Key takeaways:
- In this episode of the Poplar Propcast, host Justin Lieberknecht picks the brain of Poplar’s VP of Product, Michael Lee
- The two discuss the many challenges that Michael encountered when he first entered the property management industry
- Michael talks through the process of selling his property management company to Poplar Homes and how he landed a spot on the company’s product development side
The Poplar Propcast offers valuable industry insights for those interested in renting, owning, or investing in real estate. With expert guests and informative discussions, it’s a must-listen for anyone looking to stay ahead in the industry. On this episode, Justin Lieberknecht speaks with Michael Lee, Poplar’s VP of Product. Michael ran his property management firm, which he sold to Poplar, before taking on the challenge of directing the company’s product team.
Justin and Michael’s discussions revolve around how Michael leaped from tech to real estate and the issues he faced along the way. Michael shares his experience, from buying his first property management business to learning the ropes in a new industry.
That’s just the tip of the iceberg! Listeners can tune into the first episode of the Poplar Propcast on Google Podcast, Apple Podcast, and Spotify. Read on to get an insight into the most significant conversations that took place.
Transitioning to property management and real estate
The episode kicks off with a retelling of Michael’s humble beginnings in the industry. He recalls that before he became a seasoned real estate professional, he spent a good part of his career in tech:
“I actually come from the tech field. I was basically an electrical engineer. I was in tech for close to 15 years before I bought this property management company. It’s an interesting story here: it’s just that after 15+ years in tech, I got burned out, right? So, I was thinking about what my next steps were going to be.”
In the initial stages of his journey, Michael was eager to carve a new path in his career. After living in Chicago, San Francisco, and even Brazil in under five years, Michael and his family decided to settle down in Seattle, where he had plans to start a new business. On the podcast, he shares how he came across a property management company on a business-for-sale marketplace.
“I remember checking that box [on the website] and this property management company popped up on my radar and it piqued my interest here. So I called a broker up and he said that basically, the owner was retiring, had no children, and had no one to hand off the business to, so she wanted to sell it. And I called the broker and I said: ‘Let me fly out there. Let me talk to her. Let’s see what happens here.’ So I actually flew out the next day to Seattle and met with the seller. And, we got to talking and eventually got along so well. And I agreed to all the terms and she immediately dropped the other seller, I put my earnest money down, and the rest is history.”
At this point, Justin raises a question about Michael Lee’s experience in property management during this time. Michael explains that his parents managed their properties, but his expertise in the field was limited. After discussing his desire to purchase the property management firm, his family laid out a plan to sell the units they had out-of-state to gather enough resources to invest in properties in Seattle which they would have Michael manage under his newly-acquired management firm.
Here, Justin raises an interesting point about tenured property management firms. When the business is family-owned, the younger ones in the family step up to the plate and handle operations when the older generation of owners decides to retire. By contrast, in Michael’s experience, the owner didn’t have a rightful heir to the business.
“She just didn’t have anyone internally who was willing to step up and purchase it. This is why she went to ask a broker.”
Picking up the reins and learning about the industry
After Michael tells the story of his serendipitous encounter with the property management company he purchased, he goes in-depth about his experience running the business. When asked about the licenses he needed, Michael explained he still had to work with the property management business owner while he sorted out his licenses. During this transition period, they agreed that the owner would stay until she could fully hand over operations to him.
“In the state of Washington, it’s not like a real estate license where you can just study, take a test, and get it. It’ll actually take two or three years before you can actually be a designated broker, right? So you have a managing broker and then a designated broker. It worked out very well.”
After obtaining a regular license, Michael explained how he transitioned to the next phase of his property management career. Being new to a customer-facing industry, Michael sought the help of professionals with a longer tenure. Justin and Michael discuss how the real estate industry, specifically property managers, are known to make their careers a life-long commitment. This is an example best set by Michael’s business partner, whom he recruited on account of her over two decades of experience in the property management field.
“It’s a long-term commitment here. We joke around about how sales is more of a quick, one thing and you’re done with it. But, with property management, you’re basically married to your clients.”
