 Welcome to Finding Your Piece of the Rock on Bling Tech, Hawaii. I'm your host, Abe Lee. I have been a licensed real estate agent since 1973. I'm the owner of Century Tony on I Proper Hawaii and work with close to a hundred wonderful real estate agents in real estate sales. I started Abe Lee seminars in 1980. I taught over 11,000 students to help them get their real estate licenses and have taught continuing education classes for licensees to renew their licenses every two years. Our show is dedicated to helping buyers and sellers understand the process involved in a real estate transaction. Our special guests will talk about legal issues, escrow, title, getting a loan, surveys, home inspections, insurance, contracts, wooden trust, and much much more. And today we're especially privileged to have a president of touchstone properties talk to us about condominium association management. If you didn't know about 60% of real estate sales on Oahu involve condominium sales, which means it's a huge part of our economy. So we're very privileged to have Jim come on and speak to us about these topics. Now I met Jim years ago in my continuing education classes. And whenever he was in my classes, he was a breath of fresh air. He had great information and was always going to share his knowledge and information. And we become good business friends. And I rely on him for reliable information whenever I have a question about condominium association. So Jim, thank you so much for taking your time out of a business schedule, especially on holiday to be with us today. Thank you very much for inviting me. It's a privilege to be here. Thank you. To start off, why don't you give us a little background about yourself, where you grew up, the education, and how you got involved in real estate property management? Okay, possibly not a short answer, but I grew up in New Jersey. I was born and raised in New Jersey. I went to college at Ohio University, became a or received a degree at bachelor science in electrical engineering. I went to work for General Electric in Massachusetts. And I took the job as a field service engineer, because I didn't know where I wanted to live. And I got assigned to a place in South Carolina, which was the naval shipyard. We had a Navy contract. I ended up on a great trip. I got a great trip to Scotland and happened to be in the opposite the right time. And they talked about luck and timing and provisions. And somebody said, our rep from Hawaii is being hold hold. Who should we stand? And I was just walking by that opposite of the time and said, well, send me, I'll go. And so three months later, I was on my way to Hawaii. It was 1971. And I moved here. I was met at the airport by my family who lived here for many, many years. And 1971, it never looked back. I've been here ever since. And you don't become a comma. I know you have to be born here to be that. But I married a local woman and I just have put down the roots that are here. And I went to, I had many numerous jobs. And I said this because all of the jobs led to be supporting me and being a property manager eventually. And in 1990, I went to work for Hawaii. A telephone company. This is after putting electrical contracting and roofing on my resume as contract administration. And in 1980, I went to work for Hawaii and sell in their planning department. And three years later, I was in your land and buildings department. And all of their buildings, 179 came under me for capital improvements. And that's what you have in the condominium. And we jump forward. Besides from all the other day-to-day stuff you have is you have to plan for future capital improvements, which is your reserve funds and budgeting. So you're helping with that. And so I did that for seven years to about $20 million a year in capital projects. And in 1990, for three years, I started a painting contracting business with a couple of partners. I got out of that and joined Touchstone Properties Chuck Whale and was the president owner at the time. And he signed me up in 1983. So 1993, sorry. And this is what I've been doing ever since, 30 years. Wow. Now, how did you, how did Chuck convince you to get into property management, though? One story, my sister-in-law said, can you go look in a house for me? I had a real estate license. I got it in 1983. And she said, can you go look at a house for me? It was near where I lived. So I went over and it was a broker's open on Thursday. And I walked through the house. It was a new house in an old neighborhood in Coneyoy. And I started talking with the broker. And she said, what do you do? And I said, nothing. I'm unemployed. And she said, well, you make a good property manager. Well, that gave me the wrong impression. I thought property management, you know, you don't do nothing. So that was, it sounded pretty good. Okay. So she gave me Chuck's number and I called him and we talked for about 40 minutes on the phone. And he said, he said, I don't have anything right now. But I have a few things on the burger. I called you to come through. And two weeks later, he gave me a call. And that's when the 45-minute conversation or that's when we continued the 45-minute conversation. And what I enjoyed about Chuck was that we would go to board meetings together and afterwards we would go get something to eat or drink with both. And we would, you know, debrief. And he told me a lot about the properties, properties, but how to analyze what really happened at that board table. You know, from personalities to the meat of the subject, what we were hired to do. So it was great, great education. So that's how I got here