Ramsey Blankenship interviews guest, Kevin Gardner, President of Multifamily Utility Solutions. They discuss the unique concept of how you can increase net operating income (NOI) by leveraging utilities. Kevin’s company specializes in negotiating and overseeing multifamily access agreements with property owners. In this video, he discusses how leveraging utilities can increase revenue and reduce expenses for multifamily property owners.
Here’s a breakdown of what to expect in this episode:
- How an apartment complex owner monetizes utility permissions
- The two types of agreements with apartment owners
- Transition from cable TV to internet services for better revenue
- Regulated versus deregulated markets
- What to know more about Multifamily Utility Solutions
And so much more!
00:00:00 – 00:01:45
Misconceptions about cable service rights
00:00:00 – 00:01:45
Many people mistakenly believe they don’t need to engage with cable or internet service providers if they don’t pay for these services themselves. However, property owners must grant permission for these companies to access their property to serve residents. This permission holds significant value to the providers, making property owners key gatekeepers for potential customers. The discussion emphasizes the importance of understanding this dynamic, especially for multi-family property owners.
00:01:07 – 00:02:48
Introduction to Kevin Gardner and his service
00:01:07 – 00:02:48
Kevin Gardner, owner of Multi-Family Utility Solutions in Cleveland, Ohio, discusses his company’s unique approach to saving personnel costs for large apartment complexes by managing their utilities, primarily cable and internet services. The conversation highlights that their target market typically includes properties with 50 to 100+ units. Kevin emphasizes the often-overlooked value and leverage property owners have regarding cable TV and internet rights, noting that many people underestimate the benefits of his services because they don’t directly pay for cable.
00:02:15 – 00:04:59
Property owners’ leverage over cable companies
00:02:15 – 00:04:59
The speaker explains a common misconception that property owners must pay for internet services for their residents. In reality, since the property is privately owned, companies like cable or phone providers need the owner’s permission to access the property and serve their customers. Using the example of Cleveland, Ohio, where a company like Spectrum has a non-exclusive franchise to operate in the city, the company can only use public easements and must get permission from property owners to enter private property. This permission is valuable leverage for property owners, who essentially act as gatekeepers to potential customers living in their buildings. The speaker notes that many multi-family property owners are unaware of this and discusses how owners can monetize this permission through different contract types tailored to their goals.
00:04:28 – 00:09:57
Types of contracts and monetizing permissions
00:04:28 – 00:06:08
The discussion contrasts two business models: passing on generational wealth through real estate versus investing in properties to upgrade and sell. It then shifts to how cable companies seek permission from property owners to serve tenants, emphasizing that without the owner’s consent, the cable company cannot profit. The property owner acts as a middleman, negotiating a deal that does not increase tenant cable prices. Cable companies seek contracts to formalize these arrangements.
00:05:37 – 00:07:25
Cable companies often operate on older or expired agreements that might not be properly recorded. They want clear, recorded rights to be on properties and frequently request exclusive marketing rights (not exclusive provision) to grow their customer base. While some cable companies accept this, others, especially in rural areas with less competition, may refuse to offer compensation or formal agreements.
00:06:46 – 00:08:12
In competitive markets with multiple providers, property owners have leverage to negotiate better terms for cable and phone services. In contrast, rural areas with limited service options see less willingness from providers to compensate property owners. Satellite options exist but are often undesirable due to aesthetic concerns. The presence of competition increases the value of negotiating agreements with service providers.
00:07:45 – 00:09:57
Property owners face no upfront costs when entering agreements with cable companies. Two main types of contracts exist: right of entry agreements, where the owner markets the provider without excluding others, and bulk agreements, which may offer more control. Owners receive upfront payments plus ongoing revenue shares based on tenant subscriptions. Compensation varies widely depending on market, property size, agreement type, and competition, ranging roughly from $50 to $250 per unit.
00:09:18 – 00:13:50
Revenue potential and contract variations
00:09:18 – 00:10:59
The speaker explains payment structures involving upfront fees and quarterly revenue share commissions based on resident service uptake. Revenue share commissions vary widely by property class and occupancy, ranging from zero to $30-35 per unit annually, depending on resident affordability and property demand.
00:10:26 – 00:12:00
Using a scenario of owning 100 units with a negotiated $50 upfront fee per door and $25 annual revenue share per door, the speaker illustrates potential earnings of $5,000 upfront and $2,500 yearly. While these amounts may seem modest relative to million-dollar assets, they can significantly impact net operating income (NOI) and refinancing potential.
