Welcome to Passive Real Estate Investing. I’m your host Marco centrally. Well, I have an exciting show for you today. Why? Because I get a lot of people asking me and my team. Should I self-manage do you have a property manager that I should use or should I just manage it from afar? Well, the reality is, is that a very large percentage of investors out there in real estate actually self-manage. And so it’s not an uncommon thing, even though for years, we’ve been talking about completely turnkey investment properties, which means that they are professionally managed. That is a great option for many people. However, for many other people, they are better off self managing. They will make more money and there’s other benefits. And that’s what we’re going to talk about today. So I don’t want to steal any thunder from my guests who happens to be Dana Dunford.
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And she is the CEO of Hemlane and they are a technology enabled property management platform stay tuned and don’t tune out from this because this is very interesting. I’ve actually checked them out and I’m actually considering trying them out myself to self-manage quote unquote, one of my own properties, but she is a strong advocate of purchasing properties anywhere, which is basically aligned with our philosophy because the best investments are really not always in your backyard. Dana previously worked at apple on their worldwide financial planning and analysis team, which is very impressive. And then she worked at nest in business development. And for those of you are not familiar with nest, they are a home tech company that was acquired by Google for $3.2 billion. So they are not a small company. She received her MBA from Harvard business school, very impressive. And in her free time, she is an avid question, paraglider and a skier. Dana, welcome to the show.
Thanks so much for having me Marco.
Well, I’ve gotten to know you a little bit better here over the last week or so in other conversations. And I’m very impressed with as a company and as a service and never really understood what the name was or what it meant. But now I know because I actually read it on your website, but why don’t we start off with hem lane? You can fill in the gaps on my introduction about you. So if you want to share more about yourself, do that, because I think that actually ties into Hemlane and how that got started.
Great. So I’ll give you a little bit of background on myself and my co-founder who is equally just as important in this equation and then how that relates to Hemlane. So both of us were out there helping manage properties that weren’t in our backyard, like Marco said the best investments aren’t there and doing it haphazardly through, you know, trying to find a service professional, to go out and do the plumbing all of the way to no following up with the tenant to remind them that rent is due. And really there wasn’t a solution out there for us. And when we looked at the market, it was like, do it yourself, do everything yourself or a full service. And we really fell somewhere in the middle. And if you ask Frank, who’s my co-founder what was important to him. He really wanted to do the leasing himself for one of his properties, but he didn’t want to have to, you know, do a lot of the accounting stuff.
Cause he just didn’t know it versus someone like me. I love the county and I have an applied mathematics background as well as a finance degree. And I really wanted to be able to control all of that in the system, but knew nothing about repair coordination and wanted someone to help with that. So that was really the impetus of, you know, flexible property management. How do you get the services that you need to provide a more flexible solution versus what was in the market, which was like all or none and not having something in the middle to really help you succeed with your investments. On top of that, one other note I would say is that I think a lot of real estate investors start with one property that’s close to them and then they realize, wait, I can do so much better by going outside of where I live.
And I think a lot of people, Marco knots, a huge benefit of what you do is helping people get outside that comfort zone of, Hey, I can drive to it. And in that particular case, having a solution that’s flexible where it’s like the property down the street. I can just use software and manage it. But on the same platform, I can have a property where I have a leasing agent and a repair coordinator and a team of service professionals local because I’m physically not there and I really need someone there. So that was really the start of Hemlane and what it is today. So hopefully that helps answer it.
No, that’s a great answer. Did you stumble across this or did you have systems in place already where you didn’t have to figure out and create the processes and the systems that you use today for self managing through? Well, you didn’t have a platform back then, but you’ve turned it into a platform. So did you stumble across all this and figure it out or did you already have a starting point?
Yeah, no. It built the actual platform itself, built it all ourselves end to end. However, we started with processes that we had done as best practices, such as, Hey, a tenant inquiry has come into, maybe it was Zillow. That was like a, a platform that I was using manually. Now. It was like, okay, every day I know I follow up with the tenant and tell them the times that they can view the place or I pre-qualify them first because I don’t want to waste my time driving to show the property if they’re not qualified. And then my follow-up emails from there, but I was manually doing it. Right. And Hemlane really said, how do we take those best in class practices to make sure you don’t ever lose a tenant lead during the leasing process you’re doing pre-qualifications and everything to save yourself time, how do we build?
That’s just one example, but how do we build all of those processes into best-in-class workflow for real estate investors to leverage and use. And there’s some great platforms out there that are much more sophisticated with like templates and auto alerts, but they were really built for the larger folks. Those who had over, you know, 300, 400 rental properties. And we were sitting there saying, no, we’re the small mom and pop, we don’t have that. And the tools that we have are, are much more of like just front collection or just tenant screening, but that doesn’t solve my problem. I need something that solves that entire end to end workflow and process while still keeping me in control of the day to day.
