1773 FBF: Big Tech & New Long Term Rental Experience with Onerent’s Chuck Hattemer

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Welcome to this week's edition of Flashback Friday. Your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future. Enjoy.

This market specialist was able to tell me the absolute lowest rent they've ever rented in a particular neighborhood within a certain parameter and that number was great. It was within $50 of what they were telling me and even if I get the lowest number, that'd be a great return. Terrific result. And then the other thing about having people applying and teed up and lined up to rent your properties right away just because that marketplace is so huge and so many people, that just gives you a sense of confidence that you're going to have a very good cash flowing property without a great deal of risk that's going to sit vacant for a month or two months and that sort of thing.

Welcome to the Creating wealth show with Jason Hartman. You're about to lear a new slant on investing some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants and and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your Financial Independence Day. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Hey, it's Jason Hartman and welcome to episode 10771077. Thank you so much for joining me today. Thank you. Today we are going to talk about an exciting area that is empowering investors. It is an amazing time to be alive. And I'm not saying this specifically for this interview. I'm also saying it because I just finished another interview on a similar topic and it is the broad topic area of self management tools and the renter experience. The renter experience we've got to get be mindful of the experiences our potential tenants and our actual tenants are having when they apply to rent properties and when they're actually renting properties from us. We are dealing with the most historically proven asset class in the entire world. It's incumbent upon us to learn and use all the tools available as investors and landlords and also to to manage the experience of our prospective tenants and actual tenants. So we'll talk a little bit about that with our guest today, Chuck Hadamer. We will have that in just a moment. Thank you to all of those who entered our contest. Are very high good odds, easy to win contest for the Amazon Echo or the Ring Doorbell. Yes, let's get our homes make them smarter and smarter all the time because as we say, it's an amazing time to be alive. And the smart home features are just getting better and better and so are all of these different technologies we can use as landlords either with managers or without managers when we want to self manage. Little note here, little news item. You've heard me talk about how Trump is, you know, razzing. I'll say razzing. How's that razzing the Federal Reserve and giving them a bit of time saying the Federal Reserve has gone loco, right? You know, typical Trumpism type of language. You know, they're reigning on his parade. This is a fantastic, incredible economic boom time. The Federal Reserve is raising rates I think too quickly, but they do need to raise rates. Overall rates are artificially low, but they got to do it in a measured fashion. And I think they're, they're getting a little too aggressive about it. But on the other side of the world, One of the 81 countries I have visited, what is going on in India? Well, check this out. India's central bank chief may resign. And this article in Investopedia, I'll just read you a little bit of it. It says the bad news keeps coming for emerging market equities. Share prices in India, the world's fastest growing large economy fell on Wednesday, blah, blah, blah. But here's the thing. So the government is just literally instructing the central bank of India on what to do. Okay. There's a thing in their, in their law called Section 7. Says Section 7 of the RBI act enables the government to instruct the central bank on certain issues that it believes are serious and in the public interest. After consultation with the governor, disagreements over several issues have led the Indian government to invoke for the first time in its history. This is pretty big deal. The first time in its history. This section 7 right where they are now telling the central bank what to do. Right. And this is what we've got, right? We've got central banks around the world who claim to be separate from government. They claim to be non governmental entities, as we've said. And as G Edward Griffin has been on the show many times and, and he spoke at one of our Meet the Masters events a couple of years ago. Great speaker, gentleman, gentlemanly speaker. By the way, you know, he says the Federal Reserve is about as federal as Federal Express. Right? It's a private corporation, it's a banking cartel. And of course it's linked up and really controls the global cartel of central banks all around the world. But it's not just the US People have criticized Trump and maybe rightfully so, I don't really think we should have a Federal Reserve at all. And you've heard me talk about that extensively on prior episodes. But it's just interesting to see, you know, Trump giving the Federal Reserve a hard time and the Federal Reserve ostensibly turning a blind eye to Trump's tweets and, and proclamations and so forth and statements out there. But in India, they're controlling the central bank directly. I guess so. So we will see. By the way, interesting Washington Post article. I want to thank our client and listener, Richard, for sending this in. This article is entitled owning your own home doesn't make you rich, but owning somebody else's does. Well, you've heard me talk about this ad nauseam. I won't bore you again. I'll sum it up with my somewhat famous quote, and that is invest in places that make sense so you can afford to live in places that don't make any sense. And, and part of that strategy is to own a lot of cheap properties that you rent to other people. Well, don't call them cheap, Jason. Call them economical or inexpensive. And own those that you rent to other people