Serving Self-Managing Landlords with Hemlane CEO Dana Dunford

meet your customer where they are. What they want is what you can offer. And when you only offer one thing, they'll go somewhere else. If you yourself don't innovate or you yourself are scared of technology, you will get disrupted no matter what. It's not going to be Hemline. It may not be Hemline. It may be some other company. But what you need to do is embrace where your customer is and what you can offer them.

Welcome back to Peter Lohmann's podcast. Today we have a very special guest, Dana Dunford, co-founder and CEO of Hemlane Property Management. Dana, thanks for coming on the show today.

Thanks for having me, Peter.

Yeah, I'm really excited to have you on here. This is one of the episodes I've been looking forward to most this season. Because your product, your service, Hemlane occupies a very interesting position within our industry that is, in my opinion, totally unique. And we're going to dive into what I mean by that. Before we do, I'd love to hear a little bit about you and your background and how you came to start a property management software, property management disruptor type company.

Yeah. So first of all, Peter, thanks so much for having me today on the show. And for, for most of you listening, I assume it's quite a few property managers out there very similar to me. You probably didn't wake up as a kid and say, I am— my dream is to be a property manager. You went into it based out on need and seeing need and passion in the industry. And so I had started in technology and I was originally at Apple. And so this was back in 2010, so long time ago. And saw consumers and how consumers were connecting, obviously through technology, FaceTime, all of these things that essentially make it easier for you to have a personal relationship no matter where you are. That kind of led to my next career jump, which was over to Nest. And Nest is a home technology company. And at that point, we just acquired a company called DropCam. And DropCam is now— I have an Nest Cam. Nest Camera.

Perfect.

You have one. And that, coupled with the thermostat and then the vision of the company, which I very much backed the mission and vision of the company, was, wow, it makes owning a home and the liability associated with it— it reduces a lot of it. And my job was on the business development side, so we were working with utility partners, insurance companies to essentially help say we can mitigate risk, we can reduce energy usage, all of these different things that were actually benefits of having technology come in and facilitate in that, you know, you from the utility partner perspective, you go on vacation, you forgot to turn down your thermostat, you can do it from your phone. So certain things like that I was really passionate about. At the same time, my older sister was getting involved in real estate investments with her husband, and they were actually in Denver. They lived in Denver, but they were moving back to where we were, San Francisco. And they were always self-managing and then kind of haphazardly self-managing remotely. So I essentially got involved in thinking about the operations and the property management behind it. And one of the things that we saw there was, hey, we can actually use the brokerage and have them help with the property management. We don't only have to self-manage. Like there's this concept that, you know, 72% of owners self-manage. And so there's this concept of like, I want to be involved and manage my property, so I just need to do it myself. Well, that's not really true. There's professionals out there who could do it way better than you can do it. But a lot of times getting owners to buy into that, there's something in their head that like, I've bought a physical asset, so I'm going to do it myself. There's something in their head that you're not going to change someone's mindset. And so using that and using my background in technology said, how could we make that easier? How could we connect agents, brokers, managers, et cetera, with owners? How could we make that process easier? And how could we provide an alternative? Because anyone who wants a, um, property manager is going to go directly to a property manager. But when property managers talk about— let's just say you want to double your portfolio, Peter, um, year over year, right? There's two ways to do it. I always say the easiest is just get your current customers to give you more properties, right? Like, that's the easiest. But the second one, when you think about it, is doubling your number of clients, customers, right? And how do you do that? It's either through stealing business from others, or, which I think is slightly more exciting, opening up the market and getting those who never did think to have a property manager get much more professionalized property management help. And so there were a lot of trends that I was seeing. One of them was that, that most owners self-manage their properties.. And so how do we provide a better experience? How do we connect them with the right boots on the ground, the right professionals? That was like part of that passion and vision of what Hemley would become. And then the other one was just transparency. How do you get information over to the decision maker who is the owner faster and sooner? And so how do you provide transparency throughout the process? Of managing properties. So anyway, um, fast forward to, uh, today, um, that's exactly what we do. We say we're a tech platform that will help you with your property management. Um, we have owners, property managers, and real estate agents like leasing agents using the platform, and we stick to what our vision was of technology first. First, you should always use technology when you can as a property manager, as an owner. You shouldn't be scared of technology. You should embrace it in your process. And then two, having transparency of everything going on. And so there's no questions about— from that perspective, there's no questions about who was in the right, who was in the wrong. There's a track record, everything tracked in their calls, communications, etc. Um, just to reduce any like stigma or kind of negative connotation associated with owning and operating properties across the nation.

Sure. Love that. So I think that paints a great picture of who you are, what you've been up to, and sort of the angle that your product is taking. We're going to dive in more into the specifics of Hemlane. I'm really curious to learn first about your customers, which I would guess the vast majority of your customers are what we would consider to be self-managing property owners, self-managing landlords. What have you learned about that group of people? Because I, and I would guess my audience, I'm very interested, as you mentioned, we are interested in learning more about that group so that we can tailor our offerings to them as well. And you have a huge, you know, I'm guessing thousands, maybe tens of thousands of self-managing landlords on your platform who are using your technology and your sort of bolt-on services to basically self-manage their property with tech. In other words, they're not using a licensed real estate brokerage or property manager who then is using property management software they're primarily going to you as a software solution and then your, your service offers some boots on the ground functionality to supplement. So what, what do we know now about that 70-some percentage of self-managing property owners?

Yeah, great question, Peter. And just for the listeners, how we think about the technology and who's using it, the numbers are very true to what you see in the market. And what I mean by that is we still have property managers who use Hemlane and use it quite well. And they're the first call we have when an owner self-manages and says, hey, I don't want to self-manage anymore, or I'm moving and I just don't think I can do this. It's the property managers on Hemlane that are the first call that we make to say, hey, connect. Then you could just switch the account and the bill-to user over to yourself. So we definitely do that and give them those recommendations.