So let’s get to the heart of it. I think what a lot of people are asking is what are the reasons why I would self-manage? What are the benefits? I mean, it’s clear. I think to most people, what the benefits are of having a professional management company, it becomes very hands-off it takes a passive investment. It makes it as mostly passive as possible. But what are the reasons why someone would want to actually self manage their properties?
Yeah, great question. And before I get into like, why you self-manage and I have like five really good reasons for that. Let me go back to of like, you know, having a property manager and having that full service management, if for some reason it gets too emotional for you where you’re involved and you don’t have processes set up very well to like step yourself out of it. And suddenly you’re worrying about administrative stuff and it’s becoming a burden versus that passive income that you deserve. That’s when you may want to consider a full service manager, if you have a portfolio today, because there is no one size fits all and like the best real estate investors who self-manage, we see, they have the processes set up to mitigate risk and make sure things don’t get escalated to them right. At the end. So really making sure they set themselves up like a property manager, the best property managers I see out, there are ones where it’s like, yeah, you know, we have all these processes and procedures in place that like the chances of us having something that surfaces where a tenant is really escalated, just don’t happen that often because we have great procedures in place.
And so I would say that before you think about, self-managing think about your personality, think about how you can get those things set up and then also look at your own portfolio and make sure that if you do decide to self-manage, it doesn’t escalate or get heated. And if you do have that, you might not have the right processes in place and you might need to move to full surface. So then back to your,
So let me interrupt you on that. If you don’t mind, let’s drill down on that point before we get to these five reasons why you would want to self-manage who should and who shouldn’t be self managing because, you know, you talked about personality type and a few other things, but how do we self check ourselves? Like how do we know if we’re the type of person should or shouldn’t be self-managing?
Yeah, there are certain people out there who are really bad with operations. And these types of people are ones who never check their email, their inboxes at like 5,000, right. They don’t really check their phone they’re on vacation. Like literally you can never get ahold of them. Those are the people that like, you definitely just need to hire a full service manager, or if you never want to talk to your tenants and never want to hear from them, and you just want to check in the mail and you’re okay. If there’s an upcharge on the repair bill or something might be a little bit off because that might happen. If you’re okay with that, then like full services, a hundred percent for you. And that’s typically, actually our question at Hemlane before someone comes to us, it’s like, what’s your personality type? How are you going to be?
But if you want to be semi involved and have a little bit more control over your asset where you know, what’s going on, you can go into the system and drill into repair bills, or you have the flexibility to, you know, select the tenant yourself because you’re looking at the background and credit check and the reference checks and all of that. And you have that end decision. You want a bit more control over your asset then self-management is fantastic for you. And the reason today, so 72% of rental properties are self-managed. So 72% of rental properties are not using a traditional property manager. And I think the reason is, is because you are buying an asset and by buying a physical asset, you kind of subconsciously think I want to be semi involved. Like I’m buying something that I can see. And I think that’s why subconsciously a lot of real estate investors say, I do want to do a little bit of the management.
I don’t want to do everything. I don’t want to get the repair calls when you know, there’s a plumbing problem and I need to call out a plumber. I don’t want that, but I want to control the financials. I want to see what’s going on. I want to set up the processes of how much the application fee is or have late fees go to me, those types of things. If you want to control that stuff, then self-management is great for you. So I think it’s more a personality type and also like what you’re good at people that I find who just rock at self-management they’re so good at it are people who are very operationally focused of, they go through, they have a process, they stick through that process. And if anything goes wrong with that process, they go back to that process and say, how do I make sure this never happens again so that I really can be much more passive and have like a delightful experience with my property management.
The people I see who are terrible with self-management are the ones who like forget to respond to a tenant or like, oh, I can’t believe that they ask that question. I just won’t respond. And then the tenant gets heated. You get heated. There’s suddenly this escalation because you don’t have a really good, consistent process to really get things done, move forward, communicate effectively. And so I think it’s more of actually a personality type versus where you’ve purchased the properties or where you are. I’ve seen success with self-management with even the busiest people. So people who are working investment banking hours, I’ve seen some of those people do really well with self-management cause they set up a process they’re really good at it. And then it becomes more passive for them.
Got it. Okay. So Dana, let’s get into the reasons why you mentioned five let’s let’s just break them down one at a time, because I think this is probably the biggest question that people want to know about. And then I believe I know the second, most common or important question to investors. I’m going to leave that for later, but let’s just break these down. What are the five reasons?
Yeah. So the five reasons I have and other people might have other reasons of why they felt managed. I kind of start with the PNL and the first one is increasing income. So let me give you some examples of that. Application fees are something that typically a traditional manager will take and add that as like an ancillary revenue, same with late fees. So if a tenant is late, a lot of property management contracts say if the tenant is late, the property manager gets out late fee. However, if you’re self managing, you can still set it up in systems where it’s like automatically fees, but it goes a hundred percent to you. And so when you have these additional ancillary services, you can make money off of those, which obviously increases your net operating income. The second on the P and L is reducing that property management fee.
