Journey to Multifamily Millions

Pets & Profits: Balancing Tenant Rights and Revenue in Real Estate with Logan Miller, Ep 77

January 04, 2024 Tim Season 1 Episode 77
Journey to Multifamily Millions
Pets & Profits: Balancing Tenant Rights and Revenue in Real Estate with Logan Miller, Ep 77
Show Notes Transcript

Today's guest is Logan Miller, He is the President and Co-Founder of Our Pet Policy a leading animal management software specializing in verifying emotional support animal documentation, detecting fraudulent ESA letters, and educating tenants about why they are not considered reliable. For apartment owners, this all leads to more pets paying pet rent.

This episode stresses the importance of understanding service animals and emotional support animals (ESAs) in housing. It highlights their protection under the Americans with Disabilities Act and Fair Housing Administration, exempting them from pet fees. The discussion also addresses issues with online-purchased ESA letters and how his company verifies their reliability. 

Logan offers advice on pet management, emphasizing thorough verification processes, mid-lease inspections, and a balanced approach to pet regulations for property owners and tenants. 

If you’re an owner or investor focused on increasing revenue while staying compliant with Fair Housing regulations, you won’t want to miss this episode!

Episode Topics

[00:57]  Meet our guest, Logan Miller
[02:03] Logan's Journey into the Rental Market
[05:14] The Challenges of Renting with Pets
[07:07] Understanding the Difference Between Emotional Support and Service Animals
[16:23] The Verification Process for Emotional Support Animals
[20:09]  The Financial Impact of Emotional Support Animals on Property Owners
[23:25] What is one red flag every investor should look out for?
[23:44] What is a myth about the real estate business?
[23:55] Connecting to Logan


Notable Quotes

  • "As a veteran, I had the VA loan at my disposal—0 percent down was a game-changer. House hacking, especially with a duplex, is an excellent way to start real estate investing." - Tim Little
  • "If they have documentation, we'll approve them all. Stories like that have made property managers say, 'If they have documentation, we'll approve them all.'" - Logan Miller
  • "There needs to be a healthcare professional that can verify this. It's about responsibility and ethics in approving assistance animals." - Logan Miller
  • "From an owner's perspective, my biggest concern would be whenever I hear fair housing especially, is liability, and ensuring that I'm treating everyone exactly the same across the board." - Tim Little
  • "Exempt from additional pet fees, emotional support animals and service animals provide financial benefits to property owners while maintaining tenant satisfaction." - Logan Miller
  • "Property owners need clarity on pet fees. Knowing exemptions for emotional support and service animals helps strike a balance between tenant satisfaction and financial viability." - Tim Little


Connect with  Logan Miller

              policy. support@ourpetpolicy.com

  • Telephone: (208) 906-8886

👉 Connect with Tim

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https://podcasts.apple.com/us/podcast/journey-to-multifamily-millions/id1634643497

[00:00:00] Logan Miller: So a service animal is a dog that has been trained to help alleviate symptoms of a disability. And, it's protected by the Americans with Disabilities Act and it's required to be allowed in all public places. And that's restaurants, stores, hotels. going to visit somebody at their house, et cetera. and then there are emotional support animals, and they're regulated by the Fair Housing Administration. And there are some exemptions to that.

[00:01:05] Tim Little: Hello everyone and welcome to the journey to multifamily millions. I'm your host founder and CEO of ZANA Investments Tim Little today We're going to be talking about something a little different something that's still very relevant to apartment owners Investors and tenants pets and the man who's going to help us break down that topic is Logan Miller Logan is the president and founder of Our Pet Policy, a leading animal management software specializing in verifying emotional support animal documentation, detecting online purchased ESA letters, and educating tenants about why they are not considered reliable. For apartment owners, this all leads to more pets paying pet rent. Logan, welcome to the show.

[00:01:49] Logan Miller: Hey, thanks, Tim. Glad to be here.

[00:01:52] Tim Little: Yeah, and it is great to have you. Like I said, this is an interesting topic. Before we dive too deep into that, I gave everyone a preview of your background, but I try not to give too much away. Please get in the details of how you got started on your journey and tell us how you got to where you are today.

[00:02:09] Logan Miller: Yeah. And so in the rental, residential rental, experience, As soon as I graduated from college, my first purchase was a duplex and that's how I got into the market. And, I was surprised at how many, and we were renting to, married college couples. And I was surprised at how many of them wanted pets and how many of them were willing to pay for it, at that point. and then fast forward several years later. We started to see an increased issue, especially around emotional support animals. In one property we had an older couple and they had two emotional support animals cats and their son moved in. He had two emotional support animal dogs. Dogs chase the cats. Cats would hide up on top of the cabinets. They destroyed the cabinets. They destroyed the doors, and the carpet. And, we ended up, 6, 000 out of pocket. and a lot of elbow grease. getting that back up to Where it should be. and at that point, we found out that the son had used an online purchased ESA letter and we're like, man, there's gotta be something out there that can flag these. And, so we searched and searched, there wasn't, we worked with several lawyers, came up with a. a way to,to be able to flag those and say, let the residents know, Hey, this isn't considered reliable documentation and found out, other property managers wanted access to that as well. And so I partnered up with my brother. He's had several tech startups. And, so he's the technology guru, and I had the methods to do it. And that's how our business got started.