00:11:30 – 00:13:12
The discussion focuses on property investors who improve properties from lower to higher classes and refinance to fund new purchases. Adding modest revenue streams like laundry, trash removal, or electricity contracts can cumulatively create meaningful additional income that enhances asset value and refinancing opportunities.
00:12:38 – 00:13:50
The speaker highlights that while amenities like coin laundry may not drastically increase income, they improve tenant satisfaction and occupancy. Even small revenue increases, such as $25 per unit annually on 100 units, can significantly raise property value in markets with typical cap rates around 5%, potentially adding tens of thousands of dollars in value.
00:13:14 – 00:19:05
Financial impact on property value
00:13:14 – 00:15:27
The discussion focuses on the benefits and perceived downsides of signing contracts with cable companies for property owners. One benefit is the upfront payment, which doesn’t affect net operating income but provides immediate revenue. Concerns about the time commitment to manage the contract are addressed, clarifying that the process mainly involves communication with the cable company and typically requires only 20 to 25 hours of effort. The cable company handles much of the backend work, such as converting rent roll data, minimizing the owner’s workload.
00:14:51 – 00:16:25
The cable company requires signing a 10-year exclusive marketing contract, which makes some property owners hesitant due to uncertainty about the future. However, the speaker argues that long-term contracts have historically been beneficial and that the 10-year term is not restrictive because the rights granted do not hinder the ability to provide advanced services to residents. The discussion emphasizes that the cable companies involved are large, established corporations that continually adapt to technological changes.
00:15:53 – 00:17:32
The conversation highlights that major cable companies like Comcast, Charter Spectrum, and Cox Communications remain competitive and invest in future technologies. Although no one can predict the future with certainty, these companies plan decades ahead to maintain their market position. The speaker expresses confidence that Wi-Fi and broadband services will continue to evolve and cable companies will adapt to remain relevant.
00:16:59 – 00:18:35
Concerns about the potential obsolescence of cable services are addressed, explaining that if cable service becomes outdated, residents are not obligated to subscribe, so property owners are not adversely affected. The term ‘cable company’ is clarified as legacy terminology; these companies have transitioned into broadband providers offering high-quality internet services. Most revenue from these contracts now comes from internet services rather than traditional cable TV.
00:18:01 – 00:19:05
The revenue share from contracts is primarily generated from internet services rather than TV or phone. The cable companies have successfully transitioned their business models to focus on broadband. The contract grants them the right to provide services, but residents choose whether to subscribe, ensuring flexibility for both property owners and tenants.
00:18:34 – 00:23:55
Bulk service as an amenity option
00:18:34 – 00:20:10
The speaker explains the concept of bulk service, where an apartment owner provides cable or internet as an amenity included in rent for all units. This approach requires a transitional period, as existing leases cannot be changed mid-term. Over about a year, new and renewing leases can incorporate the service as part of rent, allowing all tenants to benefit from the amenity.
00:19:39 – 00:21:22
In bulk service, the owner pays for all units regardless of occupancy or tenant usage, which poses some financial risk. However, offering internet as an included amenity can boost occupancy rates by making the property more attractive compared to competitors who do not offer such services.
00:20:50 – 00:22:22
The owner can negotiate a bulk rate lower than individual subscriber rates, potentially charging tenants a rent increase that still results in a profit margin per unit. Equipment costs may or may not be included in the contract. This model is similar to what hotels do by providing internet to every room as a standard service.
00:21:35 – 00:23:12
Bulk internet service is typically included in rent like other amenities, such as a fitness center, and tenants do not have to use it but pay for it nonetheless. Tenants are not usually mandated to use the bulk provider exclusively but can opt for other providers if desired. The bulk provider’s service is part of the rental agreement.
00:22:39 – 00:23:55
Most apartment complexes currently prefer the non-bulk option where tenants pay for their own internet service. However, some have switched to bulk service due to its advantages. Cable companies favor bulk arrangements as it simplifies billing by sending one invoice to the property owner instead of multiple individual bills.
00:23:17 – 00:24:55
Comparing bulk vs non-bulk agreements
00:23:17 – 00:24:55
The speaker explains the preference of cable companies for bulk contracts due to lower operational costs and marketing efforts. They highlight that cable companies are unlikely to allow switching from a bulk contract back to a non-bulk arrangement, even if occupancy is low. However, if a customer on a non-bulk contract wants to switch to a bulk contract, the company is more willing to negotiate since bulk contracts are preferred. The discussion hints at applicability beyond just cable and internet services.