But let me give you a caveat with that because your time is super valuable. And I think one of the things, and this is just me playing devil’s advocate on the five reasons why to self-manage. I think a lot of times real estate investors discount their time. They don’t realize how valuable their time is. And so keep in mind while it will reduce your property management fees, you won’t be paying, you know, 10% of monthly rent, which is pretty standard. If you have a smaller portfolio, you still, while you don’t have those fees, you still should be considering how much time you’re spending every month, which you wouldn’t spend if you had a full service manager and what that time costs, and just benchmarking it against that, just to do a sanity, check that while you’re reducing your property management fees, they’re not at zero, right?
So I would put that caveat in there. And then the next one is optimizing the repair process and overseeing those bills. So I think in this particular case, a lot of times with property management, especially if you have a smaller portfolio and you decide to self manage, you can pick up a lot of things that a large operator can’t. And let me give you an example, say that, you know, there is a specific light switch that is, you’d probably get this fixed, but like if it turns off, it turns off the refrigerator to, or something like that. That would be something that if a repair request came in and said, Hey, the refrigerator’s not working. That would be the first thing on your mind. Now this is an extreme example because you’d get that fixed. But those certain types of nuances with every single property you’re able to document it.
And then remember it much faster to be able to say, how do I reduce the cost of service visits and how do I oversee the billing? So I make sure when a service professional is onsite, if they have to come out two months later and I see they have to come out two months later, I’m going to push back and say, Hey, shouldn’t have been fixed before. Now don’t get me wrong. A traditional manager is going to do that as well. Or you would hope if they’re good that they would do that. But the moment that it’s just your asset, you’re going to be much more detail oriented about that because you’re only remembering 3, 4, 5 properties potentially. Or maybe if you have 10 properties, still 10 versus a property manager who has 550 properties and someone stepping in to do the repair calls, you know, they’re going to have other people jumping into it and it’s not always going to be the same person.
So there’s that part. And then the fourth one I have is data and insights. And this is one that I actually actually think is the most important, because a lot of times as if, as a real estate investor, you talk to your property manager and you’re like, why don’t I have any leaves? Like, you know, and you’re, you’re frustrated, you saw my voice go up. Why isn’t this gone off market? It’s been 30 days, blah, blah, blah, blah, blah. And you hear from the property manager? Well, that third bedroom is kind of small. And people have said that, or I think you should reduce the fees on or reduce the rental rate. And they give you all these reasons and you kind of don’t believe them. You’re like, well, I saw the property down the street rent for the same price. Like, I don’t know if I believe you, when you actually have the data and insights into how many leads you had.
So how many tenants inquired about your property when it’s vacant, when you have the insights into, okay. Here is from that perspective, here’s how many of them actually set up a showing after three or four follow-ups, which can be automated and text message enabled. And I’m still not getting data on it, or I got data and this is actually telling me something, it allows you to move faster and change rental prices or change, lease renewal amounts to optimize again, that net operating income, because you reduce vacancy, you get tenants and faster, you incentivize tenants to stay for longer. And so having and controlling all of the data and insights and really understanding your properties actually help you to just make sure your property is performing really well with nothing getting missed. And the reason I bring up that one, number four of data and insights is I’ve spoken to some top property managers and top leasing agents where I say, well, how many times do you follow up with a tenant when they inquire about the property to view it?
And they say, oh, we follow up once. And if we don’t hear from them, we just file it away. You might not know that on your end, you know, because you’re so far removed when you are passive. But if you’re part of that self management process and you can see how many follow ups there were, there’s this kind of, I can sleep at night because you know exactly what the process has been. And you have confidence in that process because you’re controlling it and the nuggets to my final and number five reason of why you would self-manage is having that control. So once you have that data and insight, you have control over the destiny of your property and you have control over your cash flow. You’re not relying on someone else to have control over that. Cashflow. An example would be an infection. If you have an eviction with a tenant and your property manager has to bear that news and keep in mind, no property manager wants to bear that news.
Like they also want to make it where the tenant is paying on time. Everything’s very easy. But when they bear that news to you and say, it’s going to be an eviction fee. And because of COVID and how expensive things are, you’re going to have to pay $1,200 eviction fee. It’s just say that you don’t really, you never had any control upfront to help mitigate that eviction. And now you’re just reducing your net operating income because you’re paying that bill. And so when you self-manage, there’s some sort of ability to sleep at night and feel very comfortable that if something goes wrong, it was on you. And the best thing about that is you can change yourself. You can’t change other people. And I think that is actually why 72% of rentals are self-managed is that ability to have control over your asset to make sure that at the end of the day, if there’s anyone to blame, you don’t point fingers at anyone else. You point fingers at yourself.
Right? Question about the last point. It’s not very common that you have to do an eviction, regardless of whether it’s $60 to 1200, but when that costs be the same, if you were self managing versus having property management, what the cost be $1,200 because of COVID or whatever the excuse is.
