more than any money. So you can make $10,000 a month and another 20 to 25,000 in equity every year on both

ADRIENNE:
houses, plus he can do the depreciation, new depreciation schedule and cost segregation. Looked at me. He

DUKE: 
looked at me. Goes, Oh, why didn’t I speak of that? And you know he he’s struggling with stuff, yeah. And you know what he did? He called us up about six months later. He goes, Hey, Duke, you remember he told me to sell my house in Coleen. I know exactly who you are, yeah. And he goes, Yeah, we got to ever have a couple of houses now, nice. I said, Damn, I wanted to be your sales realtor, man.

ADRIENNE: 
And he says, that’s like a real life example of monopoly, right

ATTILIO:
there? Yeah, so sell one two by two plus your, Mm, hmm, yeah, it’s a smart move on your part, and you’re always providing that advice that’s good you coming from contribution and helping them with that the like,

ADRIENNE: 
just thinking outside of the box, right? Like, it’s like, I think he was maybe a little too close to the situation, and just needed someone like Duke to come in. And

ATTILIO:
there was, he was singing a song I can see clearly now, I need to sell this

DUKE: 
house, $1.8 million house, and I could rent that for what six or 7000 that’s nothing compared to what he has. Now, doesn’t owe any money, $1,000 a month in rent.

ADRIENNE: 
Yeah, because the coalina has the maintenance fees, and also they’ve got a lot of rules over there. Yeah? So I

DUKE: 
told them, I go, man, you, you’re my idol. Yeah, no, I’m listening to you. I go, man, that’s it. But I said, you know, I give advice every single day, 1% of the population Listen, yeah, it’s, it’s just like, you know, people interview me. How did you build such a successful property management company? And I tell them, and they go, why your secrets? And I said, because nobody listens.

ATTILIO: 
Well, there’s tons of information out there. What the problem is, is execution? Yeah, because you can Google anything in two seconds and it’s all there, but it’s the execution. So Duke, you know, I had a question, what? What do you what do you find? Is the the number one complaint with homeowners that are not happy with their their their investment property, and why they’re coming to you guys.

DUKE: 
Oh, well, most of them, most of them have a property manager. I would say 75% of owners that come to us only have a property manager that they’re not happy with. And it’s usually communication, okay, right? I never can reach my realtor. I never, you know, they’re so slow to respond. Yeah, my house sat on the market for three weeks before we even got advertised. Yes, most of that crazy is the reason why people come over. Yeah, the other side is people manage it. The. Itself, yeah,

ATTILIO: 
so, and we call them for rent by owner, yep.

DUKE:
And then they get to the point where they want to travel, yeah, or do something where they want to be off Island, yeah, whether it’s moving, traveling, whatever, and they want to have somebody to be responsible for it. And over the years, when you think about 10% so on a million dollar house rent for $5,500 a month to the property manager, right? So that’s $6,000 a year. For $6,000 a year, you can’t travel, yeah, Vegas or wherever, yeah, or for more than a week, you can’t be off Island. And the law states, for home ownership, for real estate, you have to have an on island representative, yeah,

ATTILIO:
cannot be a drunk uncle. We’re not gonna answer his phone anyway. Cannot be No, I, like I said, I pay it all day long. Anybody that’s building True, true wealth through investment properties. You have it professionally managed.

ADRIENNE: 
That’s when it’s truly passive. Yeah,

ATTILIO: 
deductible. And you know what? We meet with people that self manage, and they’re like, I’m so frustrated with this. I want to sell you Sure. Yeah, why don’t you get a rental analysis from Duke? By the way, an agent out there, you can get a rental analysis from Duke. You can get, we don’t we, you know, we’re not gonna snitch on you and give you stitches. You can call him. He can give you a rental analysis. The other thing too, yeah, don’t do sales. Yeah, you don’t do sales and yeah, return the agent guarantee. Return the agent guarantee. They were like, Alex, right? It’s in our referral agreement. It’s all it’s in writing. So there’s the only regret, I think, that anybody has in reaching out to you, is that they didn’t reach out to you sooner. That’s it. Well,

DUKE: 
okay, you know what’s funny is that there’s about, I would say, a good 200 to 300 agents, yeah, that call and ask questions and get pricing. Yeah, um, there’s about 20 agents that have never given me a referral, but they still call right for answers and questions, and then there’s a pretty good amount of people who give us business, yeah, and we give it back when it’s time to sell, and they trust the fact that they’re going to get a referral fee. The first month’s management fee goes to the referring agent. Nice, right? So it’s just something, it’s not a lot of money, yeah? Or a selling agent here in Honduras, but it’s peaceful. Most of the referral fees here are huge, yeah, when you look at the sale price, yeah?

ADRIENNE: 
Well, Duke, all good things must come to an end.

ATTILIO: 
All good things must come to end. We gotta leave them hanging. They gotta tune into next week’s show for your tip of the week.

ADRIENNE: 
That’s right, thanks. If you can’t get enough of dude, go

ATTILIO: 
to his website. He’s got, what do you have on there? Like, 400

ADRIENNE: 
videos and lots of reviews and lots of reviews.

DUKE: 
Yeah. Tom

ADRIENNE: 
Okay, great. Thank you has been good. Thank you, Duke, sure. Thank you. 

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