JF1442: Student Housing Has More Cash Flow Potential with Joe DiNardi

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Joe was getting into student housing himself when he realized there was something missing. There was nowhere to shop through student housing listings. He created Dwel to address this problem. Now college kids will be able to easily find and scroll through apartment listings. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Joe DiNardi Real Estate Background:

  • CEO and Co-Founder of dwel.co, an online property management and listing platform designed specifically for the off-campus college housing niche
  • Bought his first rental unit while in college and rented the extra beds out to his friends
  • Created dwel.co to professionalize the off-campus housing market and bring it into the twenty-first century
  • Say hi to him at https://www.dwel.co
  • Based in Jersey City, NJ
  • Best Ever Book: The Snowball

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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Joe DiNardi. How are you doing, Joe?

Joe DiNardi: I’m good, Joe. How about you?

Joe Fairless: I am doing well… A little bit more about Mr. DiNardy’s background – he is the CEO and co-founder of Dwel.co, which is an online property management and listing platform designed specifically for the off-campus college housing niche. He bought his first rental unit while in college, and rented the extra beds out to his friends.

He created Dwel.co to professionalize the off-campus market and to bring it into the 21st century. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Joe DiNardi: Sure thing, Joe. I actually got into real estate because of my mom. She owns a recycling company, and during the 2008 recession it started hurting, and she wanted to diversify her cashflow streams… So she came to me to help her find a different vehicle to produce cashflow.

After searching around, reading around, listening to some podcasts, I thought real estate would be a good fit because it’s fairly easy to hop right into, and it cash-flows fairly quickly compared to other businesses. So from there we struck a partnership – she’d provide the money, I would do the management… We scooped up a few duplexes in some blue-collar neighborhoods in Jersey. They started cash-flowing nice, everything was going great, and then I was off to college, where I decided to keep it going.

I didn’t really want a dorm. I’m 6’3″, I didn’t really fit in the beds, so at that point I decided “Why not just buy a property and rent out the extra beds to my friends?” This way the mortgage is covered, it gets paid down, and I still own the asset at the end.

After four years of college I realized “Well, college rentals have a lot higher cashflow than traditional rental, because you’re renting out by the bed, and not just the house, so… Single-family, 3-bedroom, instead of getting $2,000/month renting it to a family, I could rent it out as six beds, the college kids are paying $650 each for about 4k/month.

Then the property management struggles came in, of dealing with the student tenants… I was talking to one of my friends who was actually still in college, and looking to rent the property, and was complaining about how hard it was to actually find a college rental, because most of it is word of mouth, and the current sites out there weren’t very user-friendly, and he had a very hard time actually finding a property online, because most of the time there either was no picture, or it was just a picture of the outside of the property.

After we got talking, we decided to do something about it, and that’s what kind of led to the idea of Dwel.co, in which we’d create a system designed specifically for college landlords and college students to better help landlords manage their properties and better help students find a quality place to live while in school.

Joe Fairless: What are some of the unique characteristics that you had to incorporate with your website because of your target audience?

Joe DiNardi: A lot of students don’t have a background at all, and a lot of landlords want a rental background… So a lot of landlords want a co-signer on the lease, and most of the platforms out there didn’t really have a capability to do that. We had to build in the ability for a co-signer to come on and sign for the actual tenant.

Also with there being one lease, but up to possibly 12 different kids on the lease, it had to be very versatile. A lot of the current leases on other sites were very rigid; you could only add a few people on it… And only add one bank account for the property, where with kids, obviously — 12 kids on [unintelligible [00:04:46].24] bank account to pay.

As far as the management end goes, those are pretty much the biggest points.

Joe Fairless: Multiple bank accounts, co-signer on the lease, and one lease with up to 12 different college students on the lease… The bank account thing is, I suspect, a technical configuration, but the co-signer and one lease but 12 different people on the lease — I imagine you work with an attorney, draft up some sort of template, and then have that on the website. Is that right?

Joe DiNardi: Yeah, that’s pretty much right. We are looking to work with an attorney to provide more templates for landlords; most of the landlords are just providing their own lease and simply just uploading a PDF onto the site, so the kids always have access to the lease, so there’s never a disagreement of what was in it and what wasn’t, and they can always just point to it.

Joe Fairless: So you created a website, and it has these components to it, to be more friendly for landlords and then also college students. What other things did you have to take into consideration?