by working for General Electric Company and getting shipped here in 1971. I bought a condominium in 1970, put the money down in 72, was built the ready for occupancy in 75. And I had questions that my realtor couldn't answer. And so I said, I'm not going through this again. So I went to school and became a licensed realtor. And I went, I stayed inactive. I got the license in 83. And every two years I renewed it. So every year I was taking continued education right through until for the next 10 years. And 1993, when I went to Chuck, I activated my license. Perfect. So now, what's your main responsibility? I know you rose through the ranks, and now you're the president. All right. Well, my main, I was hired to be a property manager. And so as a rule of thumb, property managers in why manage about eight properties, that's the rule of thumb. So as a growing company, you're going to load your property managers to 10, 11, 12, before you hire another one, then drop them back down again and give four of them, watch to the new guy, or you want a new person. So property management was why I was hired. And one of the focuses that Chuck had was on contract administration. So a big part of our agency agreement is helping boards and other companies to do their work, whether that work is janitorial service, re-routing the building, you know, or replacing some other common element capital, so we focused a lot on that. I go out of that with me from my Hawaii Intel experience. So when did you become president? I became president. Chuck passed away, unfortunately, in 2002. And by 2005, we had special challenges at the time to keep things going and flowing. And I had been made a director of the company after he passed. And so I used my position there to convince the board of directors of Hutchstone that I needed to be in a leadership position. And so I took over. And my first efforts was to shore up the business clientele that we had and to keep the staff that we had and improve it on the staff that we had. So you grow from a small handful of associations that you manage to now how many associations are you managing? Yeah, so we manage about 105 associations. At the time in 1993, call it 1994, we had 14 properties. And the goal had always been to grow by four a year. So if you 30 years in business, that would be about 140. Well, we're a little short on there, but that's okay. So now, how do you start a new condo or condo association when someone asks you for a proposal? How do you get new business? Okay, very good question, because one time many years ago, Chuck and I both were at a seminar in Waikiki. And the speaker was talking to all of us, and the room was filled with property managers from maybe more different property management companies. One of the observations he made is you have a closed market. In order for you to grow your business, you have to take properties from somebody else. So while you're growing, they're losing or vice versa. And it was very true at the time. There had been a lot of growth in condominiums during the 70s. But now we were in the 90s. And then there was a period of time when not too many grains were going up. So basically what happens is a clientele, somebody on the board gets unhappy with their manager, usually their property manager. But there are other reasons why. And that's the first question we ask when we get contacted. We'd like a proposal from you. The first thing we want to know is who's asking, because sometimes we get asked by owners. And they're not on the board. And they have no authority whatsoever. And it's just a waste of time. And so we direct them to their board directors and get your board on board with wanting to do this. So the reasons we'll ask is what are the problems you're having now? And for example, we don't see our property manager very much. That could be a problem. That could be a problem. We're not getting advice. We're unhappy with the management company. We don't like their financial report. One time I had asked the question, and the answer was simply that the manager made scheduled meetings with the resident manager, and then didn't show up for two weeks. So she would make it and then not show up to the point that she made. And so he had transferred his shortcoming to the board of directors and the board supported the resident manager. And so they went out to go get bits. So we need to find that out because sometimes, like I said, you need to know who you're talking to. You may not have somebody who's qualified or the right person to be asking for. So the way I, sorry, go ahead. I say we get called. You ask how it comes in. It comes in by now. It comes in on email requests. We'd like a proposal. So it could be a follow call or an email request. Usually not a letter. So the way I see having been on the outside selling condominiums and houses, that usually somebody's not happy with the proper management company or they think they can get better service or better fees or rates. So sometimes I imagine it's kind of like a merry-go-round where you have every five or 10 years a new company come in and they basically let the old one go and bring the new one in hoping that there's an improvement. Yes. And you know, maybe it's so true and we could spend a long time talking about this because I had one property leave me one time. They said, well, every year, every 10 years, every 10 years equal a lot of it. So I watched more of them 10 years later. They weren't up to it. I mean, 10 years to get the answer to the question that I already knew. Okay, there was some other reason why they left us because they're, if I remember right