Yeah, the cost would be the same, but it’s typically, and I had this situation, which is why I bring it up. It’s typically that upfront of how would I have avoided an infection that allows you to sleep at night? So for example, when I had an eviction, it was someone else had done that background in credit check, and they were the ones who said, this is the tenant we’re going to have in that property. But I think if me, as the owner had put a process in place that I needed to review that background and credit check, and it also needed landlord reference checks from the past landlords. And I needed to really verify from the past places they lived, that these tenants are going to be good, paying, you know, just passive, respectable tenants. Then I feel a little bit better. But once you get your right, you have to go through that eviction.
There’s not much you can do, but there might’ve been something even that is like at the beginning, like maybe 12 months ago that you were looking at the background and credit check. If you had seen that, you would have said, yep, okay, we’re on the right track. I do also agree this tenant is good. Then say six months later, the tenant was falling behind. And there could have been an opportunity there where you could have worked with that tenant to say, Hey, just as a heads up before you get another month or two or three months behind, let’s just break the lease, right? Do a termination here. We don’t have to go through the eviction process. Are you good or cash for keys? Which there are pros and cons to that, which I won’t go over. But you have that control throughout the process to try to mitigate that risk of calving an eviction, you are a hundred percent correct Marco.
By the time you get to the eviction, there’s not much you can do. Like the fee is going to be the fee. You’re going to have to bear the cost of that. But it’s having that control over your asset to know you’ve done everything to prevent an eviction, the problem with the, having a property manager. And there’s no problem with having a property manager. But the problem you see is if you have an eviction, it’s you blaming someone else of how did we place the tenant where we have gotten to this point and a lot of real estate investors, unfortunately do that. But subconsciously, if you were the one who helped place the tenant and accept them, and you were the one who was going through some of those negotiations, the only person, again for you to blame this yourself, or at least you’re sleeping at night, knowing, Hey, I did everything I could have to try to prevent this situation versus putting it in control of someone else or in someone else’s hands.
Okay. I’m going to ask you about tenant placement a little bit later, cause that’s one of the questions that, that are more of the tactical, how to, but going back to your first reason about increasing income, I’ve always thought of self-managing as saving the seven to 10% management fee that most property management companies would be charging you. That’s typically the range we see with the property management companies around the country is 7 to 10%, 10% being the street rate. It’s often seven to 8% is, you know, someone who has more than one property or something we’ve negotiated. But regardless of what it is, that was the increased profit that I’ve always looked at. I never really stopped to think about even though in the back of my mind and you about it, but I didn’t stop to think about charging late fees and application fees as an additional profit center. You mentioned there was an ancillary income to the property management company, which it is, but now it becomes your income whenever you have to charge it.
Exactly. Yeah. Now you have to check your, the rules and regulations. So every state or not every state, but a lot of states have restrictions on how much that application fee is. And you also yourself don’t want it to be so high where a tenant feels like there’s such a burden to apply to the property, but I’ve seen a lot of people. Self-Manage where they see that and late fees and stuff like that, going to them where they do boosts their, that operating and come at the end of the year by significantly more than they would have. Otherwise,
As far as the relationship between you, the landlord or property owner and the tenant, is there a building of relationship or closer bond or is it your recommendation or advice to just keep your distance and keep it entirely professional? Not actually have relationship beyond professional. Of course.
I love this question because I think, and I, like, I just know this from going through the process, you should not have a personal bond at all with the tenants. It should be 100% strictly business when you self-manage. And that doesn’t mean that you’re not nice and friendly. Don’t get me wrong. You’re going to be very nice and friendly to your tenants. And you’re going to make sure that you respond to repair costs very quickly and professionally, but the moment that you make it personal, where it’s like, Hey, let’s go grab a glass of wine together suddenly. Then it’s not as, it’s not that business relationship where a tenant can go to you and say, maybe they will flex on the lease a little bit because we’re friends and we get wine and it suddenly makes it where you’re not drawing a line behind. This is a professional relationship. I’m going to do everything to give you five star service. But at the same time, we’re not friends, right? I’m going to make sure this is one of the best businesses you’ve ever dealt with, but I’m also not going to be your friend, just like any business you go to, if you go to a hotel, right? You’re not friends with the person running the hotel, but they give you fantastic service. And that is that’s how you should think about it.
Okay. So when I look at, you know, deals or positions or an opportunity, whatever, it may be always look at it in terms of how much time is involved and what is the return. And so when I look at self managing, I think about it as an opportunity to increase your cash on cash return and increase your cashflow, which you can do because you’re now saving seven to 10% management fee. Plus you have potentially some ancillary parts of income coming in, but then, you know, what you’re giving up to give and take is the amount of time that you’re going to need to put into it. And that’s my question is, do you have any insight or data as to how much time investors are putting in, into the quote unquote managing of their properties and maybe that’s based on the size of the portfolio? I probably would be, of course. And maybe it’s an anecdotal question, but, or answer, but like how much time is involved when you switch from property management to self-management?