that have excellent rent to value ratios and then rent an expensive home for yourself, ideally. And I've done that for many years and it's been a very good deal in the vast majority of cases. But here, this Washington Post article is just interesting. It says in in the United States, more than almost anywhere else, wealth and income are concentrated among business owners and, wait for it, landlords. Welcome to this week's edition of Flashback Friday. Your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future. Enjoy. Landlords. Yes, and that club blessed by capitalism is becoming increasingly difficult to join. Business owners and landlords tend to be about four times as wealthy as the average American. Now, let me just say something else. I may have shared this several years ago for you longtime listeners that are going through all almost 1100 episodes now for the second or third time, at the risk of repeating myself, but one of my friends in Young Entrepreneurs Organization, now called EO, or formerly yeo, now called EO Entrepreneurs Organization because of course, as the members were aging, they didn't want to lose them. So instead of being the young entrepreneurs, they just became the entrepreneurs. Yeah, whatever. I was kind of in disagreement with that, but I was a member for 10 years. Great organization. One of my friends from there, I remember he hosted one of our meetings at his business and then after the meeting at his home and you know, I was kind of talking to him and you know, he was talking about all the properties his father owned and the business his father owned and so forth and how his father became very wealthy doing all of this. And he said something very interesting to me. This is pretty good. You know, I naturally thought, well, his father is just this captain of industry and that's how he got so rich. And my friend explained to me that, you know, the businesses did well. He made good income from them. But he always says the way he really got wealthy was not from the businesses, it was from the real estate he bought along the way and some of it being commercial real estate that the businesses occupied. So income property. Either way, the most historically proven asset class in the entire world. Okay, so in a recent working paper, Austrian central bank economists. How do you pronounce that per min? Fessler and Martin Scholz used a long running U.S. wealth Survey and its newer European counterpart to compare wealth across continents. Back to the article, of course, obviously it's one of the first such comparisons to look at wealth in terms of what people use it for rather than the arbitrary percentile cutoff points. The widest inequalities they find are between groups inside countries, not necessarily across country borders. So see, when we make the survey country agnostic, but we just survey groups by what they do or what they own and how they invest. This gets interesting in their analysis. They split households into three groups. Homeowners whose primary wealth was also their primary residence. So typical homeowner form the bulk of the middle and upper middle class business owners and landlords. The landlords here, right. About 15% of U.S. households 10 tend to be among the wealthiest. Their wealth is typically used to generate additional income. Those who pay to rent their residences. About 35% of households and whose wealth is typically used to cover needs such as emergency expenses or retirement fill out the bottom of the spectrum. They're joined by homeowners and business owners whose debt exceeds their equity. Now don't be misled by that last statement, do not be misled because the typical renter of course is struggling, right? That's the typical renter. But there are very smart renters who own a lot of properties and they're big landlords, but they rent their own high end home for themselves and arbitrage that rent to value ratio. Anyway, this is just, I just thought this was a very interesting article and I thank Richard for sending it in to me just yesterday. I am going to probably dissect it a little more and talk to you about it a little bit more in the future. But we've got to get to our guest today and you know where I need to go? I need to go to Hawaii because I am on my way out of California to head to Hawaii to host our Prophets in Paradise event. Look forward to seeing all of you there. We've got an app for that. You should have received email instructions for the app download. It's got the schedule but you know the schedule is very simple for this event. We'll see you Saturday morning at 9am in the hotel ballroom and we will go to about 6pm on Saturday we will have a Hawaiian dinner after that and we're hosting the dinner and then on Sunday we go from nine to six as well. So it's going to be an awesome event and we look forward to seeing you all there for profits in Paradise. Our first, first one of these events and we've got something awesome for you. Doug and I were putting the final touches this morning on the new Wealth Builder Interactive exercise, the Wealth Builder Interactive game that we are going to play on Saturday and it is nothing short of awesome because it takes into account all of the unpredictability, sometimes ugly surprises that we get as landlords and real estate investors. Those things that really bum us out. And it takes this into account. Over the course of a 10 year wealth building path, we're going to pick a portfolio and we're going to see how it performs when these surprises, sometimes ugly surprises come up, evictions, high turnover costs, things like that. And we're going to play this all out on Saturday. So it's going to be a great time at profits in Paradise. We will look forward to seeing you there 9am Saturday. That's all you really need to know. If you didn't receive an email yet by the time you hear this message from us, talk to your investment counselor. They will give you the app download information so you have more info on the app and we will look forward to seeing you in Hawaii without further ado let's get to our guest. I think you'll find this interview to be very interesting.

