Episode 249: Co-Living with HomeRoom

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Show Notes

Welcome back to another episode of the Discount Property Investor Podcast. Your host Michael Slane invites Johnny Wolf from HomeRoom and Johnny introduced this co-living platform. Listen to this episode if you are interested in Co-living with Homeroom and want to know more about real estate.

Things that will cover in this episode:

  • Who is Johnny Wolf?
  • What is Co-Living with HomeRoom and how it works?
  •  Difference of Airbnb and Co-living with HomeRoom
  • How does HomeRoom help real estate investors?

Service Mentioned:

Welcome back to the Discount Property Investor podcast. Our mission is to share what we have learned from our experience and the experience of others to help you make more money investing like a pro. We want to teach you how to create wealth by investing in real estate, the discount property investor way. To jumpstart your real estate investing career, visit freewholesalecourse.com, the most complete free course on wholesaling real estate ever. Thanks for tuning in. 

Mike: (Welcome) to the discount property investor podcast. Your host, Mike Slane. It is February 2021 and we are finally getting out of this little cold snap we’re stuck in here in the Midwest and I’m excited to see that snow melt. It has been good for driving for dollars so guys, I love getting out there and driving when it’s snow has been sitting around for a week because it is easy, easy, easy to find those properties that somebody isn’t living in. Today, we are lucky, we’re joined with another Midwesterner. We’ve got Johnny here from HomeRoom. Johnny, welcome to the show, man. How are you? 

Johnny: I’m doing great, man. It’s really a privilege to be here and yeah, it’s good to have someone that’s in our neck of the woods so they really understand how cold it has been. 

Mike: Exactly. We’re used to these winters in the Midwest, occasionally, but man, it’s just been not fun, you know. 

Johnny: Yeah, when it drops below -10, and you know, I live in a basement that does not- it does not stay very warm. 

Mike: Right, yeah that gets cold man. Alright, so Johnny tell me a little bit about yourself and about this HomeRoom idea. So I learned about it and was pretty intrigued. It’s basically, I mean it’s co-living right? So you’re kind of- describe that to me, describe it to our audience and what that is and how that works. 

Johnny: Yeah, so co-living essentially is we like to say is a roommate living with luxury apartment amenities managed by a third party company. So HomeRoom has 190 units or bedrooms in Kansas City and Texas and what we provide- we help- one of the biggest challenges of roommate living or shared living is finding roommates so part of what we do is help match roommates, make sure that they’re compatible. We also provide you know, yard care, maid service and we do kind of online and offline social engagement, so community events like luxury apartment building. 

Mike: That’s interesting. Okay, so is it- and you say it’s rooms and I- you may have said it and I just wasn’t paying close enough attention, is it in single-family houses or are they in like more apartments or is it both or is it anything? What’s the-? 

Johnny: Yeah, so HomeRoom is specifically single family homes. Co-living is a more broad definition than that, there are companies that do- they redo apartment buildings and do it in the larger cities like New York and San Francisco but HomeRoom is specifically single family homes. 

Mike: Okay, awesome. That’s very good, so then I think that’s going to lead into my next thought on HomeRoom, which is how do I sign up for HomeRoom or what other markets are you getting into or what are you looking for as your target? Are you looking for more houses to host people or is it more, you know, tenants that you’re looking for? What’s your- what’s your major thing or is it both? I mean- 

Johnny: Yeah, so you know, mostly looking for houses. We have- in 2020, we helped a lot of real estate investors buy houses and what HomeRoom does is: we’re one of the only companies that in the United States that offers a turnkey property purchasing solution in which you can come to us with 50 grand or 100 grand if it’s Austin cuz Austin is crazy, and we’ll help you find a property for co-living, we’ll help you set it up. We’ll do some remodeling if necessary and then we’ll manage it for you and that’s- and then we’ll guarantee rent. So that’s one of our core models and we’ll continue to that forever. But what we’re actually doing in 2021 is a little bit different, we’re actually helping investors that already have properties or want to source their own properties, do it with us. We’re building essentially the Airbnb for co-living so what you will be able to do is if you have an investment property in a relative, you know, nearest city or in any kind of relatively dense location, you can list your property on our platform. We’ll provide you with roommate tenants, we’ll also provide you with instructions on how to manage roommates and then we’ll resolve any roommate disputes. So, what you will do is give the tenants to give you the framework and your returns go up 30 to 40% using our model, which is awesome. 