Well, I think I’m, so there’s surveys out there. The census bureau has one that says like, you know, poor property, it’s four hours a month. And I’m like, well, how inefficient are these people is my response to that. Right? So just a caveat from that perspective. But what I would say is I don’t think about it so much as how many properties you have, but more so how long have you been in the business? Because you could buy a hundred properties today and it would be a lot of work right off the bat, but if you buy one property or 10 properties right away, getting your initial process set up takes time. But the moment you start adding properties to your portfolio in regardless of where they are, even if they’re in 10 different states, the entire process, because you’ve set yourself up for operational success, it goes down over time.
And so like typically, I mean, it depends on tools and systems and solutions, but typically you can say, Hey, it’s going to be less than 15 minutes a month. If I have the right processes and procedures set up. In other words, these automated messages to remind tenants that rent is do automatic. Follow-Ups automatically fees, automatically renewals. And I give two options month to month versus an annual and this and that. And if you get a process set up really well, you can really reduce that time. Now there may be months where there’s slightly more time involved, right? So you might have a situation where you have a big capital expense, or you might have a situation where you have one difficult tenant. It’s a lemon it’s bound to happen where it’s been. You have to spend a little bit more time with them, but overall, it shouldn’t be that much time.
Like you should have the goal of under an hour, every single month of you going through it. Once you have your process set up that you have reoccurring rent set up, lease renewals, set up everything to make it very passive. And then the part where I think there’s the most amount of time spent as leasing, leasing will be the time when you need to find in place a new tenant and do the turnover where you will have time and the nuts, the question of do you get a leasing agent? So you don’t have to like drive out to the property or do you just set up a really good process where it’s like, you’re, pre-screening every tenant to make sure they meet your income and your credit requirements and whatever other requirements you have prior to driving out to the property to show it. I can’t tell you how many, like DIY landlords are like, oh, a tenant wants to see my property.
I’m going to go out tomorrow. And then the tenant cancels on them. And they’re like, I just drove out there. You know? So really making sure that you’ve a really good process will help. And part of that, honestly, Marco, like in the actual management is when the tenant signs that lease, making sure they understand every part of the lease and never fault going off of that. So like for example, you might have a tenant that says, oh gosh, I’m six days late. Can you just waive that late fee? Right? No bid should be automatic. It should be automatically paid in the system, et cetera. But if you, when you first sign that, lease with them, say, don’t forget, there’s a late fee there. If you were late you know, it’s due on the first slate on the second and you still haven’t paid on the fifth, there’s late fee and we don’t waive it. No, the excuse we don’t waive it. I just wanted to make you aware of that. Are you aware of that? And there’s no pets would just want to make sure you’re aware of that. No subletting, you understand this. If you can go through that process with them and then just refer back to the legally binding document with everything of who does what who’s responsible for, what, what happens in certain cases, it’s going to reduce a lot of that data administration that you have.
So let’s talk about some of the tactical aspects of this because you just led me right into it. One of the biggest things that I couldn’t really figure out as a out-of-state long distance self-managing landlord is how to do the lease up. Now I know you have a process or system in place. Maybe explain that. How does it work? You just had someone leave. Tell me about the turnover piece to essentially refresh the property and then the leasing piece, which involves showings and the placement.
Yeah. So one thing that’s a kind of a communication problem. When people hear self-management is people think I’m doing everything myself. Right, right. And that’s a fallacy there’s there. And there’s two reasons. One, if you are out of state, you physically need some boots on the ground. Like even if you’re self managing and you’re collecting the rent directly to your bank account, and you’re getting the late fees and application fees, even if you’re doing that, you still need someone physically there. And this is where I kind of laugh because I’m in technology. But like I laugh when someone’s like, oh, robots going to do my showing. It’s like, no robots not going to do. You’re showing you need someone out there. And so when you’re going through the leasing process and you can get a leasing agent. And so a leasing agent is someone, the definition is they find in place the tenant.
Once the tenants placed they’re out of the picture. In other words, they’re done with what they’ve done. They’ve successfully handed over the keys. But the leasing agents, at least the ones that we have do set up really good processes in the sense that they do pre move out inspections, then they do the move out inspection with the keys, get that you’re going to make the decisions, Marco of how much of the security deposit you want to transfer back. But they’ll just do a walk through and say, here’s the condition I need for moving. Now, you would still, I mean, you’re controlling your finances. You would still say, here’s the amount that I returned. So it’s, you know, whatever move in condition is anything beyond that, that’s not normal wear and tear. You would deduct four and then you’d send back the security deposit because you yourself have to pay for that.