It's my pleasure to welcome Chuck Hadamer to the show. He's the co founder of One Rent. This is a company that offers property management enhancement services. I don't know if I'm saying that right, maybe that's not the right tagline. But he'll tell you it's pretty exciting to see what's happening to empower investors and tenants. This company is working on a nationwide expansion and they will be in some of the linear markets, like Indianapolis, for example, relatively soon and then expanding from there. And it's a pleasure to have you. Chuck, welcome. How are you?

Thank you, Jason. I'm doing well. Pleasure to be here.

Where are you located?

I am based out of San Jose, California in the Bay Area.

So you're right there in Silicon Valley. Good stuff. Well, what does One Rent do and how did the idea come about?

One Rent is a real estate technology and services company in the residential property management space. What we do is we kind of combine the power of an online platform for landlord data driven human logistics on the ground in every market. And what that means is as a landlord you can sign up for One Rent and have your property leased and managed from beginning to end and be able to track the performance real time on your dashboard, on the software we provide while we handle all the physical aspects of showing your property, maintaining that property, filling it with qualified tenants, et cetera. So really the full lifecycle of the property we manage and we do that for real estate investors in our markets. The business is about four years old. We are a venture backed company, have about 8 million in venture funding. The inception of the idea came out of actually myself and my two co founders, Greg Enrico. We started the company in college at Santa Clara University, which is here in the heart of Silicon Valley. As well as college students, we sort of, we really approach this problem from the renter perspective. First we found that there was a lot of issues with very inconsistent and fragmented renter experience. You look online for a rental, you visit 10 different sites, Craigslist, Zillow, all these different rental listing sites, and they don't really take you from beginning to end. Right. Once you contact a landlord, it seems like, you know, it all goes offline after that initial interaction. So we saw a problem with that and really wanted to offer value for the whole experience from beginning to end. And so we launched the platform purely as just a platform in college for housing for students. And we built all the tools like payments and lease signing applications and a listing platform, and we launched that. But through that experience, we worked with a lot of traditional property managers who are using our tools. And we found that really the pure technology side was not the problem, but rather it was the logistics side of the business. So all the offline part of leasing and managing a rental property, that's where we saw the largest issue. And we talked a lot of individual real estate investors who were unhappy with the status quo of property management. And at that point around the end of 2015, we opened up all the logistics side of the business and we ended up implementing a workforce of on demand, sort of like Uber drivers for property management in all of our markets. And this team is, you know, on the ground on demand for any tasks that require physical presence. And so that's where we are today. And we work directly with property owners. We are a property manager ourselves.

So when you said it solves this problem, you kind of addressed several problems. When you said that, what did you really mean? Did you mean the problem is fragmentation? The problem is offline technology. And then I'm really excited to hear what you're talking about with the Uber driver component because I know that Uber was trying to sign a deal with, I believe Zillow or the national association of Realtors. It's interesting just, and this is not applicable directly to investors listening, but it's applicable to the whole concept of the real estate industry that I've, you know, obviously been a follower of all my life, basically actually for about, about 12,000 days. I counted them recently.

