360: House Moms 2.0

SHOW NOTES FOR EPISODE 360: HOUSE MOMS 2.0

One of the biggest challenges of managing small apartments is not having onsite property management. Bill Manassero found this a major challenge as a new multifamily owner.  His solution: In August 2018, he brought in a “House Mom” – a quasi employee tenant who would act as the onsite property overseer.  One year later and after he fired his first House Mom, he is now ready for the new and improved House Mom 2.0.  In today’s Fun Facts Friday podcast episode, Bill shares an update on how his experiment went, what he learned, what he did wrong and how his new upgrade is a huge improvement over House Mom 1.0.

House Moms 1.0

I introduced the idea of House Moms in episode #230 House Moms.  I actually recruited a House Mom and she worked at my 22 unit apartment for about a year.  She was an artist that we hired thinking we could attract other artists to the apartment and have this funky artist community.  Well, such are the best laid plans of mice and men… I’ll get more into what happened with House Mom 1.0 shortly but here is why I have House Mom 2.0.

If you’re doing real estate investing right, there should always be:

• Evaluating
• Revising, Refining
• Re-engineering
• Implementing
• Evaluating, Improving, etc.
• Your operations, processes and systems

Two Things You Need to Have for Your Real Estate Business

Every successful real estate investor need two things:

• An Annual Strategic Plan – How you are going to reach your annual goals
• An Operations/Franchise Manual – How to run your business

The idea is to come up with more efficient, effective operating systems that will eventually require less and less of your time and increase your bottomline more and more.

Well, one of my biggest challenges has been in the landlording or property management aspect of real estate investing.  It has been extremely frustrating, to say the least.

Smaller multifamily properties just are not big enough to warrant or cover the expense of full-time onsite management and maintenance.

When I started out, I bought C properties because of their great return but they also require more work.

That’s what necessitated the idea of a House Mom

Managing a Single Family Property vs. a Multifamily Property

OK, so here’s the challenge, you come to understand the economies of scale of rental property investing and you’re starting to look at single family homes  vs. multifamily.  You may start purchasing small multifamily properties duplexes, fourplexes, 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 managing presence to deal with the everyday issues and needs of your tenant community.  As you deal with more people in one building, you’ll recognize that there are new needs that are not being met by outside property management.

With a single family home, you have one family or a few people to deal with.  It doesn’t require a lot of attention, provided everything is working well and the tenants are good tenants.

When you have multifamily property, multiple people live in multiple units.  It is a different dynamic.  It’s a community.  Like a micro-mini city or village, so to speak.  And you have similar issues a city have:

As landlord, you’re like the county or city government:

• Providing power, sewage services, water, parking, security, safety, etc. to a group of people who, collectively, are dependent upon you
• They pay you for most of those services like people in a city pay taxes
• They expect that things will work because they are paying for it
• They also interact with one another because they live next door, below or on top of other renters
• High traffic – wear and tear, more damage and trash

Tenant vs. Tenant Issues

They also start off as strangers to one another and may remain that way or start to connect with other tenants. When they connect, there’s a new set of issues:

• Tenant vs. tenant issues:
  • Noise
  • Pets
  • Smoking
  • “He stole my parking spot”
  • Fights
  • Stealing
  • Bringing in sometimes “undesirable” guests that may make other tenants feel uncomfortable or even threatened
  • Tenants who do illegal things – danger to other tenants

Outside Neighborhood Influences

• And then you have other outside Influences
  • People in neighborhood who want access to your tenants for the wrong reasons (drugs, prostitution, rape)
  • People who want to break in to your units
  • People who may know a tenant and is mad at them

Here’s the issue

• You bought a multifamily property that is not large enough (under 60 or 70 units) to justify full-time on-site property management
• There is no one on site that represents your best interests or interests of the whole community
• If you hire a local property manager:
  • They will not be able have someone there during the day
  • More than likely, the only time they would go is for repairs and maintenance or to show empty units
  • You have to trust that you have nothing but outstanding tenants and that there will never be any issues
  • And you have to also hope that there are not any emergencies
• If issues do occur, where you have no presence, how would that impact you?
  • People can possibly get hurt
  • Property gets damaged
  • Lawsuits could follow
• If you could have someone there:
  • You can catch and cool problems before they escalate, whether they are a broken pipe or tenants yelling at each other
  • They can prevent problems:
    • Make sure sidewalks are salted after a storm
    • Have dangerous items repaired quickly to prevent further damage or injury
    • And the list goes on and on

Closed Circuit TV

• We put in multiple cameras that would monitor activity in the common areas (hallways) and on the exterior of the building
• It was effective but I still had to find someone who could act on things we saw, plus I couldn’t watch the cameras all day
• Cameras worked best when you can use them to provide

Enter the House Mom

• Life a college dormitory or fraternity/sorority
• Who’s very presence help keep things on an even keel
• People think twice before doing the wrong thing in front of your mom
• Here is a link to a PDF copy of my House Mom Agreement

Other Benefits of a House Mom That are BETTER Than Property Manager

• Can do showings nights and weekends
• Is present almost 24/7
• Can save money by catching things like water leaks, electrical outages, fires, vandalism, stealing
• Can protect residents by immediately contacting first responders when there are emergencies, like fires, gas leaks, violence, etc.
• Can run out and get things you need
• Can be your AirBNB Co-Host and earn extra money

We Had to Fire Our First House Mom

• It worked
• I would regularly
• It worked good for a while but we had to let our first House Mom go
• There were a lot of things we did wrong when we recruited our first House Mom
• After we sat down and evaluated where we did things wrong and revised our job description
• Here is a link to a PDF copy of the revised Letter of Agreement, Job Description and Lease Addendum: Generic_Agreement_Letter_&_Lease Addendum

House Mom 2.0

• Some of the things I Learned from House Mom 1.0 to House Mom 2.0
  • Screen the applicants better
  • Look for previous job skills that can apply
  • Contact Job references
  • Add to agreement that they can be fired if they break lease agreement
  • Don’t offer the position for free rent
  • Better to offer at reduced rent because it shows that the rent has value
  • You have to charge them something – it validates the lease and the value of the lease
  • Get a person who has strong moral convictions
  • Have someone else on the ground that can check in on your House Mom
  • Offer opportunities for cash bonuses and incentives (i.e. AirBNB)
  • Create goals and incentives where rewards will be given for meeting goals
  • Have regular weekly reports/meetings

Where You Can Find House Moms

• Facebook Job Marketplace’s
  • Apartment Co-host
  • Onsite apartment manager
• Craig List
• List it under rentals for people looking for a place to live – “Discounted rent with prior property management experience”
• Look at existing tenants
  • Sometimes you may have a tenant that fits the profile
  • just have one of those tenants that cares about the place, cleans it on their own, is a handyman type person
• Best House Moms/Dads
  • Retired, on fixed income
  • On disability or Social security so they are there a lot
  • Vets are great house moms or dads
  • Needs to be somewhat physically well
  • Can be a house mom or house dad

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Additional Episode Sponsor: Meno Studio – menostudio777@gmail.com