But you would go through that process. And then after that, that leasing agent would show the property to the tenants, make sure they know where the application is, make sure they’re qualified. They would do that whole process and then move in the tenants to give them the movement inspection. Or some of them will do the move in with the tenant and say, okay, great. Now that we have all of that keys are handed over. Everything’s good. And it goes into management. So I highly recommend a license leasing agent. And I’ve seen investors do this very successfully because they have different leasing agents in different regions. Now, some people use lock boxes like the, we lock boxes worth of credit card for the tenant at charges of a dollar returns, the dollar after they’ve gone out. But if you’re out of state, like you should not have only technology locally, like wherever your rental property is, you physically need someone there.
You need a handyman who you trust or leasing agent combination of both is what I would recommend, but you need boots on the ground. And so that’s where people who do self-management successfully or ones who understand that they understand, yeah, I’m going to manage everything. I’m going to be in charge of the approvals. I’m going to control the rent payments and the finances in the system, but I’m not physically there. So I still need someone there. And so that’s where I would just caution people. When they think about their self management process to not think about, I have to do everything from a distance, I would really incentivize people to think about how do I get the right team in place. That’s a little bit more flexible than, than the alternative.
So of those parts, these team members, if you will, what parts of those are handled by Hemlane and what parts are your responsibility as a self-managing landlord?
Yeah. So it depends on your package, but I’ll go with the complete package. That is one where we provide a leasing agent who does the turnovers. Now some leasing agents won’t do turnovers because they need the insurance to do so. Some leasing agents won’t and some owners are okay. They say, I’ve got a great turnover crew. I’m fine with them going in and doing it and managing that remotely. But then they have a team to do it. So it’s the turnover coordination, and the leasing, the finding and placing a tenant. As far as working with that agent, most agents just bundle everything together. There’s some interesting concepts out there. One is called like show digs, showdigs.com where they do like a paper showing you can get a licensed agent to go out and just charge them per showing. That works really well. If you can manage that entire process.
The reason we use these more full service agents is because a lot of times the real estate investors we work with don’t understand tenant landlord law locally in that region. And so having the realtors make sure they have the really concretely agreement that is state specific or county specific because some counties, you need a county specific lease that they really have everything put in there to help protect the landlord. That’s important. And so while I say there’s no one size fits all, all of that, we do. What Hemlane doesn’t do is we don’t work with renovations. So renovations is something that’s very difficult to do with like cause we have a 24/7 repair coordination team. They can do that remotely, but doing a renovation physically means a project manager or GC on site to do it right.
And we don’t have the network of people to do that. So that would be something you’d talk to your, to actually you Marco about, of like, do you guys know anyone locally? Who does these renovations, most of yours, I think our new development. So they potentially don’t need that, but really going through and understanding from that perspective, do you need large renovations or do you have large capital expenses and figuring out yourself, how are you going to manage that? Keeping in mind, if you’re not there, you can’t manage it from afar. You need a project manager who is boots on the ground.
Is there any other person or piece of this puzzle that Hemlane doesn’t handle for you or provide? Is that a missing piece?
Yeah. I mean the only other one I would say, which you even said it yourself is so rare. It’s like a huge question that comes to us is the evictions, typically a traditional manager or us will recommend a lawyer and a real estate attorney. Who’s very good. Who specializes in tenant, landlord, law and evictions in your area, getting them involved. If you need to. In other words, the process server has gone out, served the notice and you know, tenant hasn’t responded, you know, then you really should get a lawyer involved. That’s something where partnership wise. A lot of our agents will recommend someone to you, but we don’t have that built into the software. And so while it happens, you know, it’s like 0.05 or 7% of the time, it happens to rarely that is something that we actually don’t have the boots on the ground set up for.
Okay. So I’m thinking, how does an investor transition someone who’s got 1, 5, 10, 50 properties right now they have professional property management and it’s probably spread across different markets. How do they transition into self-management? Obviously, I don’t think you would recommend that they go cold Turkey on property management and just move and shift everything over immediately. They would probably transition. But in the process of transitioning, what would be the transition path?
Yeah. I mean the first thing we always tell everyone is checked your property management agreements. Like we’re probably only going to start with one property or two properties, because again, you want to get the process set up and then once you have it set up, it’s really easy to start adding other properties. And so pick the properties that you want to start with that self-management and then check your property management agreement. Because a lot of times there’s termination clauses. There are certain things in there where it’s cost prohibitive for you to suddenly switch systems. And so check what your contract says. The other thing I would say is if you love your property manager, like they’re so good, don’t change your process on them. Change it on one where you’re you have those questions. I mentioned where you’re like, Ooh, is this property manager really working?
Like, why don’t I have these bills seem really high, but I’m not getting the invoices. I kind of questioned things. The ones that you’re questioning could they perform better? Those are probably the ones you want to bring over to. Self-Management first, not the ones where, cause there’s great property managers out there. If you have a great property manager, who’s like on it, transparent, you like really, you really trust them. Don’t ruin that good relationship, move the properties over where you’re kind of questioning. Hey, could I get better net operating income here? And like the highest bang for my buck here, move those over first to get a process set up and try it for, we have a 30 day free trial. So try it for 30 days, try it for 60 days, whatever it is, go ahead and go through that process. And then once you do, when you set it up and you say, yep, this is what I want to do.