And as such the industry, you know, has always been under this threat. I remember in the early 90s people talking about how, you know, AT&T is going to come out with their own multiple listing service and put the Realtors out of business. And it's just never happened. But I, the one thing I think that could really change it is if Uber drivers start getting lockbox keys. That will be, that will be a major shift. And you know, when we say Uber, we're almost using that generically Lyft, Uber, any ride sharing concept. What did you mean? I know this is a giant compound question, but the first question is what is the big problem? Is it the fragmentation of the offline technology? Second part of that question was tell us about the Uber component.

The biggest problem we see is the fragmentation in the market. If you look at property management in residential, right, there's over 200,000 so called property managers in the US alone, 95% of them have five or fewer employees, these operators. Right. If you take a snapshot for example of San Francisco, there's 50 property managers just in that 10 mile radius of San Francisco. And so every property manager has a slightly different experience, slightly different process. And sure there are these sort of technology platforms like Appfolio or these essentially accounting systems and CRM systems, but the issue is that they don't really address the core customer experience for the landlord or the renter. They're really just back end accounting systems that still require, you know, these traditional operators to use. So what we believe in is our thesis is that, you know, we can create the sort of singular one click rental process for renters and by controlling the full end to end process of leasing and management. And what I mean by that is that right now as a renter, if you go online, like I was saying, you know, you're using all these different sites to find a property. As a property owner, you may be listing on all these sites, Dillo, Craigslist, etc. So there's no loyalty to one platform or brand because you just want to market your property as much as possible. And we also market all of our properties on those sites. But what's interesting is that once a renter gets into our system, they stick around and you know, about 40, 50% of our renters coming in from one of those external sites end up sticking around on our platform and apply to many different properties. So we've made it very easy for a renter to complete the rental process from beginning to end. For example, you know, they can book a showing on demand and what that does is let's say they book a showing For Thursday at 1pm, we automatically assign that showing to one of our, we call them mobile managers, which are the Uber drivers of one rent. And one of these mobile managers is assigned that task. They have a mobile app, they can accept that task and they can show up on Thursday at 1pm, open up the lockbox and show the property to that.

That's going to be so convenient. So, so that's an Uber driver can meet, take them there and open the property for them.

Yeah, well it's not, I just use the Uber driver as a metaphor analogy. It's not really. Yeah, it's not actually. It's our own workforce, but. Yes, exactly.

But then that's why they open the door. Okay, so that's why. Because it's your own workforce. So you're basically are the property managers then contracting with you to provide this service or who has the contract with you if you will. Okay, so the owner of the property has the contract with you.

Exactly. And it's an exclusive contract with us to lease and manage the property. So we offer, you know, the ability where you could just get the tenant placement, leasing services or if you'd like that, plus the full management, ongoing maintenance of the property and rent collection. That's a different option. So we offer both those options directly to the owner.

I think you alluded to this before, but I'm not sure I or the listeners understood it. Are you their property manager then or are you not exactly a property manager?

We are the property manager. We're a licensed brokerage. We have a broker.

So in all the markets you mentioned or just where you are locally?

Yep, all the markets.

Essentially you're a high tech property manager. Right. Would that be a fair statement? Okay, what do you charge for property management then?

I guess obviously our pricing changes as we expand to new markets and the percentage of the rent. So for placing a tenant, we charge anywhere between 40 and 50% of one month's rent to place that tenant. And we only charge that upon signing of the lease. And then the management of the property, if you choose to go forward with it, is 5% of the rent.

So you are, it sounds like then you are really undercutting the traditional price structure by a little bit. I mean, it's not free, it's not 20 bucks a month, but it's less expensive than a traditional manager in most cases.

