Interview with Dan Feder of F&F Properties

During quarantine, I have been making the most of my time by conducting a series of video conference interviews that I’m calling “Owner’s Equity: Conversations with Today’s Business Leaders.” Be sure and check out the Illumination Wealth YouTube channel to see all of these great interviews. There are 7 posted so far.

Dan Feder, Founder of F&F Properties

In Episode 7, I sat down virtually with Dan Feder. He is the Founder of F&F Properties, which is a San Diego-based real estate firm focused on multi-family properties and apartment complexes. They buy and sell rental properties while also providing their own excellent property management services. Prior to getting into real estate, Dan owned an equipment and financing company. His experience with this business actually gave him a lot of insight when transitioning into multi-family real estate and its market’s cyclical nature.

In our 40-minute conversation, we cover a lot of ground. We won’t get into everything in this article, so I encourage you to watch the entire interview below.

In this article, we will touch on the follow topics from Dan’s interview:

• How F&F Properties has implemented data, KPIs and dashboards to improve operational performance.
• What AB-828 is and why every real estate investor needs to be aware of the regulations this bill proposes.
• How Dan views the current state of California multi-family real estate.
• Dan’s favorite book on company culture and F&F’s mantra of “Do the right thing, plus one.”
• How professional real estate investors enhance their communities.

Today’s Multi-Family Real Estate Market

Of course, my conversation with Dan centered around what’s happening in California’s multi-family real estate market during the COVID-19 crisis and what he expects as our economy starts to open up with many new regulations potentially in place.

Dan feels that his firm is well-prepared for any situation because of the analytics tools they’ve developed. Multi-family real estate is traditionally a fairly old school industry, but F&F Properties uses the latest technology to their advantage. Dan brought in outside consultants and software developers to create dashboards that track key performance indicators (KPIs) and analyze data in real-time.

“We can measure how we are doing and we can stay up to date on everything,” Dan says. “I’m a big believer that if you give people information, they are going to be able to affect change. Everyone has to do this moving forward. Not everyone will. You have the run the business based on 2020 moving forward, not 1999 and behind.”

New Challenges

Even as prepared as his team is, they have still faced their challenges in the coronavirus economy. Dan’s biggest concern is new regulations being put into place that really work against rental property owners and property management firms. Regulations such as rent control and eviction moratoriums are being enacted in an effort to “protect” renters who may be struggling financially during this time. Dan’s concern is that many of these regulations being implemented will ultimately have a negative effect on a market where margins are already razor thin for most property owners.

One such proposed regulation is AB-828, which is one that every property owner needs to be aware of. Among other things, this bill is pushing for a 25% reduction in rent prices throughout California. This may help renters to pay their bills in the short-term, but Dan sees it as potentially devastating for many property owners.

The Real Facts

Dan highlights the fact that 2/3 of multi-family properties in California are actually owned by small businesses and individual investors. The majority of these properties are not owned by big banks and huge corporations. So, regulations aimed at helping the “little guy” can also severely hurt the other “little guys” that own many of these properties and the “little guys” who are their employees. On average, only 9 cents of rent dollar goes to the housing provider. They have their own expenses that need to be met, including mortgages, property taxes, maintenance, staff and other property management costs.

“Reducing cash flow by 25% for these property owners can lead to much bigger issues,” Dan explains. “They lose employees (who could be renters themselves), the banks pull backing and even new construction slows down if the market isn’t profitable. You may end up hurting the people you want to help.”

Is it a Good Time to Invest in California Multi-Family Real Estate?

Because of what’s happening, Dan says that he wouldn’t recommend inexperienced real estate investors to invest in California real estate anytime soon. Those with the knowledge and resources, like his firm, will be able to weather the storm and make the necessary adjustments. Those who don’t know what they are doing will probably be in for a rude awakening until things start to get back to normal in our economy. Even then, some of these regulations being enacted to address short-term problems can potentially have very long-term effects on the market.

As for how Dan keeps his team motivated during these unusual times, he talks about the value of having a strong company culture. Some of his employees are working remotely while a handful come into the office every day to handle essential property management activities.

“We doing all we’re supposed to be doing,” Dan says. “Our team has stepped up. We have a basic motto which is ‘Do the right thing, plus one.’ We’ve had that motto for years. We are looking for employees who are hungry, humble and smart.”

Dan also recommends the book “The Ideal Team Player,” which he says greatly inspires the culture at F&F Properties.

Doing the Right Thing

In Dan’s opinion, property management is an industry for people who are service-oriented, who are rational and who care about helping others. In the end, this is a service industry. Tenants are the clients and you do what you need to do to take care of them.

F&F Properties distributed more than 10,000 disposable face masks to their tenants, while also donating thousands of medical-grade masks to San Diego first responders and hospital workers. It is just one of many steps they’ve taken to help work with their tenants during this crisis.

“We try to do the right thing, even if it’s never good enough for some people,” Dan remarks. “We are trying to do everything we possibly can to work with our residents. We are all on the same team.”