Mike: Wow, that’s pretty slick so- and that’s what- man, I can’t even imagine the disputes that some of the people get into. I figured that would be like property management headache on steroids, when you’re just trying to pair up, you know, people to live together, right? I mean it is that. 

Johnny: I mean we’re pretty good at it, you know, the key is really the early stage screening. We do a pretty thorough screening, we do a video interview and then the roommates can interview their future roommate via video call so that helps make sure everyone gets along going into the situation so we really don’t- I mean, we may have a serious roommate dispute once a quarter. They- generally everyone gets along and if there’s issues, we have processes in place, we actually have a professional mediator that will step in and have a conversation with everyone. 

Mike: Gotcha. Yeah, I mean again, I think sometimes unfortunately that probably- like you said, once a quarter, you know, it’s going to happen but you’ve got what? 130, you said units? 

Johnny: 190. 

Mike: 190, yeah so again that’s to be expected when you have that many people, you know, sharing space. When we say roommates, I guess since we’re talking about single-family properties, we’re really talking about, I mean for the most part, somebody’s gonna have their own room though, right? I mean, each person gets their own room when they’re sharing. 

Johnny: Yeah, we’re only do- we only do private bedrooms at this time. We are exploring allowing couples to live together. One of the challenges with roommate houses is you know showers, you don’t want to have too many people to a shower. You also want to make sure there’s ample parking so that’s one of the reasons we are trying to figure out how to work with couples that you just having that extra car and that extra person can be a little bit of a challenge. 

Mike: I bet, yeah. 

Johnny: Yeah. 

Mike: It’s funny timing, man, I was watching- I was actually show my daughter YouTube videos and one of the ads came up and it was for I think it was called odd couples and again, you’ve probably- you’re probably more tuned in to this than I am but this is the first time I saw this. It was called odd couples and what it is is they are saying, they’re matching elderly people with younger people and the idea is- like to live with them as roommates and the idea is the younger person get a really inexpensive place to live and the older person gets someone to help with like daily tasks they can’t always do like you know, they can run to the grocery store and pick up groceries when they’re shopping and stuff like that, so I just thought that’s really interesting and this- your whole business is, you know, kind of basically that, you know, except for not you know, with the seniors and the young ones. It’s just this co-living is an interesting concept so that- I guess that leads to another question or thought that I have about HomeRoom is do you have people who live in a house by themselves and then just say hey Johnny can you help me get a tenant in one of my bedrooms? You know, something like that. Is that someone you’re interested in working with? 

Johnny: Yeah we have done that before but it’s frankly one of the challenges with and that’s like the house hack method option, and we support house hackers and one of the things that we’re really excited about in our new model is that there are tens of thousands of house hackers out there that have bought houses for roommates and then they’re like okay now I’m kind of done house hacking, what do I do now? Do I kick everyone out? Do I move to a new place and try to manage this roommate house? There’s not really a great roommate kind of management option or like a platform in which you can keep a roommate house going and that’s really what HomeRoom’s here to do. 

Mike: That is cool. So like again, they want to be a real estate investor, they start house hacking and they say okay, I need to move out but I got four people living in here, three other people living here in the other bedrooms, what do I do? So you guys can get in and help them out and0 

Johnny: Yeah, and I personally have tried to manage like a roommate house remotely at when I moved out and I moved [inaudible]- it’s a tricky thing to keep going successfully and keep the culture going and so that’s really- I mean I built HomeRoom kind of for myself to do that with my roommate houses that I created from house hacking and so it’s really sort of an option for people like myself or other people to use this as a tool to like transition into their own house without having to shut down the roommate house because a lot of times, the financials of the house hack were around having roommates. You built- you already have furniture there, that’s perfect roommates, all that stuff so yeah, and we don’t typically help people find roommates specific- we’re not really exactly a roommate matching service. 