Right, exactly, exactly. And the reason we're able to do that is because we've built a lot of automation into the process. So, you know, 70% of our customers have never used a property manager before. And this is sort of, you know, if you look at the market, there's some data out there that says, you know, only 30% of properties are professionally managed. So we're attracting a lot of new sort of retail individual investors. The average property owner we work with maybe has one to two properties. It's really the smaller investors that we're serving. And a lot of these investors also have properties in some of those tertiary markets like Indianapolis. So that's why we want to expand their next.

Right, okay, good stuff, good stuff. So basically they can hire you either to just do the lease up as a one time service or ongoing property management. Either one or both.

Right, exactly.

Okay, got it.

Exactly.

I like that. That's the, the sort of unbundled a la carte type of service that is getting more popular, thankfully, and I'm really glad it is. And so you'll get licensed in each state where you expand, Right?

Exactly, exactly. I believe there's only a few states in the US where you don't need a license, but we're able to get those licenses in your states.

Okay, great. Do you have a competitor? Who would you say is your competitor? I mean, maybe they don't do exactly what you do. But I'm curious, is it a property management software company? You mentioned Appfolio. There are many others, of course, but probably not. Right. Who would you say your competitor is? Is there anybody in your space?

Really? The kind of. The competition is sort of these online platforms like Zillow for example, where they are releasing tools for landlords to be able to try to manage properties on their own. But these are generally free tools. And again, it still requires the landlord to do all the sort of work of managing the property, the physical work of it. So we look at them as somewhat of a competitor. There's not really a company that's Full Stack, you know, with the kind of products we have for landlords and renters, that is in the single family market. So it's definitely a new space. But, you know, real estate technology is heating up. There's been billions of dollars invested into WeWork and Compass and Open Door. And so we really fit into that segment of the sort of operation.

I'm surprised you put we work in there. What does WeWork have to do with it? I mean, I mean, Compass and Open Door, I could see, you know, they're in the space, but we work. I mean, that's a, you know, co. Working space.

Yeah. So the reason I mention them is just because they are another example of a operationally heavy technology company. So they're not just a website, you know, there are operationally heavy. So we believe that is the next phase for real estate is Full Stack. We call it Full Stack sort of operations where you have the technology and software side, but you also have the offline part.

Right.

And that's a key part of sort.

Of almost back to the old. Almost back to the old saying we heard during the. The first.com boom of clicks and mortar. Right? Yeah. Where you have the bricks and mortar and the clicks. The high tech kind of concept. Yeah, yeah, that's good. I like that Full Stack offering. I think there's a lot missed with just having a website. It's just not enough, you know, you got to bring it into the physical world as well. So. I'm glad to hear that. Where do you see this going? I mean, what are some of the services that you plan to offer down the road, or just that you see the industry offering in general? I think there's, there's a lot here.

The industry as a whole, you know, I think is moving towards this sort of one place to do everything real estate related. And the beauty of property management and rentals is that we look at it as a wedge into the real estate market. Right. If you get a renter in the beginning of their experience, their first experience with real estate is renting, then as you rent. One of the services we are launching is something called Poplar street, where a renter can actually earn credit. Every time they pay rent. Living in one of our homes, they can earn this home savings credit, which we will help them buy a home in the future. And if they buy a home through us anywhere, it doesn't have to be the home they're renting, we will give them up to 100% of our commissions back as an agent to help them move into becoming a homeowner. And then at that point, the idea is that we can also have that relationship with them as a homeowner. And maybe in the future they decided to invest in real estate and become a real estate investor. So it kind of completes the circle there. So our belief is that rentals and property managers are great wedge into that market. And then on the landlord side, because we control the largest share of actively leasing inventory in our markets today. So, for example, if you went to the Bay Area or Seattle and looked online at available rentals, one out of every seven or 10 properties you'll look at is going to be a one rent home. And because of that, we collect an incredible amount of data around renters and also the offline data of, for example, foot traffic in properties. Or we inspect every home before we sign it up. And we are leveraging that data to help reduce vacancy for landlords. So that's a huge part of our vision for the future is, you know, vacancy is a $35 billion problem for landlords. Every year, you know, vacancy rates fluctuate between 7 to 12% nationally. It hasn't changed much even during the financial crash, you know, it only went up a few percentages. So vacancy is the problem we plan to solve for landlords and really deliver.

