230: House Moms

SHOW NOTES FOR EPISODE 230: HOUSE MOMS

One of the biggest challenges of managing small apartments is not having onsite property management. Depending on the size of the property, there may be a strong need for an onsite owner representative for security, service and smooth operations. In today’s Fun Facts Friday podcast episode, Bill Manassero shares a creative onsite solution that he is using called “House Moms.”

OK, so here’s the challenge, you come to understand the economies of scale of rental property investing as you start to look at single family homes  vs. multifamily.  You may start purchasing small multifamily properties 5, 10, 20, even 40 to 60 units, but you also realize that as you are dealing with more tenants under one roof, there is a growing need for a constant presence at your property to deal with everyday issues and needs of your tenants.  As you deal with more people in one building, you’ll notice that there is an increasing need for a more consistent presence.

Some of those needs are

• If you have an off-site PM, when people have needs (clogged toilet, leaky faucets, etc.), the process to get time repairs can be slow
• If tenants are having issues with each other, you need an onsite “peace keeper” who can deal with the issue immediately
• With more tenants comes more apartment traffic. You need a closer eye on who is coming and going, especially non-tenants
• Also, more tenants mean more trash left in common areas and outside that needs be cleaned up more frequently
• Problems we’ve had:
  • We switched to a no smoking building.  Even with new “No Smoking” signage, old habits are hard to break.
  • People with pets may let their pets roam freely in the hallways
  • Items have been stolen out of units
  • Solicitation of tenants/guests for drugs and sex, sometimes from other tenants
  • Tenants that would get drunk and disturb other tenants
  • Parking lot illegal transactions
  • I’ve had to hire security guards just to give people a sense of safety and prevent potential problems

We have added closed circuit TVs and that has helped both as a deterrent and as a means to catch problems.  We can go back through the tapes to find issues/incidents (if we know the approximate date and time) to get proof of problem tenants or outside violators for police action but that is timely.

Ideally, I wanted someone to just be a presence — to report and prevent problems as they happen or before they happen.  Now, hiring an onsite property manager would be ideal but, the economies of scale don’t really justify the expense to set up a full-time employee with payroll, benefits, taxes, etc.. It gets expensive and your property income has to justify that expense.  As a rule of thumb, it generally doesn’t make sense unless you have 70 or more units.  So what do you do?

That’s where I came up with what I call the “House Mom or Dad” concept.

1. Definition of House Mom/Dad – a woman/man residing in the apartment community, who, in exchange for reduced or free rent, acts as a representative/ambassador for the owner, to oversee and maintain control over, who acts as host/hostess, chaperon, and occasionally as housekeeper.

The idea comes from college dorms, sorority or frat houses, where an onsite person that, by their mere presence, acts as a deterrent to prevent many problems that might otherwise occur when tenants and non-tenants know that no one of authority is around

But how would you get someone to do this job, especially if you don’t have the funds to hire a full or part-time employee?

That’s where the idea came up.

There are people who, because of the nature of their work or schedule, may not have a consistent income, making the paying of rent a bit of a challenge.  By offering free or reduced rent, they can be assured of a nice place to live, in exchange for light job responsibilities and the role of an “onsite authority” presence.

The financial justification is as follows: Our studio apartments only rent for $450 a month.  If I offer a responsible, carefully-screened person free or reduced rent in exchange for being that onsite person, my only out-of-pocket expense will be $450 per month.  Losing rent at $450 a month is much more cost effective than, the damage or problems that can occur with no supervision ans, let’s say, hiring a part-time or full-time person on payroll, especially when I weigh out the benefits of:

• Increasing my tenant’s sense of well-being and safety
• Having a better response to tenant needs
• Maintaining a clean and healthy living environment
• And growing a stronger sense of community in the apartment

So I began my search

Where do you find?

• Best are referrals from people “on the ground” whom you trust
• You can advertise but you’ll need to carefully screen and make sure you have strong references and preferably someone with previous property management experience.
• Other skills are a plus too (handyman, landscaper, etc.)
• I started by looking for referrals from people I trusted (property manager, local realtors, etc.)
• We temporarily had one of our cleaning persons who needed a place to live but they didn’t work out long

I ended up getting a referral from my AirBNB co-host.  She knew an artist that was very responsible but strong enough to confront people if need be.

• Because of her profession, income can fluctuate from month to month, so having a steady place to live, without having to scrape up rent each month was appealing.
• Also, she is home a lot painting art that she needs to sell and that’s good

So, I did my background checks on her, like I would for any tenant:

• Credit
• Criminal
• Previous landlords

We had various phone/Skype “interview” calls.

She had to sign the lease and we added an addendum to the lease (that she also had to sign) outlining her responsibilities.

We instituted a 90-day trial period to see how it goes and, if all is well, we will extend for another 6 months, etc.

I’m looking forward to having you as our “house mom” at the Avoca Apartments in exchange for free rent.  This will be a trial run to see how it works out for both of us.  At the end of 90 days, we’ll schedule a meeting to review and see how it went.  If things are favorable, we will extend the free rent for another 6 months.

Here is a link to the actual Addendum: HOUSE MOM ADDENDUM

So far, it has been going great.

• She has come up with great, practical ideas to help make the apartment a better place to live
• She is very creative and is using that creativity to help make the place more attractive
• She walks around the property every day, picks up trash, keeps it clean and looking great
• And she’s not having a problem confronting tenants:
  • We happen to see through our cameras a few tenants set up a “garage sale” in the front of the building, which is not OK. When I notified her, she was able to very tactically approach the tenant to remove the items
  • In 5 minutes, she had the tenant put the items back in their apartment and there were no issues
• She helped us identfy two problem tenants that are now being evicted
• She shows units and even tries to recruit good prospective tenants
• She keeps the place always looking good and fresh and is a positive presence that makes our existing tenants feel better about where they live

I don’t know if a House Mom would be a good solution for you, but for me, so far, it has been more than worth it!

Well, that’s it for today…

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