So if you're listening, if you're— so for property managers who are listening, that sounds like a possible business opportunity is to become active within the Hemlane community or use the Hemlane product. And then you're the first call when a self-managing landlord doesn't want to self-manage anymore. That's interesting. I'm wondering now how many property managers in my city are on Hemlane and like, would I be the first and only call in that scenario?

Right. Yeah, yeah, for sure. So I think from that perspective, there's like that component of that. And, and property managers, I think, like to keep that a semi-secret with, um, Hemlane. Um, so it's one thing. Then you're right, it's about 70% that are owners. So like 70% owners, 30%, uh, managers on the Hemlane platform. When you, when you look at the property managers on Hemlane, they're very sophisticated. You see their responses to tenants, they're very professional. They actually— what I like about the property managers on Hamline is they're very much ingrained into the process of like, they know Hamline inside and out. When you think of an owner-operator, someone who has 1 to 4 properties and says, hey, I never wanted a property manager, I'm going to do it myself and I'm going to use the Hamline platform, which they'll use a different package than what a property manager would use, and they would use different functionality. But when you look at the owner-operators a lot of them don't know what to do. And, you know, let me give you an example. Sometimes we'll see the responses that they have to tenants and we're like, why would they say that? And so it's like, okay, well, how do you give them chatbots? How do you give them templates? How do you give them things to be much more professional? Because Peter, you probably see this too, like property management a lot of times does not have a great reputation. At all in the industry, like across the nation. You know, tenants hate their landlords. Landlords complain about their tenants. There's very much of a negative stigma. And I think, Peter, what I love about you and your audience, what you guys are doing, it's very similar to us. This should be a much better experience. People should love where they live. They should love those who are helping manage where they live. And how do you change that stigma associated with it? And how do you just give a better brand and a name to it? And so for us, that's been very much true of how do you elevate those types of things. Another example of that that we saw was with owner operators. What they originally would do was they would go ahead and put the property for rent and then all these additional terms like, hey, I have pet rent, like a pet fee or pet deposit. They would tell the tenant about it after the fact. So they would tell the tenant about it upon like lease signing and the tenant is like, what, I owe another $50 a month and an extra $500 in a security deposit? So we would pick up these messages in the system and say, how do you just make it a better process? How do you make sure in the marketing you ask, do you have pet rent? Do you have other pet fees? And then you toss them in there. So there were a lot of things like that that we started doing as Hemlane. To say, you know what, we need more transparency in the industry. Tenants should know what the owners are thinking. They shouldn't read their mind. And then on the flip side, you know, if a tenant wants to move out early or is unhappy, owners and managers should know that as well. And so for us, that was like one of the biggest things is like, hey, as a tech company, we can help influence that and make it a better experience for everyone involved. And so that was one of the things that I think was very important as part of one of our missions in the industry as we think about doing exactly what you're doing, Peter, which is elevating the industry.

Love it. And so the, the property owners on your platform, you know, they considered the available options, which is do this on my own, do this, turn these over to a professional property manager, or they stumbled on Hemlane, which is sort of an in-between solution where they've got a lot of control over what happens with their property, but it's backed by some software, some online rent collection, and a bunch of the other things that you offer. I'm really fascinated by this character, this— your customers, basically the 70% of your customers. I've always theorized that there's something about real estate investors specifically that they want control more so than picture someone who's stock trading or investing in bonds or even investing like private equity. Like there's a bunch of different ways you can invest your money, but real estate investors in particular, real estate investors, we deal with a lot of real estate investors. They seem to have really strong ideas and opinions on how they want to see things go rather than just turning it over to us and letting us professionally manage their property. And like, I've always kind of theorized, is there something about this group specifically? Maybe it's because they bought a rental property in the first place because it's a physical asset and because they can touch it and mess with it and fix it and know what's going on with it. From my perspective, it makes them somewhat difficult to deal with as a group of customers because they have these very strong opinions and the strong desire for control. Control and we're sort of wrestling with them for control over their property. I can't effectively manage the property if they're not willing to cede control of the day-to-day. And what it sounds like Hemlane has developed is that is, is possibly an in-between solution that could be very attractive to real estate investors. Is that what you're experiencing?

Yeah, it's 1,000% on that. Like, and, and that is that personality and persona. Like you can't change someone's mindset. At all. Like, I've learned that I've tried to change people's mindsets about certain things. You just can't. Um, people have strong opinions. And yes, I, I think part of it has to do with, to your point, it's a physical asset. So, um, if I'm going to invest in S&P 500 or into some company, I'm really saying, hey, the CEO's running this company, I'm not part of the day-to-day. But when you buy a physical asset, you know, owners— and I know, Peter, you and I are in the space and say people who've had no management, who manage thousands of properties, are going to know what to do better than the owner, right? The owner hasn't seen as many properties. But with that, there's still this concept of, hey, if I can control it, I can increase my bottom line. And that meant—

which, like, it's— that's an interesting assumption. You know, is that correct? I don't— I'm not so sure about that.

Yeah. And I think it's heavily dependent on who that real estate investor is, where the property is, where they're located. How involved they are, are they smart enough to make the right decisions and educated? Like, I think there's a lot of components to that. But Peter, you and I are not going to influence someone's decision on that. They're going to have to make that decision for themselves. And I think as part of that, it's our job to make sure that, like, you guys have a lot of liability with having a management contract in place. If suddenly an owner starts going out and does things wrong and the tenant starts saying, hey, I'm going to sue the property manager, they should be, you know, I don't know if there's ever been a case like that, but there could be. And so there's a lot of liability with that. It's very similar to us on the flip side where an owner will come to us looking for property management advice. We can't provide advice. We're not a property manager. We are not a real estate attorney. Like, we cannot do any of that.

I wanted to ask you about that.

You can't make those decisions.

I wanted to ask you about how you stay out of trouble with the state regulatory agencies who, who basically require property managers to be licensed and all that, because obviously you're, you're golden on your lower tier plans where you're basically just providing software, but on some of your higher tier plans, which we'll talk about, you're providing a lot of, of wraparound services for the self-managing landlords. I'm guessing you have to be careful there to make sure you're not crossing the line into licensed activities. Is this something that you guys are like, you sort of have this invisible wall where it's like, no, we're not going to get into X, Y, and Z, because that is, you know, in majority of states considered something you need a license to do unless you own the property.