Mike: Right. 

Johnny: We find that, you know, there’s- the ecosystem of a roommate house is something that’s- it’s better when it’s holistically versus just trying to match roommates, you know? And so we like to have the house review the setup of the house and make sure that the space works before putting the people in and so when you just do a roommate match, it doesn’t kind of- it’s not as holistic and complete as that.  

Mike: Yeah, that is also something again I just have never thought about in the real estate space. 

Johnny: Sure. 

Mike: I mean in my world anyways, I’ve always seen some of the, you know, the lower-end properties where they’ll have, you know, subletting room by room but this is definitely not that case. I mean, it’s nicer- I mean I’m assuming here, you got decent properties and pretty decent areas. We’re talking about, you know, Kansas city, I’m assuming more of the suburban side of it more so than the city center. Same thing with you said it was Austin, is that right? The second location? 

Johnny: Austin and Dallas. 

Mike: Oh excellent. 

Johnny: Yeah, we’re all over Dallas. In Kansas City we’re- yeah, we do try to stay in areas that are nicer that young professionals would want to live in so that’s sort of really our target market. I think with the platform, we’re going to be a little bit more open to, you know, if houses are not in the most ideal location and someone’s like wants to use our platform and that’s okay, cuz it’ll be their house [inaudible] but for today, we’re in the very nice areas. Typically BB+ areas Overland Park, Prairie Village, stuff like that. 

Mike: Okay, cool. And so, you say your platform- described that again just for me cuz again, I’m trying to understand. 

Johnny: Sure. 

Mike: I know the concept now and you mentioned the services that you offer but I mean, kind of go into that a little bit more for me. So, we’ve got a property, it’s in not as nice of an area but you’re willing to do what for it though? I mean again, are you- just describe it again if you could.  

Johnny: Yeah, so the new platform that we’re working on is essentially Airbnb for co-living properties. So just like Airbnb, if you own a property and you’re like this could be really nice for a vacation rental based on location or some other thing, you can list your property as a host on Airbnb and then Airbnb will provide the framework in which short-term stayers and guests will come and book your property. Very similar to that so with HomeRoom, you’d find a house that has a lot of bedrooms, it seems like a place that young people would want to live, this is great but I can’t- I don’t know how to do a roommate house, it just doesn’t make sense to me so you’d list it on our platform just like Airbnb and become a host. We would give you guidelines on how to set up the property and typically require some light furnishing, maybe a TV. Nothing as extensive as a short term rental but just the basics, right? So some roommates can move in. It’s hard for roommates to get their own furniture and you don’t really want them to cuz they usually will find the cheapest thing and they don’t have a truck and it’s just- it’s a mess so we have guidelines for you if you want to be a host for a co-living property. And then we’ll direct- then we’ll fill it up with young professional tenants and then you’ll be all set and typically, you know, in some cases, rent has gone up 100% versus what it would rent on a typical open market. It’s all over the board from a 50 to 100% increase in rental income. 

Mike: What- on the furniture thing, cuz like an Airbnb and I’m just going to compare and contrast cuz that is my from your area, at least in this case at all. With an Airbnb, you have to do full furnishing and on this one you said kind of light furnishing like a TV and a couch, what about in the bedroom itself? Are you- are you putting in a dresser and a bed or are they-? 

Johnny: That’s not something that- we actually at HomeRoom don’t furnish the bedrooms. We do have an option within the guest facing side in which they can request a room be furnished and then we’ll have the furniture, that will increase the price of the room. We have- we’ll have a professional furnishing company bring the furniture and then remove it after they move out. But we prefer to have folks that are going to stay a bit longer and people that want to stay longer want to bring their own furniture so that’s sort of our motto. 

Mike: Exactly, again so yeah, Airbnb short-term, they’re not bringing furniture with them but again, somebody who’s staying 6 months or 12 months. 

Johnny: Yeah. 

Mike: Is going to be a little longer. So what are the lease terms then for the tenants? I mean they’re not really guests, they’re basically tenants at this point. I mean, do you have 12 month leases or how do you guys manage that? 

