Bump Your Rental By 3-5% With Jim Monk
Episode 450: Bump Your Rental By 3-5% With Jim Monk
In this COVID-19 pandemic, it can be a challenge to even increase your rentals. But what if you can do that with just a little tweaking in your properties? Jim Monk of Clozzits has a little hack for you! In this episode, he joins host Mitch Stephen to talk about how you can bump your rental by three to five percent just by rethinking the ordinary and often forgotten closet spaces with your portfolio. He shares with us the amazing things they do at Clozzits to help you increase your overall asset value and ROI without the middle people post-COVID. What is more, Jim then shares his journey on how he broke away from a broader path and went into Corporate America, grew a couple of different companies and financial services, and then moved into passive real estate. Tune in and discover Jim’s tips on real estate that can increase your marketability and earning potential and more.
I have a person who’s going to tell you how to increase your ROI on your single-family houses and even your small multifamily houses, 3% to 5%. It’s a little-known hack but you’re going to find it interesting. If you’re a little more sophisticated, we’ll change that word hack to a strategy. It just depends. We little guys like hacks. With those big companies, I can’t say they have a hack, so they have to have a strategy. Jim Monk, how are you doing?
I’m doing great. I’m above ground, blessed. It’s an amazing day.
We’re going to get on with this. I’m interested to hear about this hack myself. I need to pay homage to LiveComm.com, lead generation plus mass texting equals success. It works for all kinds of businesses, not just the real estate business. I developed LiveComm to solve some issues I was having. My problem was I was having too many people call my salesman, and I needed something to do about that. That’s quite the problem to have though. Isn’t it, Jim?
Check out LiveComm.com. There’s a video on the front page. You’ll find out why I averaged only nine days on the market with my last 300 houses that I posted up for sale. I’m going to show you how I did it, I’ll tell you how I did it and what I combined LiveComm with to make it really simple. Sales are not my problem anymore. We’re focusing on acquisitions these days because sales are a non-issue. LiveComm, thanks for being a sponsor. We appreciate you. Paid the bills, Jim. What we need to do now is tell the audience a little bit about who Jim Monk is in a nutshell, not the long version, but the short version. We can figure out who the hell you are.
I’ll keep it as short as I can. I’m originally from Louisiana. I’ve graduated high school and college. I’ve made some marks there, so I broke away from a broader path. Moving forward, I went into Corporate America, grew a couple of different companies and financial services, and then moved into passive real estate as a passive investor. Like most of your readers, I started out with a couple of homes, moved some duplexes, then went into multifamily, and that’s where I met my business partner, Steven Bolos.In Texas, options are a little thinner, and demands are high. Click To Tweet
He and I both were running in different paths. He was running the largest renovations company for the multifamily space called United Renovations, which is now Katerra. I’m trying to figure out how to move the needle. How do you move the needle whenever you’ve write done your hard surfaces, your flooring, you’ve done everything, and you’re trying to figure out how can I get a rent bump? Talking to him, I said, “Let me ask a simple question. What is the thing that you haven’t touched? What is the area of all the renovations you’re doing that you haven’t touched?” That started the process of development of Clozzits and where we’re at now. I run Clozzits, we’re a two-year-old company that manufactures closet systems for multifamily and single-family space.
I saw Clozzits but I didn’t think it meant closets because you spell it Clozzits. I thought maybe that’s the inventor’s last name. I don’t know.
I came from Louisiana, I can’t spell.
There are some closets in the bag, you and Al Bundy. I guess he’s not called Al Bundy now in Modern Family, but he sells closets.
It’s not a picture. It’s real. This is actually one of our salespeople’s offices, but long of it is about we discovered a way through cutting out all the middle people by manufacturing the product ourselves, creating in a way that either we could install it or the investors or ownership could install it, that they’re seeing a 3% to 5% rent increase on post–COVID. More importantly, we were looking at that net operating income. That’s what we were focused on is what is it doing to that and what is it doing to the value of the home? For a lot of our clients, they’re seeing between a 30% to 37% ROI, and it’s impacting depending on how sophisticated the client is cap rates and so forth. They’re seeing a very strong return on their investment with us.