Yeah. The laws are written to be very gray, which is like not ideal for anyone.

Fun for you.

Yeah. I don't like gray. It's either black or white and that's it. But I don't like gray. And so the reason that I bring that up is because for us, we have to have everything in the, in black or white. And so we actually call the Department of Real Estate and we'll call them out on these things. And so some examples of that, Peter, are showing properties. We ourselves don't ever show properties. If someone wants an agent, then what they're going to go ahead and do is they're going to go ahead and use a licensed agent. And we're going to say, here is an agent you can use, right? Here's an agent you can use. It's a property manager on Hemlane who has a property management license. So it's a very gray area. And we like black and white. I don't ever want to be in a courtroom where someone's saying like, oh, well, the law should be interpreted this way. It's like, how do you use case law? How do you create the law? And how do you get something written by the Department of Real Estate to tell you what you can and can't do?

And have you had success with that? Because I feel like every time I've tried to talk to these regulatory bodies about a hypothetical or like, hey, is this allowed? Is this not allowed? They're like, we could never comment on, you know, like You're just gonna have to do it and see if you get in trouble. That's what I always feel like the response I get.

And, and my response is that I'm not going to do it if it's— if, if I'm gonna have to see. I don't want— I like to sleep well at night, so like, I'm not going to check that. But let me give you some examples of this, Peter. So one of the, the more recent examples was self-guided tours, and this actually came from property managers, not owners. But then owners on the platform were like, we want self-guided tour technology too. Now they own the lockbox and the locks, so Hemling doesn't own it, and they do the tours, right? Um, and so the first thing I asked was, self-guided tours, does like the lockbox slash keyless entry system need a license? And they're like, no, absolutely not. As long as the owner's making the final decision, as long as anything that is, um, not like written down, like do you accept Section 8 and stuff, if it's an actual decision or question, is, is done through the owner, the owner makes a decision. As long as the owner's drafting the lease, the owner is managing the property, they can do that themselves. Or if they don't want to do that, then great, a property manager on Hemlink can do it for them and have a contract with them. That to me is very black and white. One of the ones that was interesting, which was not black and white to me, and the departments of real estate— and I mean, there's one in every state, but they haven't gone back to me— is, hey, in order to do showings Do you need a license? And the original answer that I got on that one was yes, you do need a license. And then a response— another question that we had was, okay, but if you have a lockbox and that just— or like keyless entry and that just opens and closes the door, what about if you just had a showing agent, someone go to the property, open the door and close the door, and never talk to the tenant or never make decisions? Do they need a license? They couldn't answer that question for us. Yeah. So still to this day, we will not allow— we ourselves say, if an owner says, hey, can you just pay someone to go out to show the property? We say no, we're not going to go find some random person. You can use a leasing agent and have their price and their brokerage involved, or you can do it yourself through a self-guided tour. But a gray area is not a place that we're going to go.

Based on my understanding of Ohio law, and I sat on a task force put together by the state to make recommendations to update the existing property management and real estate licensing law. Based on my understanding in Ohio, I think you are making a good decision to not get involved in arranging someone to open the door for a property owner. I think there's, a good chance that could be considered property management under the Ohio definition for which you would need a license. Now, what's interesting about specifically showings is to be the person who opens the door and lets someone in, you don't need a license, but you need to be operating under the direct supervision of somebody who does have a real estate broker's license. And so we have people on our team who do exactly what you just described, but they are under the direct supervision of me, a licensed real estate broker in the state of Ohio. And we have other licensed salespeople working here as well. So very interesting sort of needle thread that you're trying to— what am I trying to say here? Needle that you're trying to thread. Thread, yeah. To try and— because your incentive, right, is to offer as much functionality and features to your property owners to make their life as easy as possible to your customers. But you can't run the risk of getting shut down in a given state either. So you've got to— you have a very narrow walkway there to, to head down in terms of features.

Yep, exactly. And that concept of rental assistance is one that we bring up often. In your point, it's a rental assistant that's in direct supervision under you, right? And so the question is like, how much can you take rental assistance for owners? And a virtual assistant and all of that. And so those are really the laws that we're really focused on. And our goal is to write down what the Bureau of Real Estate, you know, their team says whenever you call them or email them to make sure that we say, listen, you guys need to consider— we're not going to get involved in it by any way, but consider updating some of the rules and regulations, which they definitely have. I've seen over the past couple of years it's been done. It still needs to be much more black and white from my perspective and not this gray area. But from our perspective, anytime we launch a new product, we will one, go to the Department of Real Estate to make sure like, hey, is this legal? Um, how is the law working and interpreted? And then we also go to our law firm, it's called Menott, um, they're a nationwide real estate, and ask them how would be interpreted, right? Yeah. And so there's— but there's always, I think, with tech companies, um, there's always that, that question of what tech companies go too far. I think you're right, there are a lot of tech companies out there that at the beginning just jump on board. They don't have a license, they say they're a property manager or whatever. And I, I think that in real estate more generally, you do have to be very, very conservative in everything you do because it's one of the most litigious spaces that I've ever seen, especially with tenant-landlord law only getting much worse and much more complex, worse for the managers and the landlords. And so I think from that perspective, it's very much of, you know, Peter, both what you and I stand for of saying, how do we just provide an experience that protects owners as much as possible. But they make the decisions or the managers on our platform make the decisions. We don't make any of those decisions.

Yeah. One more question on sort of licensing regulation and compliance before we move off of that riveting topic. You know, you and I are interested in it, but I know a lot of people are probably like, oh man, talking about real estate licensing law. So some, you know, as you know, there's a small handful of states that have no regulation around property management. Maine is one example that comes to mind. I have a friend who owns and runs a management company there. So does Hemlane offer some products in some states and then others in other? It's just like that would be too confusing. It's just a blanket, all 50 states or none.