Johnny: Yeah, our default is sort of a 12-month lease that automatically renews if you know, they don’t have to do anything to keep living there. You can go down to 3 months and that’s no problem but typically the price goes up so anytime you’re kind of adding more churn and more vacancy rest then you have to pay a little bit more for that. 

Mike: Yeah, that makes sense. I mean again, as an owner of a house, I’d want that or you know, the- I think most tenants would expect that as well. You know, hotels are way more expensive than renting a house for a month. 

Johnny: Totally. Yeah, the average stay ends up being between 12 and 13 months and our goal honestly is o get that even longer so it’s not- I do- we are seeing you know, a lot of changes in terms of young adult living patterns. They’re staying places not at- you know, they’re moving around more, and more and more of them are not living in studio apartments. Young adults and that’s kind of a general classification, but 20 to 30-ish, only one in five of them are living alone today. 52% of them are living with their parents which is because probably of the Covid and the economy. 26% of them are living with roommates so we’re finding is kind of like this is- this sort of living model which is where it’s more flexible, its more common and you don’t quite have to bring as much stuff is becoming more and more- is becoming more and more popular with people in this age range. Now we think over time this living kind of pattern and kind of more migrant, less you don’t have to furnish when you move, it’s easier. I think that’s gonna become more and more kind of widespread throughout all of residential real estate. 

Mike: Yeah, no I tend to agree with you and I think that you kind of hit the nail on the head and that is another topic I guess would be is how has Covid affected, you know, HomeRoom? I mean I think that some people would be very, very hesitant to do the co-living given, you know, all the hoopla about Covid. I mean maybe not in your target age group though. Again, since its younger people, they may not have as much fear with that so is there any- have you had many issues with that or-? 

Johnny: Yeah, you don’t hear the term hoopla everyday so I like that by the way. We actually- we did- we were sort of in a good phase, we were set up in a good spot for Covid. We sort of- we slowed our expansion down, we were adding, you know, a couple houses a month and we slowed it down to just adding one every other month and we dropped our vacancy to about zero. We didn’t find- we found that no one wanted to leave and we had some people that still wanted to come so the demand was still pretty strong based on the amount of inventory we had and so it wasn’t- it wasn’t really an issue. We have a pretty firm Covid protocol but because everyone- the outer [inaudible] at home are 27, that- I think that lowered the stress tremendously. 

Mike: Right. 

Johnny: If we were doing roommate houses for folks that are retired, that would be different. It would be- I don’t know, the stress- my stress personally would have been much, much higher. 

Mike: Well yeah, so kinda like that one that I saw the commercial for, like odd couple’s or whatever it’s called. If your matching a twenty-something with a senior, I mean shoot the senior has every reason to be scared, whereas the 20-something’s got to go to work and you know stuff like that. 

Johnny: It’s a tough combination in 2020 for sure. It sounds like a fun game show in maybe 2022. 

Mike: A reality show where something [inaudible] a good, you know, comedy gold in there but- 

Johnny: For sure. 

Mike: Yeah, not something I necessarily would want to do. So, how does HomeRoom or how does your platform help an investor like me? And again, not necessarily like me cuz I’m not in Kansas City but again, when you get to St. Louis, I know I’ll be having to reach out to you guys because our Airbnb’s are doing well but we always like to keep the model, you know, growing and diversified. How does someone like me get set up and how do we take advantage of your services so that we can kind of manage it more like our normal stuff which is you know, we think about it once a year, you know, or less. 