Especially in smaller houses or smaller quarters, you’ve got to squeeze every inch out of every space in the closet like that. They’re the same old thing. If you’ve got a bar that runs from one end to another, good luck. I hope you can fit your crap in there. It gives you a lot better chance. I like the way this stuff looks. I’m not normally organized, but when I want to get organized, I’m a freak about it, if that makes any sense. When I say, “This closet or this space is going to be,” then these systems would help out a lot.
One of the drivers for this is your renters, your residents. I know a lot of people out there go, “It’s just a closet. It’s a rod and a shelf. It does what it needs to do.” A lot of the residents that are renting out are watching HGTV. They’re seeing the Kardashians with what they have in their closet systems. My mom has got 70 years‘ worth of stuff. It’s like, “Where will I put it all?” She’s a renter. Then you have your Millennials saying, “I want some of these amenities. I want to feel good everywhere I go in my property, my house.” That’s one of the big drivers that they’re willing to pay for that because it’s what they desire. It’s what they want.
Is there an average size of a closet, Jim?
Usually about 4×6. That’s about the average we see out there.
What can you do in a 4×6? What does it cost?
Our average nationally installed is around $750. We do have clients that will say, “Send me the materials. We design it out.” You’re looking at something less because we’re cutting out our labor on that. Their interns are installing either themselves or they’re having their maintenance team or a trim carpenter, someone’s installing it. The beauty of the product is that you can do it quickly on the make–readies. I can turn a screwdriver, but I’m not the best. For 2.5 hours, that’s a rip out, put in. It’s designed to be a no–cut product in the field. If you can read instructions, then you can install them.
You got the 4×6 at $750 installed. What if you want to install it yourself? How much do the pieces cost you?
There are a couple of different items to think of, but let’s say in Texas here, freight’s going to be a $100, $150 getting it down just where we’re at. Average is around $400 to $450.
There’s a flux for freight. How do you have this idea?
The way we started was there was a big company out there. A lot of our clients are quite large, not that we don’t work with smaller ones. It’s a group called Knightvest. If you’re familiar with Knightvest, they own a lot of multifamily properties in Texas, a couple of billion dollars’ worth. We went to them and said, “We think we can get room increases.” We did it in a class–C property that I have. We were able to get an $8 rent bump. ROI wasn’t great but we were able to get an $8 rent bump. We said, “We think we can get a higher rent bump if we’re talking about something so it’s a little bit better quality property.” We went in and now we’re probably twenty of their properties now out of theirs and growing outside of the state.
You got someone to agree to let you do some closets. You did a few units at a time to prove the concept. Let me ask you this, I’m curious from an entrepreneurial side. Did you volunteer to put some in to see if they could bump the rent or did you go to people that already were renting and say, “For an extra $10 a month, we’ll put this in,” or did you throw them in and try to rent the place for an extra $10?
I love this because very much like you, I’m very big in entrepreneurship. We went at it going, “It’s a new concept,” people think we’re crazy because it’s utilitarian. The industry hasn’t changed a lot as you know.
I’m going to guess that you threw them in for free in someone’s apartment complex, and then when they saw the difference installed in real–time, then you got a client. That’s what I’m going to guess you did.
That’s exactly right. It’s how we got 50 of the clients so far, and they’re large ones. On the REIT side, we have Tricon, which has got 50,000 single–family homes, we’re working with them. These are large–scale companies that do a lot of testing on them and a lot of penny–pinchings. I would tell you that they’ve come in and they’ve been able to get that. Average is $35 rent increase per month and nationwide.
They probably have pretty lavish apartments too and some pretty lavish closets, right?