Joe DiNardi: When building it, it was a lot of legal hoops we had to jump through to not put ourselves in a place where we were considered the property manager. We’d made some big mistakes early on; we tried outsourcing development to off-shore developers, and that just ended up eating a lot of money and a lot of time and didn’t produce anything. We actually ended up just picking up coding, learning it ourselves; then we were able to actually crank it out a lot quicker and have a very versatile website.

Joe Fairless: When did you first launch it?

Joe DiNardi: We launched about three months ago now, and we have just shy of 100 users at this point. We’re actually in the process of building a listing portal, so college kids can find their apartments easier. That should be launched in mid-September, and that’s when we’re really gonna kick up marketing and really provide a lot more value to people.

Joe Fairless: Are you still buying properties while you create this?

Joe DiNardi: I took a little stop from buying properties.

Joe Fairless: You’ve been busy?

Joe DiNardi: Yeah. [laughs] And we’re bootstrapped, so I funneled all my money into this.

Joe Fairless: Okay. I interrupted you. You were about to say you had to pay off something.

Joe DiNardi: No, thank God my mom covered my student loan, so I was able to dive right into this.

Joe Fairless: Good stuff. Well, when you say 100 users, are those college students or are those landlords with properties?

Joe DiNardi: Those are landlords with properties, and then each landlord has on average three tenants.

Joe Fairless: Okay. How did you find those 100 landlords with properties to get on your website?

Joe DiNardi: All the co-founders are Rutgers alumni, so we started at our alma mater; pretty much went door-knocking, got tenants to give us their landlord’s information, and from there we contacted them directly to start building a first interest.

Then we found once we got to 40 or so users, organic reach started to pick up; a lot of these guys talk to each other and a few of them own multiple properties. Once we kind of defined our setting at Rutgers, we’ll be ready to start expanding to other schools.

Joe Fairless: That’s great stuff. What are some unique challenges that you noticed as an owner of the property when you were a landlord that you had to take into consideration whenever you were working with college students?

Joe DiNardi: The biggest was definitely getting a co-signer. I actually got burned on one of my properties. I didn’t have a co-signer, and one of the kids decided just to not pay, caused a lot of problems… There were four kids in the property, and he caused a lot of problems in the group. The one kid just decided to leave, and it cost me about two months of headaches to sort everything out. Luckily, the other guys were good kids and decided to step up and cover their lease, so I didn’t really have to take anyone to court… But it caused a lot of problems and I had to end up discounting a quarter of the rent for one month, instead of doing cash for keys, or anything like that.

Joe Fairless: How much does it cost to build a website like Dwel.co?

Joe DiNardi: I’d say we just passed the six-figure mark, and going forward it’s just gonna start costing more and more in total. We’ve gotta get funding; within the next three months we’re gonna probably start going for funding… This way the business model is proven and we have something to show.

Joe Fairless: Are you making money right now? These are two separate questions… 1) Are you bringing in income? 2) Are you making money?

Joe DiNardi: We’re bringing in income. Right now the costs are higher than the revenue though.

Joe Fairless: You’ve got 100 landlords… What would be the breakeven point for you?

Joe DiNardi: Our breakeven point would be 800 tenants on the system. Three tenants per landlord, so probably around the 300 landlord mark would be our breakeven.

Joe Fairless: What else have you learned through this process?

Joe DiNardi: I learned to expect the unexpected, definitely. A lot of things come up, and change, and you’ve gotta learn to be quick on your feet and on the fly. With technology, a lot of things can happen in a very short period of time, and you’ve gotta be able to pivot quickly.

Joe Fairless: What would you say to someone who has a rental property and it is near a school, but they don’t do student rentals?

Joe DiNardi: I’d say to switch over and do student rentals. It’s a lot more lucrative. It can be a little bit more of a headache, because this is the kids’ first experience being out of the house, first time living on their own, you’ve gotta educate them a little about the leasing and rental process, but in the end you’ll make more money. Like I said, it’s $650/bed, so so long as you’ve got three bedrooms plus, you’ll end up making more renting out to the students than you would to a typical lease.

And as far as maintenance goes, so long as you’re putting in stock cabinets, very typical and easy to find, cheap materials, the maintenance costs will end up being the same as if it was a normal rental, because obviously the items will be cheaper; college kids do put some wear and tear on it, so that kind of negates that cost saving.