Johnny: Yeah, I mean in our platform, we’re more or less about that. So I mean, you- when we get to St. Louis, you have a couple options with us and, you know, since you are driving for dollars, I know which one you would probably take but one is we’ll have a local partner real estate agent that will actually look on the MLS and off market to find properties that match exactly what we’re looking for. You know, about 2,000 square feet, typically two full bathrooms at least, a good amount of parking. We typically tend to avoid HOA neighborhoods and if you do short-term rentals, I’m sure you do too. So, we can help you enter the co-living market by buying a property specifically for that purpose, that’s option one. Option two is if you already have a property and if you have a, you know, you have an Airbnb and you’re like it’s not as performing as well or I’d like a more stable investment, co-living is a lot more consistent than Airbnb would be. Then the conversion is pretty simple since you would probably already have pictures of a furnished property. You would just go on our platform like Airbnb and list it, right? And so, we will- we have, you know, professional leasing agents  that are even more full service than Airbnb. They’re actually actively filling houses with these roommates, setting up interviews between the roommates making sure they get along and then depending on if you’d like us to do the full property management, which we actually would do all the maintenance for you or- and we would do all the utility setup and all that stuff, or if you want to manage that, we have two different price tiers for that depending on how active you want to be. 

Mike: Awesome. Yeah so that means you guys will do full- basically full service property management, it sounds like or work with the owners who want to- want to still have their finger pulse on the property as well, so that’s very [inaudible]. 

Johnny: Yeah. Yeah I mean with Airbnb, you’ve got services like Vacasa, you know where they’ll do the property management for you and they’ll take a cut and so we’re sort of an integrated- or our company’s integrated in the sense of we are Airbnb with Vacasa in one in a sense that we will do the full service management if you like, but if you don’t, that’s fine with us too and we’ll let you do that. 

Mike: Very cool. Yeah, I mean our preference, we try to get as passive as possible even though passive income isn’t truly a real thing. 

Johnny: No. 

Mike: I mean again, you’re in real estate, you know the truth. There is passive income taxed differently but it doesn’t always mean it’s passive, right? 

Johnny: Correct. 

Mike: Cool. Well Johnny, I loved having you on and learning a little bit more HomeRoom. I’m going to send people to your website, I’ll put a link below as well in the show notes and below this but if they’re looking for more info on HomeRoom, where do they go? Is it just the website? 

Johnny: Yeah livehomeroom.com, you can- /invest is where our investors can go to learn more about our products. You can always reach me personally at Johnny@livehomeroom.com and I’m happy to answer any questions there but yeah our website has got 24/7 chat support so you can go on there and ask us questions, we’re happy to help. 

Mike: Awesome, man. Well before we wrap up though, I did want to see if you had any interesting stories about having so many different roommates. I saw here it says from having 132 roommates, so is that you personally or is that the- 

Johnny: That’s HomeRoom. 

Mike: HomeRoom, gotcha gotcha. Yeah, so tell me something crazy that’s come about and obviously no names or too many details. 

Johnny: Sure, sure. Yeah, so we had a- we had actually an older gentleman who lived at one of our houses and he had collapsed in his backyard and so I think there’s some- there’s like some really cool value behind having young people in some of these aging neighborhoods cuz there’s just no one, you know like you want like kind of the show you were talking about. You want to you know kind of want to pair age demographics together versus having them all clustered in a you know, homogenous groups. So he- the roommate actually ended up calling the 911 and saved the guy’s life so that was pretty cool like a proud HomeRoom moment. 

Mike: Yeah, for sure. 

Johnny: We definitely had a number of times where items have been stolen from the fridge. 

Mike: Yeah. 

Johnny: You know and stuff like that and we’ve had you know, little roommate- inner roommate conflicts and all that but you know, it’s kind of a cool hero story where the roommate like saw the guy crumbled down on the grass and saved his life so it was awesome.  

Mike: That is awesome. 

Johnny: Definitely have been a couple times where we had people in Covid and we have roommates like giving them soup, like through the door cuz they were quarantined in their room which was hard but you know, it’s better than being alone I think in 2020 is having roommates that would do that. 

Mike: Yeah. Very cool, man. 

Johnny: Yeah. 

Mike: Well Johnny, yeah thank you so much for joining me. Any other things you want to say? Feel free to say it, otherwise we’ll go ahead and wrap up and I will definitely have to reach out to you guys again, maybe even start looking in Kansas City to expand our little- our little portfolio. 

Johnny: Awesome man, we’d love to work with you at anytime. Feel free to reach out. It was really nice talking to you. 

Mike: Same man, thank you so much for coming on. 

Johnny: Thank you. 

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