They do. When you look at a lot of them, a lot of them are trying to deal with the B–class property sets right now because the cost of C’s and the cost of A’s is so expensive. Rental properties are expensive now. They’re trying to figure out, “How can I get a little bit more out of it and maybe refinance faster?” I will tell you some things that have been very interesting to us, Mitch. The reason why people buy closets is not even just for the rent increase. They’re trying to refinance faster because they get the NOI, they get their numbers and they’ll do that.
Some of them don’t want to want to defer profits, what they’ll do is they’ll come in and say, “We don’t pay taxes on the profits this year. Let’s go and buy some of these closet systems and throw them in. They’re pretty cheap in the grand scheme of things and defer it for a year as an operating cost.” You have some out there that are doing it as a setup and not a negative. I’d say, “This program works and some of my properties, I’m getting ready to sell my units or sell my houses that I’ve got my portfolio. I want to take a little bit more chips off the table. I want to get some more money out of that.” They show the program with say 3 to 5, 6 homes and they say, “Here’s my portfolio of 50 homes. You can go do that when you buy my portfolio.” It’s very clever how some people are adopting and adapting it. It’s not just about getting the rent increase all the time, sometimes it needs a bigger strategy.
How many closets are you working on a year?
We’re going to do about 10,000 this 2021. In 2022, we’re scheduled to do 45,000 based on new construction, which we don’t focus on. We do more rip out and replace, but that’s a big market as you know. Some guys have big door sets. We work with UDR, Pinnacle, Knightvest, which are big groups. What’s happening is as we have gotten larger in the last couple of years, there are smaller investors who want in on this. They go, “I want to be those guys. How do I do what they’re doing?” They’ve crunched the numbers. We get guys all over the country saying, “I saw this one. I was walking on a property. I saw you install this in here, it’s got your logo on it. Tell me a little more about your program.” I love our large clients, but the small ones are the ones that are your entrepreneurship. That’s what grows our economy, that’s what grows jobs. It’s local like yourself. I’d prefer that. I’m an entrepreneur, we’re growing jobs. That’s what we’re about.
I think this is a fantastic idea. It’s something simple that you can get your arms around. It’s not rocket science. If it bumps your ROI 3% to 5% and who knows even a little bit more, because if you’re a real salesman or if someone stands in your closet and is infatuated, then maybe we’re going to bump them a little bit more. If someone starts commenting that you’re showing the house to rent, they start commenting on all the closets, it’s like, “They’re pretty impressed with that. Maybe we’re going to raise it $15 a month, not $10.”
It’s a differentiator as well. People have options. We’re here in Texas, you and I, options are a little thinner, demands are high. They have options, and so that’s one of the other factors. It’s a differentiator. Like myself with my wife or for anyone walking through a girlfriend or daughter, they pause. They look in there and they’re imagining.
Like the kitchen, like the bathroom, a man goes by, he doesn’t give a damn. He’s like, “It’s got a sink, a dishwasher, good.” Who’s impressed by this, the man or the woman?
Typically, it’s the female and there’s a relationship going on. The man’s looking for functionality. He’s like, “More space, I can put my motor on it or something.” These are three quarter inch plywood. These are melamine finish. This is not particle wood. We stand behind our product. It’s designed to last. It can hold about 350 to 400 pounds per unit set, they’re designed to do that. Their design does take abuse. I hate to say it, the residents that you serve can abuse stuff. They’re very hard on things. That’s one of the reasons we designed the way we did it. This is our fifth version of the product based on feedback from renters and residents, and that’s in less than two years.
I didn’t see it here and I don’t think there is, but in case I missed it, are we giving away anything? Do you have a video, webinar or anything to give away, or are we just talking about this product?
We beta tests. Under the right circumstances, typically if someone’s going to have a number of units or something of that nature or a number of homes in a specific area, we’ll beta test if it makes sense. That’s one of the things I would say we’re willing to give out for the smaller groups or individuals and investors is to say, “Try it and see if it works.” My thing is that we’re going to lose a couple here, but what we’re doing is raising the water level and all boats rise on that.