This is exactly what I was thinking. Once you’ve done that, then you can go to the next stage, which is bringing and transitioning the rest of your portfolio over to Hemlane or to whatever self management solution you’re using. Then you can start moving things over where I see things go wrong is where people don’t look at that management agreement and end on really bad terms with the past manager. And don’t give them a heads up and act professional about it or where I’ve seen it go poorly. As they say, I want to put all my properties on a self management solution and then they don’t put the time aside and work aside to get those initial processes set up and they just assume it’s going to be passive. That’s where I really see people fail on self management side.
Here’s a related question, but maybe I’m throwing you a little bit of a curve ball here. You may not have ever been asked this question, but do you see people being more successful when they are self managing a properties in let’s call them A-class neighborhoods versus B or C class neighborhoods, you know, slightly different demographics, different price points and whatnot, but just very generally speaking, an a class versus a B class neighborhood versus a seat. Did people have more luck in one over the other? I would imagine that the, a class neighborhoods are probably the easiest, most passive neighborhoods to self-manage property in, whereas in a C-Class neighbor, you have more transient called sketchy, but more transient types of tenants. And maybe they’re a little bit more hard on the property. And so there might be more inspections or repairs or whatever. Do you have any comments or thoughts about that?
And remind me to go over luxury, which is a class above a, I’ll give you some examples of that too. So a B and kind of C plus are really good to self-manage, especially a and B. And part of the reason is I’ve never understand, stood this with property managers, C class will D class is the most difficult to manage and then C classes the next most difficult to manage. And what’s interesting about property management fees is it’s 10% of monthly brunch. So like if you think of an A-class neighborhood where it’s $6,000 a month in monthly rent, that’s paid to a property manager, one someone who’s applying for a rental that is an a class property is most likely going to have fantastic credit set up online rent and be working around the clock. So they never put in a repair request, right. Then let’s go down to the C class.
And so you get $600 a month in monthly rent, the property manager. Now let’s go down to C class property, maybe it’s $500 a month rental. The property manager only makes $50, but they’re having to drive over and collect a rent check because the tenants don’t pay online. They’re not tech enabled. They’re having to do a lot more qualifications. Cause a lot of the tenants have five 20 credit scores that don’t qualify. And so I’ve never actually really understood this whole percentage of monthly rent because it should be reversed like the nicer properties, which have really qualified tenants are usually the easiest to manage. So it’s like they should actually be charging less. And that’s actually why I’m a fan of a lot. Some property managers are moving towards flat rate. I’m actually a huge fan of that with property managers for that reason. So then let’s go over kind of who it’s for, if you have C-Class properties, but the tenants are like tech savvy.
They can pay online. Even if it’s on their mobile phone, they don’t need a computer, but if they can pay online and they’re semi tech savvy and there’s not going to be a lot of administration with that, you know, self-managing is fantastic where it becomes a problem is if it’s, you know, C class where, you know, you placed a tenant and none of them are qualified, right? Like you literally had to go below your credit or income requirements to get someone in there. That’s probably gonna be a lot more work, a lot more turnovers, all sorts of things you probably don’t want to self-manage it. The other one that’s really interesting. So the lower the classes, the more difficult it is to self-manage, but the more difficult it is for anyone to manage the really interesting one is luxury properties. And we’ve seen this because we’ve had some rentals that are like $40,000 a month on humbling.
And what’s really interesting. I mean, I’m talking about the mega, like, you know, Hollywood stars. What’s really interesting about those and it’s same rate because it’s like a flat rate for a subscription, but what’s really interesting about those. It’s not that the tenants are not qualified or they’re not going to pay, but they have this expectation and level of service that is so different than what you would do for B or a B or C class properties. So for example, they’re expecting someone to come out at [spp-timestamp time=”10:00″] PM at night to change a light bulb, or they’re expecting, there’s a tiny little scratch on the wall. Why aren’t you sending someone out with white gloves to fix that? And so it was actually really interesting because luxury properties, sometimes we get those and people are like, aren’t those the easiest to manage? It’s like, well, no, because we know what the tenants and we put notes in, like we have to call the owners and basically say, when repairs come in of like, how do you want us to handle this? Because there’s a very expensive way to do it. We could get someone out there right away. And like, you know, come with, you know, this white glove service for them, but it’s going to cost you more. But like these tenants are expecting that because it is luxury. And so those ones sometimes are a little bit more difficult to manage just because you have a process of how you would put together property management process and procedures that make sense. And those ones you make exceptions to. That’s the one thing I’ll leave you with.
Okay. Well, before I ask you my last question, just give us a quick overview of what Hemlane can automate and help a self managing landlord take care of. And then we’ll just wrap up at the end with how to contact him lane and find out more information on.
