Don Werner’s system wasn’t working. As president of the Metrex Property Group in Denver, he manages 18 rental properties with 800 units. He has almost 200 vendors that help his 15 employees keep his buildings running. And he has to keep track of them all.
Work orders, unit status reports, apartment painting schedules: all of that had to be tracked. Werner was working in QuickBooks, spreadsheet programs and Microsoft Word to keep his documents in order — which didn’t actually keep them organized at all.
“I had literally bastardized QuickBooks to do what I needed it to do,” Werner says. “I was putting pieces of information in multiple places. That was just really fraught with error.”
Then, in 2006, he was offered a chance to be a beta tester for DIY Real Estate Solutions. The Cleveland-based company offers small-business owners a suite of technology to help better manage their rental properties. And in the current real estate market, the company sees potential for even more independent owners to enter the business.
The Web-based service offers owners and managers a hub to handle all their information, including the online application process, background checks, lease forms, occupancy records, vendor payments and financial statements. It also provides an online portal to attract new renters and for current tenants to pay rent and file maintenance requests.
The service costs about 50 cents per unit per month, says CEO Steven Lloyd, which adds up to about $125 a month for the average client. Werner spends about $3,000 a year with DIY, but similar management programs can cost $10,000 or more annually, he says.
With DIY, Werner can see important details on any of his apartments in one place: When the stove in unit 302 was last replaced, for example, and if it’s still under the manufacturer’s warranty. When the carpet was last replaced — and if it was just last year, why does it look like someone changed the oil for their Harley on it? (“That has happened,” he says.)
“It has saved time in processing. ... It has improved the accuracy of files,” he says. “I know intimately what’s going on with a tenant, with a unit, with vendors. It really does an outstanding job of pulling all that together with one click.”
DIY traces its roots to a company called Management Reports Inc., which started as a service bureau in Cleveland in 1971. It contracted with large property management firms for business services such as accounting. In 1985, MRI filed for Chapter 11 bankruptcy.
Three years later, Bob Lasser came on board to help turn it around. Don Katt was then a junior programmer and Lloyd was in charge of MRI’s Northeast regional offices.
MRI serviced the top 20 percent of the real estate market, including big investment companies such as Allstate, Prudential, JP Morgan and Morgan Stanley and companies such as Developers Diversified Realty. In 2002, MRI was a $33 million-a-year company and sold to Intuit (the folks who brought you QuickBook, Turbo Tax and other programs).
Lasser (now chairman), Katt (chief technical officer) and Lloyd came back together to form DIY in 2005, bringing MRI’s basic service ideas into the 21st century and a different segment of the marketplace.
They launched their software service company in 2007 with the goal of focusing on the largest segment of the property management market: owners who manage 1,000 or fewer units. Of the 35 million rentable units in the United States, Lloyd says, 32 million are operated by independent owners. That’s 80 percent of the market.
The company has 260 clients throughout the country and has doubled its client base from February 2008 to February 2009. Its annual revenue — somewhere between $200,000 and $500,000 — grew 151 percent from 2007 to 2008, Lloyd says.
“We expect our business to grow,” he says. Even with the down economy and rise in foreclosures, banks will need to pay someone to take care of the buildings.
“There’s always someone who wants to solve that problem for the right price,” Lloyd says.
Lynn-Ann Gries, chief investment officer of JumpStart Ventures, a division of Cleveland-based JumpStart Inc., says she likes the DIY team’s experience in the sector. All told, the company’s three principals have more than 70 years in the property management technology sector. And, she says, they had already built a product that was ready to go to market.
JumpStart did some research of its own and found that property managers liked the software. “Nobody said, ‘That’s the stupidest thing I’ve ever heard of, and I use ABC software, and it works fine,’ ” Gries says.
The investment firm has awarded $220,000 to DIY to date, with another $180,000 committed.
The company’s main obstacle is marketing to an extremely fragmented network of businesses, Lloyd says.
“It’s extremely difficult,” he says. “There’s no one quick shot that’s going to solve the issues of marketing.”
So as a first step, DIY is attempting to connect with national property management organizations and their membership. Though scattered, the market is also powerful.
”That marketplace we came from is not the largest marketplace for rental properties in the country,” Lloyd says. “It’s small-business USA that drives the economy.”
COMPANY AT A GLANCE
Name: DIY Real Estate Solutions
Location: Cleveland
Founded: 2005
Revenue: between $200,000 and $500,000
Executive team:
Bob Lasser, chairman
Don Katt, chief technology officer
Steven Lloyd, CEO
Employees: 4 (not counting executive team)