Filling the tech gap in property management
After explaining how he gained footing with his property management company, the discussion takes another direction as Justin asks about the processes the property management company used back then. Michael gleefully recalls what happened when he first visited the office and was greeted by how arduous things were.
“I was shocked when I walked into the office. There were twenty or thirty file cabinets, about five feet tall, just full of documents. They used a software called Promise, and it was DOS-based. Basically, everything was paper-based.”
Michael proceeds to paint a picture of how the property management company he purchased went about their operations. Coming from a tech background, he recalls how he saw an opportunity to automate many of the day-to-day tasks that the company was doing. After two to three months of observing the manual processes, Michael made it his order of business to start using property management software that would simplify tasks like signing the lease agreement and collecting or paying rent.
“It was such a great relief once we transferred to the property management software, especially for the online portals for our tenants and owners.”
Spotting the opportunity for automation
After introducing tech into his property management company, Michael narrates how he and his business partner increased their number of doors in the fastest way possible. While the businesses’ portfolio steadily grew through their digital marketing efforts, Michael explains that he wasn’t satisfied with gaining one or two doors a month.
Together with his business partner, Michael recalls how they arrived at the decision to buy out another property management company.
“Right around this time, my business partner knew another person that was thinking about retiring. One of the largest companies here called John L. Scott. She handled their property division and she had about right around 300, 400 doors at that time. So we approached her and it took about three months of constantly kind of trying to figure out what she wanted to do. So, during these lunches went to I proposed ‘What about partnering here? I know you want to retire eventually. So let’s create an exit plan for you here. So I get that much closer to my thousand doors, right? Eventually, a couple of months later we agreed to it. We signed the paperwork and became one company.”
With 600 doors after merging with his second property management business acquisition, Michael focused on the tech side. Given that most of the processes needed to run the business were cyclical, an opportunity to automate its operations presented itself.
“I wanted to do more without hiring more people and adding more resources, and that’s where automation comes in. What I found out is basically, with the manual processes in place in any typical property management company, one property manager could probably deal with 90 to 100 doors on average. Right around the 90 to 100 part is where things start falling apart and things start being forgotten. Manual processes will cause these inefficiencies, that’s where I wanted to focus on. I calculated if we can automate a lot of stuff, we can double their throughput.”
Michael points out that although he knew how helpful automation could be for his property management business, he simply didn’t have the time to execute the necessary solutions. As Michael and his team hit the three-year mark for their business, one of his partners was considering retiring for good, and they had to think of an exit plan.
Michael’s first encounter with Poplar
In 2019, Michael recalls how he received an email from Poplar Homes. From there, Michael’s team and Poplar started discussing selling their business to Poplar. After a few delays caused by the onset of the pandemic, Michael’s team was able to close the deal with Poplar.
“We officially closed on December 31st, which was probably a better point to sell, because the financials were cut off right there, and then we start fresh on January 1st. So, the process was fairly straightforward: Poplar Homes came in and they gave us a list of documents that we needed to provide, then we just handed it over to our CPA and our bookkeeper.”
One of the compelling parts of Michael’s story, aside from the milestones he carved out with his business, is how he eventually became the VP of Product at Poplar Homes. Upon discovering that the team at Poplar shared the same vision to automate and streamline the processes within property management, Michael’s interest was piqued.
“The Poplar team set me up in a meeting with CTO Rico Mok and we had a discussion here, kinda what I envisioned property management should be headed towards. Rico had the exact same vision as well. At that point I said: ‘I need to join you guys.’ So this is how I came aboard here and eventually became a product manager here. And Rico was excited because you rarely find a tech guy with a property management background.”
Bottom line
Michael Lee’s story of moving from the tech industry to the property tech (proptech) industry shows exciting opportunities for aspiring investors seeking a new business venture. Although Michael started with little to no background in the industry, he eventually learned the ropes by creating the right partnerships and prioritizing customer service. By bringing tech-enabled solutions to the manual and laborious issues of the real estate lifecycle, Michael found the perfect balance of his passions that he has turned into his current career.
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