I got the offer. I’m going to put it in layman terms. If you’re a mover and a shaker out there, like you’re not one-off, you’re doing 10, 15, 20, maybe 50 houses a year, call Jim, he’ll do a beta for you. Don’t jerk him around. If you’re not serious about following up or anything, don’t do that to anyone. If you’re serious and you do a little bit of volume every year, at least a little bit if not a lot, then call him up, and maybe he’ll do a beta test in your market with you. If it works, buy some closets from him. Fair enough?
Did I say it right?
You did.Be bold in whatever you’re doing in life. Click To Tweet
Don’t jerk him around if you’re not serious. Don’t do it for a free closet because then you’re an asshole. That’s not what we’re trying to do. We’re trying to get win-win–wins here. Wins for you, wins for him and wins for the people that are living in your house. Let’s do it like that. Go to 1000Houses.com/Clozzits. Just remember ZZ Top. I think you need to get that song and get the rights to it, and then you have to have a big ZZ hanging on the closets, and then no one will ever forget you.
I just watched a documentary on ZZ Top. They did one on Netflix, where they were down on New Braunfels.
Let me know when you talk to ZZ Top. I want to be there.
I definitely will. I appreciate it. It’s a smart idea. That is a clever idea. Let me know if I can help you out with anything.
Guys, go to 1000Houses.com/Clozzits. Did I cover everything? Are we good on this or did I leave anything out? If there’s something more you want to say and I didn’t get to it, now’s your chance. I’ll give you the floor.
I appreciate it. It’s been a very enjoyable conversation. I think people have to have an open mind. I tell people all the time, “You need to be bold.” Be bold in whatever you’re doing in life. If you’re an owner and you’re wanting to try to figure out some other ways to make some additional revenue, or just put something to spruce up the area, this would be a way to do it. This would be a clever way to do it.
This is what I want to say, “God bless America.” This man is making a closet for heaven’s sakes. Get out there and think of something. Who has the passion for closets? Who is in love with closets? Who was this person? I think they figured out the closet was being neglected so, “We’re going to go fix that problem.”
I’ll put it on HGTV. We start getting people on, “That’s a great idea. We need to do that in the multifamily space.” They’re like, “Yeah.” Your single–families are working out well and we’re creating jobs like you said.
If you put some doors on that, you can organize the garage too.
That is very true. We haven’t talked about that.
I don’t even know anything about it yet. I just doubled your business. Make the man go, “Wow.” The man’s the guy who makes the money and if he wants to pay an extra $25, it doesn’t matter. I know that he is going to act like he’s consulting with his wife, but if he wants that closet thing, he is in. It’s done.
That’s a great idea though, we have not done that.
Are you going to do it?
I would talk to my people.
It’s as good as done. It makes perfect sense. You doubled your business because the garage is bigger than the closets all the time. There’s a whole lot more crap to store in the garage than there ever was in a closet. It’s a done deal. Somewhere in the fine print just say “Thank you, Mitch,” at the bottom of everything.
I totally will.
Go to 1000Houses.com/Clozzits. I’m pointing this out to all the readers. Masterminds are good because you don’t know what you don’t know and you’re not thinking about what you’re not thinking about. Sometimes when you get creative people together, things just happen that you may not even intend to happen. I’m not saying whether he’s going to go do garages or not, but he might. If he did, it’s because a couple of guys got around the campfire, shooting the crap one day and came up with this idea. I want to thank LiveComm.com for sponsoring this episode. Watch the videos on the homepage and learn why my last 300 houses have been less than nine days on the market. Check it out. Lead generation plus mass texting, equals your success. Thank you for stopping by to get you some Jim Monk and learn about Clozzits. We’re out of here.
About Jim Monk
Jim Monk is the President of CLOZZITS. CLOZZITS has developed a program to increase rents 3%- while improving the Net Operating Income (NOI) and Asset Value.
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