Kevin Gardner explains how to make money from your cable supplier as well as save on Gas and Electric in deregulated states.
Please join my Facebook group for multifamily discussion. https://www.facebook.com/groups/StarkeyMultifamily/
00:00:00 – 00:01:56
Introduction and guest background
00:00:00 – 00:01:56
The podcast host Reed Starkey introduces his guest Kevin Gardner, who shares his background in telecommunications. Kevin began his career selling cable door-to-door and advanced through Comcast, eventually managing negotiations with property owners. Twelve years ago, he started his own company initially representing major cable providers like Comcast and Charter. When these companies brought negotiations in-house, Kevin’s company shifted focus to assisting property owners directly by negotiating cable contracts for them over the past seven years.
00:01:15 – 00:03:01
Cable companies franchise and property rights
00:01:15 – 00:03:01
Cable companies receive a franchise to operate within municipalities, allowing them to use public easements but not personal property without permission. Homeowners grant access through service agreements, effectively giving cable companies the right to be on their property. In multifamily housing, property owners act as intermediaries who must grant the cable company permission to serve residents. Cable companies often negotiate compensation for property owners in exchange for service access to residents.
00:02:24 – 00:05:59
Municipal franchise and cable competition
00:02:24 – 00:05:59
The discussion explains how municipalities, such as cities or townships, have the authority to grant franchises to cable companies to operate within their public easements. Cable companies receive non-exclusive franchises, meaning multiple companies can be authorized to serve the same area. However, the high cost of building cable infrastructure, like laying fiber and constructing distribution sites, often limits competition. In densely populated areas, multiple cable operators can coexist profitably because the customer base is large enough to justify the investment. Conversely, in less populated areas, only one provider typically operates due to the lower return on investment. Examples include Detroit’s metro area with several providers versus more rural suburbs with fewer options. Franchise terms are negotiated directly with the companies.
00:05:20 – 00:09:43
Negotiating cable contract terms
00:05:20 – 00:06:57
Negotiating a cable contract involves many variables such as the number of cable companies available, existing contracts, and property size. Larger properties, like a 150-unit complex, generally have more leverage for higher compensation. Cable companies consider what they can afford to give, their return on investment, and whether exclusive rights to wiring or marketing are granted.
00:06:27 – 00:08:12
The value of a contract depends on the investment and exclusivity granted; exclusive rights over more customers typically yield higher compensation. Compensation models vary, including revenue share (ongoing commissions) and lump-sum payments. There is a trend toward revenue share to incentivize property managers to help grow the cable company’s business, aligning interests and supporting ongoing cash flow.
00:07:34 – 00:09:43
Property owners have different priorities: some prefer lump-sum fees for immediate improvements, while others value ongoing revenue share payments. An example from Tennessee involved a property owner using a lump sum from the cable company to upgrade amenities like a pool deck to justify raising rents to market levels. This approach allowed upgrades without out-of-pocket costs, although others focus on steady quarterly income from revenue share.
00:09:10 – 00:11:14
Why use a negotiation expert
00:09:10 – 00:11:14
The speaker explains that their company has extensive experience on both sides of contract negotiations, allowing them to streamline the process and identify negotiable elements efficiently. Their commission-based compensation model aligns their incentives with maximizing the owner’s earnings. They highlight their deep understanding of various negotiation aspects, such as renting wiring and marketing rights, which many might not consider. The process they follow involves 16 detailed steps to cover all variables involved.
00:10:45 – 00:13:37
Negotiation process and timing
00:10:45 – 00:13:37
The discussion emphasizes the importance of contacting experts early in the property buying process to verify the existence of cable contracts. These contracts can often be overlooked due to changes in ownership of properties and cable companies, as well as lost or misplaced documents. Historically, cable contracts were long-term agreements, but over time, consolidations and ownership transfers have complicated their tracking. Early involvement can help uncover hidden contracts and potentially secure additional financial benefits that buyers might otherwise miss.
00:13:03 – 00:14:42
Importance of contract due diligence
00:13:03 – 00:14:42
The discussion focuses on compensation related to property contracts, emphasizing that if you are absorbing a multi-year contract, you should be entitled to a proportional share of the original compensation. However, it is crucial to request this compensation before the deal closes, as it is unlikely to be awarded retroactively. Important factors in securing compensation include the number of units and the property’s location, with cable companies rarely offering compensation for properties with fewer than 20 units. Favorable terms are more common when dealing with properties exceeding 100 units.