now, they're still with that company and that'd be 20 years later. So that wasn't a true statement every 10 days. But you know, somebody gets on the board, if this is important, somebody gets on the board of directors and they said, well, we have to go out to bid. We should get out a bid every three years. We should get a bid. And I say to them, and no kidding, I've said this, do you have a dentist? Yes. Do you like your dentist? Yeah, you trust your dentist here. That's your dentist is your agent. You know, these there for your bed, that's what your agent is. We're here for your benefit. Are we doing something wrong? Because if we are, I hope you'll give us the opportunity to fix it before you just go out to bid. Because all that has become the same thing. You know, we might do it better. We might do it worse than the other guy, but we all do the same thing. So now, what's your main responsibility to the condominium association? You have the contract, they hired you. This got to be a what I call a thankless job sometimes. Because nobody's happy. Why are you raising the maintenance fee again? Or whatever, right? So how do you what your responsibility to the association on a daily or monthly or annual basis, right? Okay, okay, that's a good and well answered question, but I'll keep it short. First of all, you have to ask what what kind of what kind of agency agreement do you want? Okay, there's there's physical, there's administrative, and there's fiscal management. So a full management contract includes all three of those things. So we have basically, we either have a full contract, or we have fiscal admin only. In one case, out of 105, we have fiscal only. Okay, they didn't want the admin either. They wanted to write their own letters, they can do all that secretarial support and copying and all that records retention themselves. So full management contract, you have the physical management, you have a property manager assigned to you, he's going to come out and do property inspections, you've got to do the budget, a nice same key, but it could be here or she and everything the buck stops on the property management steps, everything goes through the property network. So either within internally here, they, you know, somebody in accounting has got a question about something, they need to go to the property manager to get the answer. Now, one of the things that our agency agreement, and I think you'll find this in all agency agreements is we take our direction from the board of directors, condominium law chapter by 14, you know, the board of directors has total control of the business of the association. Owners get to elect their directors and basically saying, okay, for the bylaws, take care of us. It's your job. So the more and more you hear about owners want to come to the meeting and they want to, they want to take part in the debate, which the law allows them to do, but they don't get to vote. Those decisions are the board of directors decision. So everything you do in an agency agreement, which ours is about eight pages long is, is at the direction. And now we only have 10 minutes left. Can you imagine time is flying? Okay. So now let me ask you, how do you handle the, what I call the rising maintenance fees? And what do you see as a big gorilla's that you have to take care of that a lot of associates that are not taking care of like the sprinkler system or the sewer lines or the elevators or the swimming pool or whatever it is, how do you handle these rising costs? Okay, good question. And I'll try to keep this simple, but it's not a simple question. First of all, I think a lot of people in the business know at least the realtors have heard about, you know, the pipe, the pipes, the waste pipes in buildings have been collapsing, leaking. What that does is it increases the number of insurance claims that you have, therefore your insurance rates go up. But those pipes have to be replaced. And what we found, all of us in this business is that pipes weren't on the reserve study, they're part of the building, but they weren't on the reserve study. Why is that? So I researched it, okay, from an engineering standpoint, I researched it. And the reason they weren't on there is because FDR pipes had 100 year life. They were built to last 100 years. And when I said I did research, I found that manufacturers started decreasing the amount of materials they were putting in the pipes starting about 50 years ago. And the pipes became thinner and thinner and thinner, thus you have failure sooner, they don't have 100 year life anymore. So that's what, so now you have a project where you weren't saving on the reserve study or what did you do? So you special assess the owner to pay for replacing that pipe because you didn't have the money. There's another way to fund it, which but the owners, the owners have to approve it. Okay, so you go to the owner to say the board of directors requesting your permission to borrow the X million dollars we need to replace the pipes. And if they approve that, then the board can go negotiate a loan. But they don't, the board doesn't have the permission, direct permission to just go borrow money. They have to get the approval of the owners in there. So you fund by borrowing money, you fund by special assessing the owners, or you fund by increasing the maintenance fees and planning the project in the future. And I'm sure there's a lot of pushback from people that are on fixed income, we can't afford it. Yes, and I do a class on budgeting for community associations and one of the worst reasons and I hear often from board members is we are people