Too confusing. Yeah, we're a tech company and it's one of the worries and risks is, hey, you call in Peter and say you've got a property in Maine, and we go, great, we could do all of these things that I said we don't do, right? We can go ahead and manage your property and make your decisions and, and all of that. And then suddenly, Peter, you had a property in Ohio and you're like, what the heck? I thought you guys did. That's even very confusing for you as a customer. And so for us, it's very much about that consistency. How do you provide consistency across everything, um, that you offer. Um, so got it.

Yeah. Okay, great. So you are in, um, Silicon Valley, right? And, or, or, uh, that area. You think of yourself as a tech company, and I want to explore this intersection of technology and property management and boots on the ground, Things like providing showings. There's been a bunch of companies that have tried at various levels of tech integration or tech solutions to attack the problem of property management. And when I say the problem of property management, you articulated very well how they're not a very well-liked group of professionals. I, I heard you on another podcast, You say that in your original research, you found that property managers are the second lowest ranked service provider on Angie's List, now called Angie, which I thought was really interesting. I didn't know that, but it doesn't surprise me. So there's this problem of property management. There's been property management companies, property management software companies, and those who are sort of in between who have tried to attack this problem. How can we make a great solution that tenants love, property owners love, And they've attacked this problem with various levels of technology. The sort of 0% example being the traditional mom-and-pop property manager in a small town, maybe not even running a property management software, certainly can't pay rent online. And then the extreme example being some VC-backed group that has 100% tech everything, no boots on the ground, no local offices, no ability to post a notice. It's like all pure digital. So with that being sort of the background, what do we know now, 10 years into this experiment of attacking the problem of property management with varying levels of technology? What do we know now that we didn't then? And how is that informing your approach to product decisions on like, all right, this is going to be tech, this is going to be an add-on service, and this is going to be something that we're just not even going to try to do.

Remotely? Yeah, great question. I have some really strong opinions on this, um, from being in the industry. So I think one, um, let's just talk about traditional managers in general, because I think that traditional property management gets a bad rap because of, um, certain managers who do things wrong. And the biggest one, Peter, I bet you could guess it. What's the biggest one that you hear as a no-no that property managers do?

Well, the biggest complaint I hear from property owners is my property manager didn't get back to me. That's a big one. Another one I see a lot is like accounting errors and mistakes that the property owners find.

It's the accounting errors and the stealing of money. So there will be, you know, 5% of the industry. I don't know what it is. Don't quote me on 5%, but a percentage of the industry that makes everyone else look bad. Right? But I think the advantage is property managers can start using technology to consolidate. Instead of having an average of 137,000 property managers out there, you can have a couple of staples in every single city that are tried, tested, true, have consolidated, provided a very consistent process, rather than a ton of small and mom-and-pop that have 3 people running around with their heads chopped off because they feel like they need to do the leasing and the repairs. And now they're a lawyer and an accountant and everything. And when you're trying to do it all and you're one person, you don't do anything well. And so I think that when you look at the future of the traditional management industry, I think it only gets better. And I think it's actually technology that helps you get there. So the Yardies and that Folios of the world that help make you efficient and automate yourself out, just like Hemlane does that for managers of like, how do we automate you out of the administration? How do we get you on to the more important high-value things, which is the communication? If someone has questions about things, making sure you can respond to them accurately. So I think traditional management from that perspective is something that is getting better and better over time. And I think consolidation in this industry is a good thing. Now, business models out there, there's different ones. And I think a lot of— so this is for traditional property management backed by venture capital. I think it's a very bad business model. I don't believe in it. And that's why I said, Peter, I warn you, I have strong opinions.

I love strong opinions. I'm from New Jersey, like, bring it on.

Yeah. And here is why. Um, venture capitalists expect very high growth. They expect growth where things are consistent and where you can overnight turn on a city, get, you know, a million renter rental properties, you know, within a month, whatever it is. Um, but go through and scale at really high numbers and volumes. It works for something like Uber, because Uber provides a consistent experience where it's like, hey, a driver is taking you from point A to point B. They follow the map. It's consistent. It's actually very difficult to mess that up, right?

Yeah. The way the word I put to this is like scope of service. The scope of service for a black cab driver is very clear. Like you just said it, get in the car, take me here. Right. The scope of service for property management is actually extremely unclear and gray.

And that's the difficulty. And that's why I'm very opposed to tech-enabled brokerages for property management. I'm not going to comment on tech-enabled brokerages for buy-sell because I don't know that space well enough. I only know property management like you, Peter. I don't believe that works. The reason people pay property managers the big bucks is because there is inconsistency. Consistency and communication that needs to be done. That is not something that is black and white, right? That communication is not— it's not like, okay, here's exactly the answer. And how much AI can solve for it, like, it's not there yet. There's fair housing, there's a ton of different things. Could it get there? I don't know. There's a lot of a personal touch where someone doesn't want to talk to AI. They want a human to pick up the phone and say, here's exactly what we're going to do. And there's someone behind—

Yeah, it's one thing when they're buying shoes online, it's another when their heat is out in January and now they're talking with a robot that's telling, you know, telling them to change the batteries in the thermostat. And, and, you know, that's just infuriating for a resident.

Yeah. And they're like, what the heck? So I, I think from that perspective, that model doesn't work. That's where I say you need more Peters, more property managers of the world using technology like Hemlines, using Navfolios, Yardies of the world, whatever technology is best for you. To help do that and be the one there. So if it's not a consistent process of this is what we go through, then we won't take it on. And it has to be something that's a repeatable process, like an administrative thing where Peter himself would get so bored of it that it's like, yeah, this is— and it makes no decisions. But anything that requires a decision is not something I think that can be VC-backable. You need a traditional manager. Doing that, or you need the, um, uh, you would need the, um, owner to do that. And so that's where I think you have this separation between the two, and where I think a lot of companies have gotten it wrong. And our goal is obviously to make sure that, um, that, that, uh, we continue to keep things scalable.