How, how are you going to do that? Tell me more, tell us more about that.

So, for example, you know, one of the things is pricing of a property. There's many different levers you can pull to reduce vacancy. And an example is pricing. So pricing a rental property has Always been sort of a market guest process. You see the big sites like Zillow, they have the zestimate, but that estimate is only based off of the listed price of the listings in their platform. It doesn't take into account the offline data of the showings of, you know, the quality of the home stuff that they don't have insight to because they don't have boots on the ground operations. So, you know, we may get to the same rough, same estimate initially as Zillow. And I'm not going to say that, you know, we have a better initial estimate as Zillow because they've spent tens of millions of dollars on that. But what we can do is we have a tighter feedback loop on adjusting that price dynamically based off the performance of that property. So, for example, if we are doing showings on a home, every time we do a showing, we survey the renter and the mobile manager who did that showing for feedback. So we collect both qualitative and quantitative data around the showing that can inform how we adjust the pricing on a property. So that's just one example. There's many other levers you can pull. For example, we've, we get an excess of renter applications on our platform, so we have algorithms that can help better match renters to landlords. So there's a lot of different sort of levers that you can pull to reduce vacancy. And we plan, you know, we've already been able to reduce our vacancy average number of vacancy days by about 30% over the past year since we really focused on growing our, the market share of leasing inventory that we own.

Yeah, very interesting. You know, it's, it's just fascinating and I think this ought to really excite every investor listening. It's fascinating to see how the industry is maturing. It's becoming much more refined and more efficient. You know, this may not be something a lot of the listeners can use today because you're not in every market, right. But certainly there will be, you know, there will be a knockoff or two. I mean, when the iPhone came out, you know, suddenly there were a zillion Android phones that or similar in concept, right? So you're going to have these evolutions or really revolutions to some extent in the industry. And I think that's pretty exciting for people listening. Ultimately though, the market will become more of a perfect market like the stock market. And in some ways that limits opportunity because when there's more perfection, there's less chance to like, wheel and deal with, you know what I mean? You can't get a deal on Apple stock. The price is the price, right. Take it or leave it, you know, whether you're buying or selling because it's a perfect market. But I think we're a long way away from that. But you know, we're certainly increasing a lot of operational efficiency here and yeah, reducing vacancy. I always thought that it's just crazy that properties aren't often enough. I mean they are sometimes, but not often enough really marketed extensively before they are on the market. You know, why aren't we seeing these rental properties listed long before they are vacant? And sometimes, you know, you can elicit the tenants cooperation but if the tenant is a slob, that's not going to help you anyway. But you know, you just have the generic photos of the house that you took while it was vacant or while it was staged and you use those over and over long before tenants vacate and then you really reduce vacancy. So a lot of good things coming I think out of this. So. Yeah, good. Any final words you want to share with our listeners?

Like you mentioned, we're just on the, on the west coast today, but we are looking for, you know, these new markets where real estate investors, you know, more single family assets and and so you know, to any listeners out there who have the single family assets and any of the sort of top 20 metro areas in the US definitely keep tuned for one rent expansion. We're planning to go to about six new markets over the next 12 months including places like Indianapolis, Philadelphia, Phoenix, any really top single family rental markets along with some of the higher end markets like New York and Boston or Chicago. So definitely very excited to be able to expand one rent services. And like you said, there is a lot of refinement in the industry but it's a huge market and so I'm sure there will be multiple players and our goal is to really be, you know, the best sort of renter facing brand and drive that value back to landlords and real estate investors. We want to be the preferred place that renters rent long term and that should be valuable for landlords.

All right, good stuff. Well, hey, thank you for joining us. Appreciate it.

Awesome. Thank you so much. Jason.

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