on fixed income, they can't afford it, we can't raise the maintenance fees. That's the worst reason whatsoever. You have a responsibility and a duty to maintain the property, which means if you need more money, you need to raise the maintenance fees. And the fixed income person has to deal with that issue. Sometimes it means selling. Now roughly, that's a tough job. Now roughly, how much is say a sewer line retrofit per apartment owner? I mean, I know it's hard to say, but roughly, what would it cost per owner? Another good question. So the more owners you have in the building that you're buying into, the more people there is to spread that cost over. It's something to remember for a buyer to remember. Okay, if I buy a unit in a 10 unit building, I got one tenth of whatever the cost is going to be, whatever project we're going to do, but if there's 572 units in this building, why should it be not as big as one tenth? That's for sure. And so the more units you have in the building, there's other issues that come with that. But that's one of the benefits and having a lot of fellow orders is that the cost can be spread around. I know a 353 unit building that did their pipes less than 10 years ago. It was 33,000 three unit. Okay, there's a high rise building. That's why you buy a condo, what we call far as all two-story, wood frame, townhouse building, 300 units. You don't have that kind of cost. You're happy because you don't have those expensive risers going up 13 stories. So for some people, it might be wiser, not always, to maybe buy a house or a townhouse where you have less, I guess, horizontal vertical costs because that costs a lot of money. And it puts a lot of people out of their apartment for a while. They can't live there while they're doing this, can they? That depends on the engineering of the building and how the, for this building, I just mentioned, it was built back in the 16th, so they had asbestos to deal with as people got out of their apartments. But they were told they made the arrangement still live somewhere else. But it was, we were able to say, five days. We're coming in Monday, we're done. You're moving back in Monday. Well, you're moving back in Saturday. And it worked like a clock. It was a really great company that ran the whole thing. You know, we earned it. The company was the place to pipe it. Jim, unfortunately, we're running out of time. So can I ask you to come back and do part two? Yes, you can. Because there's a lot more. There's a lot more. The areas I know I want to talk about is the kind of questions we get from prospective buyers. And generally, most, I think all the kind of the property management companies will say, we don't talk to buyers. We can talk to the seller because the seller is part of the orders association. We represent the orders association in the orders, not the buyers. Yeah, I'd love to talk about the one they call the RR105C, which is the financial statement. And I think Kutztown doesn't use the RR105C, but you have a similar form that gives the financial status. I'm no question here. Okay. And it has all the same. It has most of the same. RR105C, we were part of developing that. And at one time, working with the real estate commission, it was a monster of a form. And our attorneys couldn't get past the fact that it was putting in a liability on the real estate company that was a part of it. So we got out. We pushed for the condo questionnaire. And they whittled that monster form down to what it is today, which is it's not much more than what the condo questionnaire is. And you know this, what was it, the collapse of the building? Okay, so the FHA changed a few rules. Okay. And so the condo questionnaire had to be expanded by two answers in order to accommodate them. But it does its job. It's there because the lender needs it. The lender needs that information so they can give the loan to the buyer. So let's do this. We'll schedule you a few months from now. And let's see about other issues that have come up, especially the hurricane insurance coverage, which is creating a huge mess right now. Let's do one on insurance and one on fire life safety. All right, very good. We got you. Or two with part three, because wow, all right. That one there is crazy. All right. Well, thank you so much for taking time out of your busy schedule. And I really appreciate you taking the time out of your experience, years of business and your background. And so if you are interested in having more information, go to the website, touchstoneproperties.com. And you can always email the info at touchstoneproperties-something. And there you see it in the website. And if you wanted to have a review of this video, it's going to be broadcast, and it'll be archived. So you can always look at this as a reference material, and then look for Jim Barrow, who's going to come back on the second and third days, and we'll be really interested in looking at the other two topics that you talked about. There's a lot more to talk about that we haven't even touched yet. So, and if you are interested about real estate classes, information about things that you should know in the real estate sales process, go to abdseminars.com. And we have a schedule of classes, both live and independent study, that will help you not to just get a real estate license, but to prepare you to become a more educated consumer, so you know what the heck you're talking about when you buy a house, which is your biggest investment in your life. So thank you so much for being with us, and have a wonderful President's Day, and thank you, Jim. We'll see you soon. Thank you. Thanks.