So, and I think we'll, we'll continue to explore this topic of of the intersection of technology and property management. As we continue the discussion, I want to hit on your— so Hemlane's service offerings. I was checking out the pricing page as I was preparing for the show. You have a broad range of plans to choose from. It's actually fascinating. It ranges— I just popped in, you know, there's like a little pricing calculator there. I popped in 50 units just to see what that would be. The plans range from $2 a month per unit to $20 to $68 per unit per month. Fascinatingly broad pricing options there. What are the, what are the, like, the big picture differences between those 3 plans that account for those major price differences?

Yeah, so there's the— I'll go through each one of them. It starts with the free plan. That's actually brand new. That was to say, hey, experience something, just experience it. The technology, there's a lot of small mom-and-pop landlords and property managers just getting started who are like, after 14 days, I don't want to be cut off. I want to understand and explore it for a little bit longer. That's where I say, okay, do it for free. Just do it for free and go on there and experience a little bit of Hamline for free. Advertise your property, you know, background and credit checks, all that kind of stuff. Okay, the next one basic is, is, is software. There is no like administrative process tech-enabled service in there at all. It is rent collection. You know, when you put in a maintenance request, there's no troubleshooting with it. It literally just the tenant submits a maintenance request, it goes to you, right?

Yeah. And so I'm picturing what I make up is that's That's more in line with Buildium, Appfolio, Propertyware, Rentvine. Pricing is in line close to what those guys charge. And I'm guessing functionality is, you know, you're not, you're not doing anything on the owner's behalf at that pricing level.

Exactly. Exactly. Yeah. Then when you get to the essential package, you can think of it almost as like Tenant Turner may be a good one. Latchell's like basic package may be a good one. Where it's like you have some sort of administrative things through chatbots and humans to be able to do call logs for you. So like, you know, something comes in, a repair request, and the tenant calls at 2 AM, we will pick up that call for you, follow the script, send it to you, you get the request, you know, right away. But we're able to help de-escalate that from a P0 to a P2, or sometimes like a tenant will call and it's like, yeah, you need to call 911 or you need to call the fire department for that, right? You know, those types of things. And so there's very clear— everything is transparent there and it goes through that process and there's follow-up required on those, right? Because you want to make sure the owner is informed. They know everything going on. Nothing is hidden from them. And you want to make sure that the next steps are followed. If the owner says, this is the handyman I want called for any handyman request, every plumbing request, I want this person called, blah, blah, blah, you're just dispatching those people. So it's very much of that. And a lot of that's the technology doing it because it picks up the tenant's availability. And then there's humans that get involved too. And that's our tech-enabled services. And it's a very consistent process. And the only process we follow is the owner's process. So if the owner says don't send anyone out and let the place burn down, they would have notes that would say that. No owner would do that. That's an extreme example, but we're following exactly what the owner or property manager's direction is with that.

Is it just sort of the after-hours picking up calls, call logs, or is there other things that also come with that package?

Yeah, they do it 24/7, so it's not just the after-hours.

They'll do it during the daytime as well.

And it's interesting because with property managers, a lot of times they're saying, hey, I can't pay someone when like I'm out doing a showing, I can't pay someone to be in the office to do the administration. That's where it's great. It's like, great, you have someone there to make yourself look professional. They'll have the call log, the hall log, all of that reported.

So is it, is it like you'll take calls, any, any call from the resident? So they have a question about the rent, question about the late fee, question about a showing, question about maintenance.

Is that right? No, it's just repair coordination.

Strictly repair coordination.

Okay, got it. Yes, just repair coordination for that. Then the next one, the highest package, which is the complete one, is it for everything? We have guides. So there's a move-in guide, there's a tenant communication guide, and there's a repair coordination guide. How you want all of that stuff handled. For example, noise violations. What would you like the response to be for tenants if a tenant talks about a noise violation or something like that. So it's templated out with all of that stuff that they have in order to respond based on what the owner wants. If there is any question about how to interpret a lease, property management dispute question, a negotiation question, we can't do that. That would go back to the owner, right, to provide that advice. The other big thing that happens in that package is payouts to vendors. And so what will happen, Peter, is let's just say you have your plumber on site and they need to be paid out through your bank account. You have thresholds in there and approval. So you'd get like if it's over your threshold, you'd get a text message that says click 1 for approval to pay it out. So it acts as basically that accounting, like almost like a Bill.com if you've ever used Bill.com to pay out vendors. Um, it's exactly like bill.com to pay that out. And then you also can select from a network of service professionals if you don't have your own, who you want to work with. These are not home service professionals, these are third parties. And we're saying in your area there's these, you know, 7 handymen, these 8 plumbers, etc., who are on the platform. Who do you want to work with? And we'll go ahead and dispatch there. Most people say it's in the order of, you know, these are my thresholds, this is my expectations, reviews, all of that. And then we go through and do that dispatch for them. But if there's any sort of questions, insurance getting involved, anything above their thresholds, any sort of advice that you have to give, that's where the owner would be involved. And so you'll see how, how we built Hem Lane was very much of the owner is part of all those threads. They're responding in there, etc. It's not our team saying, hey, we're hiding it, which a property manager like yourself would do. Those— all those repair comments back and forth with the tenant, you wouldn't have your owner see it. They pay you the big bucks to do that. In our particular case, we're saying, nope, you're part of those, you're helping respond and going through all of that.

Yeah, got it.

Okay.

