Well, how did we get here?   (Sung to the tune by the Talking Heads “Once in a Lifetime”).

It is a fairly long, but interesting, story.  The theme is “learning from your mistakes.”

The Boise Years

Peter and Ruth Nelson, the founders of Full Service Property Management (FSPM), were living in the North End of Boise, ID, across the street from Camel’s Back Park.  This was circa 1985 — 4 decades ago!  They owned a house on the corner of 13th and Bella.  It had a small, detached rental in the back (off Ireme).  This unit later got labeled ‘ADU’ for Accessory Dwelling Unit.  (Back then it was just “a unit”.)  Peter and Ruth thought “This will be great.  The tenants can help pay our mortgage.”  I mean, what could possibly go wrong?!!!

Back then Peter was young and naive.  He thought everyone was just like him — honest, transparent, and always with good intentions.

Well, as you might imagine, those first 8 years or so were a bit rough.  He would find good tenants, but he would also find not-so-good tenants who told him everything he wanted to hear, but rarely delivered.  Every time a bad tenant would move in Peter would ask himself “What did I miss?  How could I have avoided leasing to this tenant?”  Gradually, over time, a tenant screening process was developed.

The Tenant Screening Process

Peter found that he could weed out many bad tenants at the property showing. He turned the ‘showing’ into more of an ‘interview’.   He would ask certain questions that would speak to the motivation of the prospects for why they did what they did — work, looking for a home, etc.  That worked great for a while…until it didn’t!

He found over the years that fewer bad prospects were leaking through with this interview approach.  But one too many was still too many.  He needed to apply another filter.  That filter was the VOR — Verification of Rent.  Peter found that if he called the prospect’s current and past landlords he could learn all kinds of things about the prospects.  His two main concerns were:

1. Did they pay rent on time? and
2. Did they take care of the property?

The simplicity of the objectives made it easier to manage.

Credit Reports

Over the years Peter discovered that there was a loose correlation — very loose — between a prospect’s credit score and the type of tenant he wanted to lease to.  He had tenants with 450 credit scores who treated their home like a castle and took care of everything perfectly.  Conversely, he rented to tenants with 720+ scores that he was really excited about who trashed the place out.  He quickly determined that the emphasis most people put on credit scores for tenant screening was largely just bunk.  He needed to focus on the interview and VOR.  The credit score was helpful, but on a secondary level.

The Bend Years

About 1988 Peter moved to Bend, OR.  Ruth stayed behind in Boise and continued to manage the ADU.  After a couple of years in Bend, Peter was able to buy a home.  A year or two later he had enough saved up to buy a rental.

Story: How Big Can Your Ego Get??

Grand Targhee Ski Resort is out of Pocatello, ID.  It is not at the end of the world…but you can see it from there!  Peter went out with a friend on a ski vacation.  Just before leaving, he made an offer on a house (that later became the rental).  The house was selling for around $150,000.  He gave a local friend power of attorney to negotiate the purchase for him while he was on his ski vacation.

One day he walks into the lodge at the ski resort to call to find out how the purchase was proceeding.  (This was before cell phones!)  He was feeling like a million bucks — making phone calls from remote ski areas about big real estate deals.  He had finally arrived!  His head was enlarging by the minute!!

Except the phone was not immediately available.  There was someone using the phone.  As he waited around, he overheard the man was on a call to the L.A. area.  It had something to do with a multi-million dollar real estate deal!   When he heard this, all of the air in Peter’s head left and it shrank 8 sizes!  His ego had been checked!!

Three Rentals

So now Peter and Ruth were up to 3 rentals — two in Boise and one in Bend.  Things were looking up.  But then Peter got laid off.  He did what any successful person would do — he started painting houses and doing anything he could to make those mortgage payments and keep things afloat.

On top of that, the State of Idaho called the note on the property in Boise due!  Peter had gotten a first-time homebuyer mortgage that required the property to be owner-occupied.  When they discovered it was not they called the note due.  That would ordinarily be good news for an unemployed engineer.  But selling a house — at a distance — takes money.  Money Peter didn’t have!  Eventually, he was able to sell the Boise property before they foreclosed on him.

The Seattle Move

In 1990 Peter found a job working for Puget Sound Energy in Seattle.  He moved to Seattle and continued to rent out his two Bend houses.  Real estate in Seattle was considerably more expensive than in Bend or Boise, so Peter and Ruth rented for the first year or two.  After 2-3 years in Seattle, they were able to amass enough money for a down payment on their own home.

Story: Tenants from Hell

Shortly after moving to Seattle Peter and Ruth were living hand-to-mouth.  Everything was more expensive and penny-pinching was in full mode!

Just then one of the Bend rentals turned over.  Peter was too busy (and broke!) to drive to Bend to show the property.  He tried renting the place out remotely.  The home sat on the market longer than what they had hoped for.  They were getting desperate.  Finally, they received an application.  There was light at the end of the tunnel!  Or was there?

Because he was leasing remotely, Peter’s interview process was heavily compromised.  Everything “checked out” over the phone.  He then called the applicant’s landlord — his mother!  Who’s mother wouldn’t give their young adult a glowing referral?!  Peter was desperate.  He accepted the tenant and they moved in.

Three months later Peter and Ruth had kicked the tenants out of the house.  They drove down to Bend to turn the property over.  Peter recalls rolling up the carpet that was full of syringes while watching his wife washing the walls.  She had nothing to do with approving the tenants and here she was washing grimy walls.  Peter swore at that moment he would never do remote (or virtual) showings/interviews again!