Joe Fairless: You mentioned the $650/bed. You’re referring to where Rutgers is, right? But in Lubbock, Texas, for example, it’s probably gonna be a lot cheaper than $650/bed. You’re just using based on the numbers that you’re looking at in Jersey?

Joe DiNardi: It’s based on what we’re looking at in Jersey. We did a little bit of research and found the prices may be cheaper in other places, but proportionally it’s pretty much the same increase.

Joe Fairless: What about if an investor has a property, they are near a college, they have a property management company who does not have experience with student rentals – how should they approach that? Because you’re saying it’s more lucrative – great, I’m all in, but wait… Wait a second – I don’t have my management company in place that can do that.

Joe DiNardi: If they’re with a management company, I’m confident that the management company could probably pick up working with students. There are a decent amount of property managers around Rutgers even that do deal only with student rentals. It’s not too much different… Like I said, it’s more just about educating them on what they should expect and defining clear lines and procedures in the beginning.

Joe Fairless: Based on your experience as a real estate investor and now certainly entrepreneur, what is your best real estate investing advice ever?

Joe DiNardi: Best advice would be always screen your tenants, no matter if they don’t have a background or not. For college students it really pays to go onto their social media links, for instance, and look at what they’re doing there. If they look like they’re really rowdy and partying out all the time, you can expect some more damage on your property than someone a lot calmer on social media, with student tenants. It is hard to kind of screen them, because they don’t have a previous history, and that’s why it’s important to get a co-signer on the lease and to make sure you get the highest security deposit you can, just in case something goes wrong. If not, you give it back and everybody’s happy.

Joe Fairless: What’s the highest security deposit that you see charged or taken?

Joe DiNardi: For me, I can only do a month and a half max. That’s for New Jersey state law… So a month and a half the rent amount.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Joe DiNardi: Let’s do it.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break:  [[00:13:08].00] to [[00:14:12].29]

Joe Fairless: Best ever book you’ve recently read?

Joe DiNardi: The Snowball, about Warren Buffet’s life.

Joe Fairless: Best ever deal you’ve done?

Joe DiNardi: It was actually a small mobile home unit we picked up real cheap on a foreclosure and it actually turned out to be a 12% ROI every year.

Joe Fairless: Where’s that at?

Joe DiNardi: It’s down in South Jersey. We found it through a friend of a friend.

Joe Fairless: Huh, found it through a friend of a friend… Did you first friend tell you about their friend who had it? Is that how it worked?

Joe DiNardi: No, the first one is a real estate agent, who passed this on to a  banker who was actually dealing with it.

Joe Fairless: What are the numbers on that deal?

Joe DiNardi: We picked it up for about $90,000, and it’s cash-flowing close to $2,600/month, with very minimal maintenance cost.

Joe Fairless: Is it just parked in some mobile home park?

Joe DiNardi: No, actually it’s surrounded by other mobile homes, but it’s not a mobile home park. Each mobile home actually has its own lot and owns the land.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Joe DiNardi: Not doing due diligence, assuming that we were gonna actually get more cashflow than we actually did, just being naive and optimistic in the beginning. We ended up paying too much, thinking we can get more, and didn’t put enough research in on one of the first deals we made.

Joe Fairless: Best ever way you like to give back?

Joe DiNardi: Right now it’s providing students with the resources and information they need to actually become informed renters and know what to expect about the process, and be able to protect themselves from getting ripped off… Because unfortunately in some college towns you do deal with some bad actors who are just trying to take advantage of naive people.

Joe Fairless: How can the Best Ever listeners learn more about your company?

Joe DiNardi: You can visit us at Dwel.co, or type that into any social media site and we’ll come up.

Joe Fairless: Congrats on the launch of your company. It certainly is a service that is needed. Best of luck with your launch  and your continued success… Really necessary for any landlord who is looking to rent to students to know some of the challenges that you came across, so that regardless if they use your platform or not, they should be aware that 1) in the lease there should be a co-signer available within the lease; 2) you’ll have one lease, but you might have up to 12 different college students on the lease, so make sure the lease is flexible enough to accommodate that; 3) there are multiple banks that are gonna be sending you money, and 4) have the highest security deposit that you possibly can.

Those are four tips for renting to college students that you shared with us, so thank you for that and thank you for talking to us about your entrepreneurial venture. Best of luck to you!

Joe DiNardi: Thank you, Joe. It was great talking to you.

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