This is so interesting to me because you have this spectrum of product offerings and, you know, anchoring is a big thing in, in the, the buying psychology of consumers. And at the low end, your plan is anchored against the Buildiums, the AppFolios, and the other property management accounting softwares. On the high end, you're sort of, they're, they're anchoring against traditional property management, which is going to be more like, you know, I think you're coming in. So at that $68 per unit per month for 50 units, a full-service property manager's going to be anywhere from 10 to 50% more expensive than that, and possibly even more once you account for all of the fees that property managers can and do charge. And then that one in the middle is kind of like, I would call that like category design. There's just, there's nothing. I don't have a reference point for $20 per unit per month. It's certainly not a software product, but it's way cheaper than any property manager I've ever heard of, but like by almost like an order of magnitude. And so now if I'm putting my consumer hat on for a moment, it's forcing me to break away my anchors and my comparisons and compare your product to itself, to the value that it's providing to me as a consumer. And that is kind of, it's like a superpower to be able to bring a product to market that meets that description. Andrew Smallwood got me reading Play Bigger, which is all about category design. And so like I've been, I've been sort of interested in this space. So as a professional property manager, I'm a little scared. Because this is something new and novel. And for, for the right consumers, they probably glom onto this and love it, right? This is great. It's all the stuff that I want to still have control over. The things I hate doing and that are boring or monotonous, or I don't know how to do, the software's helping me with. They're freeing up my time. I don't have to worry about after-hours maintenance, but I'm getting like, I'm getting basically, you know, a certain category of your consumers is probably thinking, I'm getting 90% of what I want out of a property manager for like 20% of the cost. Yes. So yeah, you're smiling because—

okay. Yeah, I wouldn't say it's 90%. Anyone who comes to us and says they're looking for a full-service property manager, we tell them you're at the wrong place. Okay. You do the work. You have to put lease renewals in. You have to decide those rates. You have to put notice of non-renewals. You have to work with the tenant on the move-outs. Like, there is a lot of things that go into property management that, like, we don't touch. To your point, that's why you pay the property managers the big bucks. I think for us, and the lesson for a full-service property manager, so like the traditional model that I always say is if you yourself don't innovate or you yourself are scared of technology, you will get disrupted. No matter what, it's not going to be Hemline. It may not be Hemline, it may be some other company, but what you need to do is embrace where your customer is and what you can offer them. And actually, what's really cool about it that I have seen is that there are quite a few, um, property managers who use Hemline and give unbundled packages. They say, what of this stuff do you want? I'll get your whole Hemline account set up and maybe you want a lighter version and you want to take over this, great, you do that and I'll just do this stuff. I'll just do the leasing or I'll go ahead and do X, Y, and Z. And they're able to innovate. And then the— for— I've only had one property manager say this, but I remember it. They said, hey, you know, I don't like to use technology, um, because it's going to take my job. It's not going to take your job. We've already proven that all those venture capital brokerages, like licensed brokerages, were not a great business. It's very hard to scale it in venture. Traditional property management will stay around. But what happens is, I think in the, the full-service property management space, you get so worked up about technology, and it's like, you shouldn't get worked up about technology. You also shouldn't get worked up about other managers. You should wake up every morning and say 72% of people self-manage. How do I get more of that 72% and how do I attract them to me? Whether it's using a property platform like Chemly to do it, you try to unbundle things with your current offering, whatever it is, you know that that is not changing. Those people aren't going to wake up one day and say, great, now I want, you know, full service management. They still want to do some self-management. So how do you rethink about your contracts? And I think those managers are the ones that I find fascinating. Where they say, you know what, owner, I'll just do your repair coordination, will be your repair coordination line, or, okay, owner, I'll just go ahead and help with your move-outs and your inspections. Like, whatever it is, I think the industry itself needs that innovation to what we saw, and more people need to do that. And that will essentially help elevate it because I also think property management gets a bad rap because there's bad landlords out there and tenants associate that with property management. So the more you can get professional property managers, consolidation of the industry where really strong property managers are in each city, I think you're going to see a lot of the industry, all of us move up together rather than have us stay down here where it has a bad rap.

Yeah, I'm fascinated by the concept of unbundling property management and thinking really hard about what part of our package of services do our customers really value? Like, we do a million things as property managers. We do accounting, we do leasing, we do maintenance coordination, we do legal defense, we do drafting of documents, we do, you know, tax prep. Like, there's so much that goes into it. And I always just get to wondering, like, what part of this is actually valuable for property owners and how could I enhance that part of the offering, or how could I unbundle it, or how could I charge, you know, how, how could I do 50% less work but still charge 90% of what we're charging now and still have a happy customer? There's something there. It's really difficult because, because of the fiduciary re— nature of the relationship where the, the property owner, which is the principal in that relationship, they're basically delegating all this authority to the property manager. So what this would require is for the property manager to say, no, actually, I'm going to give you most of your authority back. I'm only going to take a small section of it, and I'm going to really own this one thing for you and blow you away. But you as a property owner are still going to handle X, Y, and Z if it ever comes up. I love exploring this line of thinking because we do need fresh thinking along these lines in our industry. And I love the work that you all are doing, and I want to continue to like push this conversation forward.

Yeah, no, and I think we just need more of that. It's like, it's so fascinating to me that property managers will step all over each other or step all over tech companies and, and all of that rather than just saying, hey, we've got a big problem to solve. Most of the industry is not using any of us. So how do we come up and provide a solution that, that the customer wants? Because always the— I always tell you, the customer is always right. Customers first, all of that. If we have someone who comes to us, and this was why we had a free package, we had people come to us who said, I have zero willingness to pay for software. Great. How do you have them experience it and be able to do something which doesn't give negative gross margins where you could experience it? And so I think from that perspective, customer acquisition cost is very expensive in property management. You see it with— and then, and then you can have churn as really high. And so the question is, how do you reduce your customer acquisition cost and reduce your churn? And I think these are just two different ways to do it. It's like meet your customer where they are. What they want is what you can offer. And when you only offer one thing, then suddenly they'll go somewhere else. I mean, our agents package, which is where we, we say, here's the licensed property managers and leasing agents in your area. Choose one to help find and place a tenant. Hemlane doesn't take a cut of it. 100% of that fee goes to the brokerage. You can just choose one on Hemlane and go from there. Part of that package was because people are jumping off and saying— off of that platform and saying, hey, I want to do— I want to self-manage, but I want a leasing agent to find and place a tenant. Right. Great. We shouldn't have them jump off. We should have them stay on and we should give them what they want. And so— and then, of course, For us, we kind of explored and said, can we make money off of it? We said, no, we can't. 100% goes to the brokerage. It's usually one month's rent. It could be 50%, but usually it's one month's rent. We're not allowed to price that. The brokerage chooses that. But I think, you know, you listen to your customers and what they want and then you're able to design and build for that and that will significantly reduce your churn. So you preemptively— and I love Peter, you do so many surveys. And I think that's good, doing surveys with your owners of just understanding, hey, how are things going with property management on a scale of 1 to 10? Anonymously, if we could change anything, what would it be that you would want changed? Hey, if you were to ever leave us, what would it be for? I'm going to self-manage my property. I'm going to sell my property. It's like, yeah, with the sale, you probably can't, you know, stop that. But if it's like they're going to self-manage, okay, why would they want to self-manage? Just next question. How do you prevent them from doing that and sticking with you? So I think there's a lot of things that can change, and I think the beauty of technology is while some things get more simplified because you have technology to automate it, then you can go out and focus on how do I differentiate, how do I make something better and different. And so I'm a huge fan, Peter, of what you guys are doing from that perspective as well, of, of kind of bringing that next level of where is the innovation in property management, and then how from an industry perspective, do we attract more people to owning and operating real estate? Because if you make it so easy, they'll go out and purchase more properties rather than put it in the S&P 500.