Story – Land Development & Greed

Having been a landlord, mortgage broker, and foreclosure investor, Peter was now ready to try his hand at real estate development.  He found an opportunity to purchase one acre across the street from Kubota Gardens Japanese Park in South Seattle.  Land development is a high-risk deal.  You stand to make or lose a lot of money!

Peter divided the acre into 8 lots and brought utilities in.  He quickly found a home builder for the property and was all set to close.  Weeks before closing, Peter got a great (read “greedy) idea.  He went into the bank for a short-term loan to hide his profits from the IRS.  Except that the buyer never came to the table to close!  Months went by and Peter got his attorney to renegotiate the deal.  Surely that would seal the deal.  Still no deal.

By now the bank was getting antsy.  Eight months had passed on a 3-month note.  They were talking foreclosure on two rentals Peter had cross-collateralized to secure the note.  Peter and Ruth by this time had 3 rentals, and they were looking at losing two of those to the bank.  Big watershed moment.

With a lot of hard work and the Good Lord’s help, they were able to avert foreclosure.  They eventually closed with another buyer and made $0 on the entire deal!  The lesson learned: don’t be greedy!

Foreclosures

Through the early 1990s, Peter worked at Puget Power.  When they merged with WA Natural Gas around 1995 he found his escape pod, took the severance, and started brokering mortgages from home.  In 1996 Peter and Ruth had their only son, Will.  Now a new father, working at home took on special significance.  Peter vowed he would not work for ‘da man’ again and be forced to leave his family five days a week.

You see, we create the reality we are looking for.  We just need the commitment to follow through.

Around 2001, Peter met a man who introduced him to foreclosures.  Using a home equity loan on their personal home and two lines of credit on the two Bend rentals, Peter was able to access enough capital to be a player in the foreclosure game.  Peter was buying properties to fold into a rental portfolio.  He was bidding against “flippers” — people who would ‘fix and flip’ the property and repeat 2-4 times per year.   Their strategy made more money for the year.  Peter’s strategy made more money for a lifetime!!

There is an important side note here.  Real estate is not a ‘get rich quick’ game.  It takes time.  But if you stick with it, and don’t sell or give up, you will succeed!

Sailing (Almost) Around the World

Peter is a sailor and in 2011 an opportunity came up.  Peter purchased a sailboat and with his then 13-year-old son sailed it from North Carolina to the Mediterranean.  Ruth is a lot smarter and chose to fly over and meet them!  They spent two glorious years living and sailing on the boat in the Med and Caribbean Seas.  They lived on their equity lines.  With the euro at $1.40 to the dollar, they were burning through the equity lines at a fast clip.

In 2011 they realized they needed to get home.  They didn’t have enough money to stay out.  Peter delivered their boat back to Seattle (by way of the Panama Canal and Hawaii).  They had left their portfolio of rentals with a respected property management company in Seattle.  When they got home they had $7,000 left on half a million dollars of equity lines.  When they took back their rentals from the management company they inherited $7,000 in unpaid bills — some of them dating back 8 months!

The two were now officially “broke”.  Asset rich; but cash poor.  Lesson learned: when owning real estate, always keep a rainy day fund.  As soon as it goes dry then expect expensive things to happen!

A Company Is Born

Peter was scrambling to find the next chapter in their lives to keep the family going.  Their son, Will, would be entering college soon and things were destined to get a lot more expensive.  Peter tried 5-day sailing charters in the San Juan Islands, but could not earn enough for their family.  He had to do something!

One day he stumbled upon a webpage that offered a property management business model for $99.  This is not the sort of thing he was accustomed to, but “Desperation is the raw material of drastic change.” (William S. Burroughs)  He signed up and the rest, as they say, is history.

The Wild West Years

The early years were just that — wild.  We didn’t know what the heck we were doing.  We didn’t have the money to hire quality people, so everything was done ‘shooting from the hip’.  Amazingly, we never got sued.  Several years went by before we recognized the need to standardize our processes.  Many thanks to Jon Rinker (now retired) for his efforts in that regard.

We managed to start our business (unknowingly) at the start of a huge growth cycle for property management.  The 2010-2019 decade will be marked as one of great opportunity for property management companies.

COVID & Post-COVID Years

When COVID hit FSPM immediately went to virtual meetings to inform our clients of what the company was doing in response to this unheard-of pandemic, and to also allay fears.  It was an unprecedented time.   At the same time, staff was guaranteed their hours based on the previous three timesheets submitted.  More than looking at the bottom line, is looking at the bottom line of the staff!!!

In the aftermath of the pandemic, things have settled down.  The Company is actively pursuing several new initiatives.  The goal is to create a whole new paradigm of what good property management should look like.  Advance.  Advance.  Advance!

Epilogue

Over the past 40 years, most of the knowledge Peter and Ruth have gained has come through personal experience.  Some of the lessons have been more expensive than others, but ALL of them have shaped the style of property management that is unique to Full Service Property Management.  A style that focuses on:

• Good communication
• Respect for everyone
• Honesty, integrity, and transparency

Full Service doesn’t claim to be perfect.  The last guy to do that lived a couple of thousand years ago.  When someone in the company goofs they own up to it.  The key is not goofing up as often as others.

Peter and Ruth divorced in 2023, but remain friends and partners to this day.