00:14:10 – 00:16:07
Factors affecting contract value
00:14:10 – 00:16:07
The speaker describes a negotiation scenario in Louisville where an owner had 94 units, just under the 100-unit threshold, resulting in an unsatisfactory deal. The owner later purchased an additional property, increasing the total to 150 units. By waiting and negotiating for both properties together, they secured a much better deal. This strategy involved walking away initially while maintaining a good relationship, anticipating improved leverage in the future. The discussion concludes by considering whether multiple property owners could collaborate to negotiate collectively.
00:15:28 – 00:17:20
Multiple property owners negotiation
00:15:28 – 00:17:20
The speaker explains the advantages of representing multiple property owners, highlighting the efficiency gained by clients dealing with a single point of contact rather than multiple individuals. This approach reduces client time spent on phone calls and improves overall communication. Additionally, the speaker discusses how market competitiveness and the number of customers impact property value, noting that properties in more competitive markets with more customers typically command higher prices.
00:16:38 – 00:19:24
Impact of apartment class and customers
00:16:38 – 00:18:26
The discussion compares A-class and C-class apartments in terms of customer base and services used, highlighting that internet usage is higher in Class A and B properties. Internet has become the most valued product for cable companies due to its higher profit margins compared to traditional video services. Changes in customer preferences have shifted focus away from telephone services towards internet.
00:17:49 – 00:19:24
The speaker reflects on the evolution of cable services, noting that initially, TV was basic with fewer channels and better margins. Over time, the number of channels has increased significantly, squeezing profit margins on video services. The main profitability now lies in high-speed internet, and cable operators focus on how much margin they can allocate to this service.
00:18:53 – 00:21:53
Utility savings opportunities
00:18:53 – 00:21:53
The speaker explains that their company employs a broker specializing in electric and gas for deregulated energy markets, covering 17 states with varying combinations of electric and gas deregulation. Savings depend on factors like energy usage, presence of common areas, laundry facilities, and amenities such as pools and clubhouses. Larger complexes with higher utility consumption have more potential for savings, while smaller complexes with in-unit laundry have less opportunity. The company investigates potential savings at no cost to property owners, earning commissions only if they secure better rates from suppliers. Illinois is highlighted as a state with significant potential for both electric and gas savings.
00:21:18 – 00:22:31
How to check eligibility for savings
00:21:18 – 00:22:31
The speaker explains that viewers can check whether their state is eligible for deregulated energy markets by visiting their website, which lists all deregulated states. The site also indicates where their broker operates and highlights markets with better opportunities. This information helps customers decide if they want to proceed with energy services.
00:21:55 – 00:24:41
Contact and commission details
00:21:55 – 00:24:41
Kevin Gardner explains the process for contacting him and how his company approaches potential business opportunities in multifamily utility solutions. They first assess if there is a viable opportunity before signing any contracts to avoid wasted effort. Their commission is based on a sliding scale depending on the number of units, with payment only occurring after the client receives payment from the provider. The process can take several months, but they focus on building long-term relationships and repeat business. Kevin emphasizes the uniqueness of their business model and the potential in the deregulated cable market, highlighting their commitment to win-win partnerships.
00:24:10 – 00:25:40
Business model and client benefits
00:24:10 – 00:25:40
The speaker discusses how the multifamily real estate business is booming, attracting many new investors who are busy managing their initial properties and expanding their portfolios. To ease their workload, the service offered is turnkey, handling much of the work for the owners while still generating income for them. The process is designed to be simple, with the company negotiating on behalf of owners under a letter of authorization, but importantly, they do not have the authority to sign agreements—final decisions remain with the property owners.
00:25:16 – 00:26:12
Closing remarks and thanks
00:25:16 – 00:26:12
The speaker reflects on initially not profiting from their efforts until the timing became favorable about a year later. They express appreciation for Kevin and Reid, thanking them and feeling honored to be one of the initial guests. The conversation concludes with well wishes for continued success.