Yeah, I think the way traditional property managers have tried to solve this— we talked about the problem of property management earlier and the amount of technology that's brought to bear on the problem. The way traditional property managers have tried to solve the problem of property management is to just do more. Anything the owner asks for, we'll do it and we'll do it right away and we'll do it for free like it's included. That's how most mom-and-pop or traditional property managers have attempted to solve the problem. And that has been a disaster. It has been a disaster. It results in high stress, high employee turnover, and it actually results in low property owner satisfaction. Because you're trying to do a million things and you're doing them all poorly. I think we actually have to go the other direction and say, here's what we do, very narrowly defined. We will do nothing else, but these things that we're going to do, we are going to make promises to you both in our marketing and sales communication, but we're going to have SLAs around response time or delivery or quality or whatever it is. So that there is no question as to whether or not we are delivering what we said we were going to deliver. There can be no argument because it's black and white. Now that may mean property managers need to reduce the scope of their service by 50% or more and just say, we're not doing this. We're not doing this. We're not doing this. We're not doing this. Sorry, but we're going to do these 3 things and we're going to do an amazing job for you. And these other solutions, you're going to have to either figure that out or we can give, like Hemline does, we're going to give you some recommendations of folks you can go to for those. But this idea of just trying to be everything to everyone, and that really comes out of the realtor world because that's basically what realtors do during the process of a sale. It is a disaster. And so I like that Hemlane has taken a very opinionated approach and said, you know what, we're going to stay legally compliant and we're only going to do this subset of things. We're going to be very clear and upfront about that and say we are not a full-service property manager. I would like to see more property managers say We are not a full-service property manager. We only do X, Y, and Z. So really interesting.

Well, and that's where I think as a property, as a property manager, remember when an owner calls you, they're thinking about how much is this going to cost me and do I trust this person? Those are usually the things that go on in their head when they're first reaching you. And so if you can give them that trust and say, great, I pick up my phone right away, blah, blah, blah, blah, blah, I'm on top of things. But like, here's why you should go with me. It is slightly less than maybe what someone else is charging, but that's big. That's because I'm going to do 90% rather than that extra 10%. What I noticed is owners don't care because they're like, it's more affordable. And you're right, I think like one of the biggest ones I see property managers get into, which gets really dangerous, is renovations. Because you have some property managers who are very good with them, don't get me wrong. They've got contractors, general contractors, et cetera. But things like that where it's like you have to be off the property like, you know, 12 times, they're charging a small project management coordination fee, things go wrong. And certain things like that, I'm like, well, should you be doing that? Or should you just be having some sort of consistent process and say, here are 4 different, you know, general contractors that you could work with on this project? And so I think you're right. You need to figure out what you yourself are personally good at. If you're a property manager who's been in construction for a long time, great. Maybe you change your mind. But I think a lot of those things of questioning what you can do well and what you can't do well and making sure that you have that consistency, I think you're right. That's really important because otherwise the owner is going to tell you, great, Peter, drive by my property every week, do this and that. And then you're thinking about it and you're like, Okay, my property management fee was $200 a month. I've driven past the property 6 times. I've already lost money at this point. And so you really do need to think about those things. And the more upfront about— I always say you always give the person the reason why when there's a no. So like for us, one of the frequent ones we get is like, do you manage recurring services? And we say, no, we don't, but here is why. It is something that you're going to have to mark off. Did they complete the work? Blah, blah, blah, blah, blah. Did the tenant confirm they completed the work? Because if not, then we wouldn't be doing our job right. Like, you know, if we're not confirming that it's done, we don't have a personal relationship with your landscaper or your pool service man. Um, and the tenants are going to get freaking annoyed if we reach out to them every week to confirm the landscaping was done, right? And so it's like, no, we can't do that. You can do it yourself. You can call in landscaping company, set them up to come on a recurring basis, but we are not going to manage that process because if you wanted us to, we would have to check off that the work was done and we cannot do that. And so there's certain things like that. Now, a property manager most likely that manages the recurring services, but for you yourself, you need to make those decisions and make sure they understand the why. And then it makes a ton more sense when you say, here's why We don't do that, and here's why it's better that you do it, or here's why it's better someone else does it. And when they get that, like another solution, they're like, oh, okay, makes sense, sounds good. And no questions asked from there.

Yeah, that's great. All right, I want to, I want to wrap by asking you a few questions about Hemley and the company, and maybe some of these you can't answer, that's fine. But can you tell me about unit growth on the platform, like number of units or growth year over year or anything like that?

Yeah, we have— so we don't give like forecast numbers or anything like that, but we have 28,000, over 28,000 rentals on the platform that are paying. And then obviously there's the free plan. We don't count those as our units, but they're definitely on there too. And it's a lot more from that perspective.

Got it. And are you seeing growth accelerate or like how is this looking over the past 2, 3 years? COVID? Just curious.