Perfect. Sounds good. Yeah. So Hemlane is a flexible solution to property management. You can basically select a package that works for you starts with software. So anything that we believe technology can do better than humans is built into there that’s everything from automatically. These two reminding you on the lease renewals to even following up with tenants after they walked out of a rental showing to say, Hey, are you interested in the property? Do you want to apply? If not, tell us why not? Like we really want that data. We really want to know what we could improve with this property. So that’s the first thing. Then the second thing is leasing agents. So we have a network of leasing agents across 1300 studies. So anything with an MSA over a hundred thousand where you can get access to these agents who are local, they don’t work for Hemlane.
So they work for third-party brokerages. You can pick what agent you want to work with on Hamlin and work with them for that leasing. If you’re out of state or you don’t have time to find in place the tenant and do the turnover coordination, if you don’t like the agent and you just switch them out to someone else, usually everyone likes the agent with that. There’s a matching process. Most people like the agent they’re matched to, but just in case you don’t just know that you could switch them out, which makes sense where agents are competing against each other for quality, right? And then the third component, which actually think is the most important is 24/7 repair coordination. So while you’re having all the approvals and things like that, a tenant can either call or submit a request online. And then we go through the troubleshooting.
So 7% of requests are closed without it ever having to send out a service professional. We do the troubleshooting to say, Hey, could the tenant fix this? You know, is this discretionary potentially something that’s so small we would do when a handyman comes out later, rather than sending someone out and charging the owner, that service call. So we go through that entire process and then we go through and send out the service professionals, follow up with the tenant, follow up with the service professional, confirm the work’s done, get the pictures and voices close out the work order, pay the service professional, upload everything in the system. And with repair coordination, it’s 24/7. So even emergency dispatch and we have thresholds. So you could say by threshold is $200. If it’s over that, please call me that way. You don’t have any surprise bills. So that’s really the humbling platform today of what we have we’re in all 50 states. And then we have a 14,000 rentals
And then payment automation. I don’t know if really drilled into that. That’s part of Hemlane or is that outside piece?
No additional fees for payment processing. It’s bank to bank transfer. You can do credit card. We warn you. It’s not a great way to collect rent because tenants can dispute it. But by default, it’s a bank to bank transfer from the tenant to you. They don’t pay by the second to the month then or whatever the due date is the day after they get an automatic reminder that they owe rent. And then you have your late fees automatically set up. So on a certain date, a late fee kicks in. And then if the tenant tries to go on the platform to pay the rent, they have to pay the late fee before they pay the rent. Right.
Okay. Last, quick question. Then we’ll wrap up with your contact information. What’s your best advice on what to look for when you’re purchasing an investment property?
I think, gosh, that’s that question? I like that question, but it’s so specific for the person. So let me just answer it for myself. Right? I’m looking for something that will automatically cashflow. I don’t want an alligator or something that I’m pouring money into. Right. That’s the first thing I’m also looking for. Gosh, you said only one thing, but this is like everything put together
And that’s the advice. Okay, good. The other thing is making sure there’s some opportunity of growth. So I look for like areas where I think there’s some sort of gentrification. So if like Starbucks and whole foods are already there, like I don’t see opportunity, but if I see like a yoga studio, a good healthy food store, but it’s not whole foods or some chain. And I see a pet store, like that might be a signal to me that like, this is a good neighborhood that I might want to go into it’s up and coming, et cetera. So there’s certain things I look for from that perspective. Yeah. So anyway, there you go high level.
All right. Well tell our listeners how they can find you or your company and get more information.
Yeah. So I love talking to real estate investors about property management. So my email is dana@hemlane.com. But then you can also go to www.hemlane.com to learn a little bit more about what we do or on social media. I believe we’re the only Hemlane out there. So you can go ahead and look that up.
Well, Dana, thank you for taking the time. This has been enlightening and I’m sure people listening to this are gonna have more questions. So they’ll go to your website and there’s FAQ’s and other things on there as well that they can learn more about Hemlane.
Perfect! Thanks so much for having me Marco.
Thank you.
Well, there you have it. This is an opportunity to consider self-management for yourself and you don’t need to jump in head first. What you could do is you can test it out with one property, see how it goes. If you like it, and you’re doing well with it and it’s working out and it’s more profitable, then it’s something you can consider. It’s just an option. And I know it’s not for everybody, but like Dana was saying 72% of property owners out there. Self-Manage so I am not surprised that this is a popular option. Anyway, that is it for today. I hope you got some good information and food for thought. Download our free report. The ultimate guide to passive real estate investing it’s on our websites at passive real estate, investing.com and our main website@noradarealestate.com. And if you are interested in investing or expanding your portfolio, get your free strategy session with my team here of investment counselors, just submit the form on our website. We’ll contact you usually within 12 hours. If you have questions about real estate, submit them to me at ask Marco, just go to our passiverealestateinvesting.com website, click the little button that says Ask Marco, and you can submit your question. Remember to subscribe and spread the word, share this with like-minded people. Leave us a rating review. I greatly appreciate it. Thank you for listening. We will see you on our next episode.
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