00:24:24 – 00:29:03
Other utilities and deregulated markets
00:24:24 – 00:26:07
The discussion begins with how utility billing systems can be implemented to manage and recoup costs for apartment complexes. The speaker explains that the availability of options like electric and gas services depends on whether the market is deregulated. In deregulated markets, multiple competitors offer services allowing customers to shop for better rates, while regulated markets have a single provider with state-controlled rates.
00:26:07 – 00:27:46
Examples of deregulated markets include Cleveland, Ohio, and several states in the Northeast and Midwest such as Pennsylvania, New Jersey, New York, Massachusetts, Connecticut, Illinois, and Ohio. The conversation then shifts to trash services, which can also vary by market with both private and state-driven providers. A trusted company specializes in trash services and refers clients to the speaker’s company for cable and internet expertise. Trash service auditing can reveal opportunities to save 20-25% by analyzing service frequency, types, and exploring multiple provider options.
00:27:46 – 00:29:03
The topic moves to renters insurance, which differs from utilities because it involves local agents representing insurance companies rather than direct contractual services. Typically, local agents work on referral fees by promoting their insurance products as preferred options for residents. The discussion concludes by inviting further insights on multi-family utility solutions and leveraging the ownership of multiple units for additional benefits.
00:28:27 – 00:30:46
Multi-family Utility Solutions business model
00:28:27 – 00:30:46
The speaker explains that their business operates on commission only, so they provide a free assessment and only get paid if they generate revenue for the client. If the client is not satisfied or does not sign agreements with the cable company, no payment is due. They emphasize the importance of an initial conversation to understand the client’s market, number of units, other properties, and long-term goals such as whether they plan to flip the property or need immediate cash flow. Regarding decision-making, the final agreement must be signed by the owner or an authorized officer, though property managers can be involved in the process.
00:30:08 – 00:34:47
Delegation and signing agreements
00:30:08 – 00:31:40
The discussion focuses on the role of property managers in signing agreements related to properties. It is explained that property managers, who have detailed knowledge of tenants and leases, can facilitate the process by signing necessary documents. The process typically involves providing property details, verifying existing contracts, and submitting a W-9 form. The ease of obtaining this information and signing agreements is emphasized.
00:31:09 – 00:32:47
The speakers discuss how agreements related to properties may or may not appear on title searches depending on whether they are recorded, which varies by property size and market. Concerns about new buyers understanding existing contracts on a property are addressed, with reassurance that revenue-sharing contracts transfer to new owners and are usually disclosed during due diligence rather than through title searches.
00:32:19 – 00:33:52
There is further explanation about how revenue share contracts reflect in financial documents, providing clarity to buyers about income generated from such agreements. An example is given where a property under contract had a cable company agreement recorded on the title, which was a point of concern because it restricted the owner’s choice of service providers. The discussion highlights the importance of understanding these contracts during due diligence.
00:33:21 – 00:34:47
The conversation concludes by emphasizing a long-term perspective in property investments, focusing on building relationships rather than short-term gains. The speaker offers to provide advice on specific property deals to help buyers understand any potential concerns, often giving guidance freely to support long-term partnerships.
00:34:19 – 00:36:50
Advice and biggest misconceptions in real estate investing
00:34:19 – 00:36:50
Kevin discusses a common misconception in real estate regarding cable and internet utilities. He explains that cable companies often push bulk agreements because they prefer them, but these are not always the best option for every property. Kevin emphasizes that one size does not fit all and advises investors to consider what works best for their specific situation. He highlights the importance of building long-term relationships by providing good service and guidance, ensuring clients feel confident to return for future deals. Kevin finds satisfaction in maintaining ongoing client relationships and supporting their growing portfolios.
00:36:21 – 00:37:56
Contact information and closing remarks
00:36:21 – 00:37:46
Kevin from multifamilyutilitysolutions.com explains that their company is growing but still maintains simple communication, inviting anyone to contact him directly via email or phone for questions and discussions. He emphasizes their role in educating clients, sometimes reconnecting after long periods when clients are ready to use their services. The conversation ends with mutual appreciation and the hope to stay connected.
00:37:19 – 00:37:56
The episode concludes with thanks to the listeners of the Gorilla State Investing podcast, which provides honest insights on succeeding in real estate, and directs listeners to learn more at realfocus.org.