Yeah, growth has continued to accelerate. Um, COVID was a really interesting one for us. During COVID we expected for, uh, for the company to go under. We were told by our investors, cut all your headcount, the world is collapsing, shut everything down, right? So we did, we did cut our headcount. This was like right when it was announced that everything was shut down, nothing to do with our own numbers. But we cut all the open requisitions. And I actually think that hurt us. I think we should have just hired more, hired a ton more people during that time. But the reason I bring that up is COVID actually helped us. There were a lot of people, I can't tell you how long it took to get someone into Zoom so we could give them a demo of our product pre-COVID. After COVID, everyone would get into Zoom. Like Zoom was like a word, just like Google, that everyone would use. And then suddenly there were a lot of people out there who would say, hey, I go down and I collect the rent every month and I go to the property. And they didn't want to do that anymore. And so they were looking for an alternative solution in order to say, hey, how do I just communicate but do it not in person? And so I think that's helped us and that trend has continued. What has changed is the rise of accidental landlords. So it used to be a lot of real estate investors coming to Hamline. Real estate investors still come to Hamline, but they're buying fewer properties, right? Because of where interest rates are and cash flow, right? Based on the numbers. And so what you'll see is there's a lot more accidental landlords. We see a lot of people who say, hey, I want to self-manage this because it was my home, but I've upgraded homes., but I'm locked into this asset with a 3% interest rate, so I want to continue to hold onto this. How can I manage it? And then they, um, look at Hemlane for that. Um, and then we also obviously grow through our property managers. Our property managers continue to grow with us. Um, we've had, um, some of the fantastic ones on Hemlane, um, since the beginning. They continue to grow with us and, um, we always, uh, try to make the product better for them. An accounting feature, all that kind of stuff as well.

Yeah, that's awesome. And are you able to share like the average units per customer? Like, is this mostly single family with one property or what does that look like?

Yeah, if they're not a property manager, it's an average of 8 rentals, but the median is 6. Wow. So very few more fall toward that lower. But yeah, it's a much more sophisticated renter or owner than you would otherwise think. Yeah, it's not the 1, 2, 3 Cs.

I definitely would have guessed more like 2. So that's really interesting. So folks who are beyond their first 4 units or so, they're— it sounds like that's when they're ready for a solution like Hemlane. Maybe prior to that where they were using Excel or something like that.

Yeah, exactly.

Exactly.

It's much more, I think, from that perspective, sophisticated and they're managing themselves. They used to have their handyman do these kind of things and it's like, actually, no, I should have a system do it instead.

Yeah, got it. And does Hemlane have any integrations with any third-party vendors or any type of a marketplace where vendors can plug in and be part of like the Hemlane solution or an API or anything like that?

They have to go through us, so they have to register and then go in and say, hey, you know, I'm— well, if they're service professional, we have to prequalify them. So that's a whole different process they have to go through. But there's no like API thing. It's actually really interesting. We took much more of the AppFolio approach versus the Yardi approach. Yardi is very much of like, hey, pay us $25,000 or whatever it is and you can have an API into our system. And for us, how we saw it with our customer was they don't want 5,000 APIs and try to figure out what's the best one. We're in this space, we see these properties every day and focus and concentrate on them so much. And so from that perspective, we know our customer, what they're going to want. And so instead of having like 5 different credit background and credit check companies, we just have one. We went through all of them, we looked at the pros and cons and we said for this customer base, this is the best. And so we took much more of that approach, which is much more of that Folio approach. Of consistency. I think Buildium is much more like Yardi where it's like a free-for-all. But for us, we want a consistent experience because we always want 5-star reviews from our customers. So we want a consistent experience. What we sell them is what they get. If they're using a partner, it's an integrated one that we've done a deep integration with, an API that's closed, not open, etc.

Yeah. Got it. And you and Hemline has property accounting built into the product. So you basically had to build that from scratch.

Is that right? Yep, we built it from scratch. There's some cool companies, I think that's called like Teal and a couple other ones that basically are like accounting as a service type thing where it's like an API and it will build an accounting platform for you. We looked into those, but at the end of the day we decided to build it ourselves.

Okay. Because building a property management accounting platform is no walk in the park. I know some people who have tried to do it and it's not— it's no It's not like just building a little QuickBooks function or something. There's a lot to trust accounting and security deposits and all that.

It's a lot more simplified than you would think. So we built it for the 80%, not the 20%. It is cash basis accounting, not accrual-based accounting, and single-entry accounting, so not double. And so we made it much more simplified. Why we made that decision, because that's always important to talk about the why. Why we made that decision is we actually went out and spoke with the top property management softwares out there and the big ones, the big ones that the big enterprise folks use. And what is so funny, which none of them will tell you about because they're embarrassed to say it, is most of their customers will use QuickBooks or some other third-party accounting. Even after they've built the whole thing, they still use QuickBooks or some other accounting solution. And so for us, that was a signal of, hey, if you— for that additional 20%, they can go out and use QuickBooks. If they have such an accounting need where they need double entry accounting, they can pay the $10 a month, which is the starter base on QuickBooks, to make that work. Right. And so, yeah, we've— it's always a balance because you, you wonder how much time you should spend on something and how good you should make it. And so we say, hey, we'll build for the 80%, we'll consider the other 20%, but we would need a good use case or understanding of why they would use us over QuickBooks or some other enterprise accounting solution.

Yeah.

Okay.

Thank you for sharing that. I'm going to wrap it here. This was really interesting. Thank you for coming on the show, Dana. If folks want to follow along with Hemlane and you and keep up with all the news and great stuff that Hemlane is up to, where's the best place for them to do that?

Yeah, you can go to hemlane.com. So H-E-M-L-A-N-E. And then I'm just definitely recommend the show and Peter, if you try any of our services for free, we'd love to chat with you.

Awesome.

Thanks again, Dana.

Thanks, Peter. If you like the show and want to get connected to the community, you can follow me on Twitter @PSLohmann and subscribe to my email newsletter on my website, peterlohmann.com. I try to share as much valuable property management content as I can on a regular basis. Thanks again for listening and have a great week.