[00:03:34] Tim Little: Awesome. So I want to go back to what you started with the purchase of a duplex, it's a real estate-focused show. So I'm going to ask you about any investment that you had, right? So was that first duplex, was that an intentional investment property, or was that a residence as well?

[00:03:55] Logan Miller: Yeah. So I lived in the top half and rented out the basement.

[00:04:00] Tim Little: Okay, nice. So you were doing the house hacking thing.

[00:04:02] Logan Miller: yep,

[00:04:03] Tim Little: Nice. And that's such a great way, I tell people, in terms of getting started, you don't necessarily need a ton of money, but if you can find yourself, a duplex or a triplex that's reasonable, that you can afford, harder to do nowadays, but back then, I would have recommended anyone to house hack, and it's one of the things that I kind of regret I didn't do, especially because as a veteran, I had the VA loan, Accessible to me, which means I could put 0 percent down, which is just huge because a lot of vets don't know that you can use a VA loan for a duplex, triplex, even up to a quadplex, and sometimes even get the rents to help qualify you for the purchase of that house. So I'm just curious, how did that investment wind up working out for you more generally?

[00:04:53] Logan Miller: yeah, no, fantastic investment, and yeah, back then things were way cheaper than they are now. but yeah, no, the rent that we collected paid for, the mortgage, insurance, everything. And so basically, you can look at it as rent-free. We took and just doubled the payment every month to help pay it off quicker and be able to grow another way. Yeah, and just, for the audience, pets are a huge part of this business And they may not understand that if they don't have pets themselves if they do have pets then they know if they've ever rented because and it comes down to what you have as well, right? so I had a 90-pound Doberman and even trying to find a place to rent was a challenge first of all, right because you have breed restrictions and say you can even find a place that will take Dobermans, then it's, oh, by weight.

[00:05:45] Tim Little: dogs only up to 30 pounds, and I'm like, That's a cat. That's not a dog as far as I'm concerned. so it was a challenge to find a place that would take dogs that big. and then you're paying a nonrefundable pet deposit. Then you're paying $30, 40 a month pet rent. And those costs really start to add up both for the tenant and for the owner as well, in terms of revenue. And so that's what we're going to dive into in a little bit. but you obviously as an entrepreneur saw this need in the market. Was it primarily those property managers that you thought would be the best, target audience, for this service?

[00:06:26] Logan Miller: yeah, so the end beneficiaries are going to be the owners, right? Cause the less damage, the less, the tenants that have a lot of damage, from these, and there's no way of recouping those expenses if you're, they're not paying for those pet fees. and, and being able to keep a tenant from coming in and saying, Hey, I have five emotional support animals, in this, one-bedroom apartment complex. if you don't have a way to curb that, you're going to end up with excess damage. You're going to end up more out of pocket and that ends up. ends up coming out of the owner's pocket, but then also is a headache for the property managers and they want to do as good a job for the owners as well. so we've been, it was the property managers more so requesting it. but on behalf of the owners as well.

[00:07:07] Tim Little: Yeah, and just so we can set a level, in terms of definitions, can you please break down the difference between an emotional support animal And an official service animal?

[00:07:20] Logan Miller: Yeah. Yeah. So a service animal is a dog that has been trained, to help alleviate, symptoms of a disability. And, it's protected by the Americans with Disabilities Act and it's required to be allowed in all public places. And that's restaurants, stores, hotels. going to visit somebody at their house, et cetera. and then there's emotional support animals, and they're regulated by the Fair Housing Administration. And there are some exemptions to that. And so when I had my duplex because I was living in half of it,I was exempt from that. And so when they requested to have an emotional support animal, I could let them know, hey, I, you, because I live in half of it, and this isn't a business, it was owned just under my personal name. I could say, I don't have to abide by those fair housing rules. And so what I did was, I said, hey, there's a 300 nonrefundable fee, to have your animal. And that goes towards excess, extra cleaning, and stuff when they move out. And they were all good with all the, and as I said, they're college couples, and they're willing to pay the fee to have their cat there for six months, which surprised me, but they did it. And, anyway, so that's the difference. and so emotional support animals only have rights, in, long-term housing. and, so hotels, there are some legalities about it like short-term housing. Is it their permanent housing at the time? Did they sell a house? They're living here for two weeks while they're moving to another house. So there are some gray areas there. but that's the difference. but when it comes to verifying those animals. For service animals, they're broken down into two categories. They're broken down into ones, tenants that have observable disabilities and tenants that have non-observable disabilities. And so if they have a non-observable disability, you can verify that animal in the same method that you verify emotional support animals. If it's an, if it's a visible or an obvious disability, a blind icing dog, a dog that pulls a wheelchair, et cetera, then there's no reason to verify it at that point.

[00:09:14] Tim Little: Yeah. And that makes a lot of sense. I've had tenants, who are, under the VA program, And PTSD, which is a nonvisible thing. but those were still legitimate service dogs, and I had to take that into account. Totally. Okay with that. From an owner's perspective, my biggest concern would be whenever I hear fair housing, especially liability, and ensuring that I'm treating everyone exactly the same across the board. So do you find that a lot of property management companies have a standard rule, set into their Absolutely? Their, lease, and if not, I imagine that's something that you recommend.

[00:09:54] Logan Miller: Yeah. Yeah. So every property should have a process for that when it's requested. And we've interviewed people where they hired a new property manager. The property manager knew it had a no pets policy. And Fair Housing, they do sting operations and so they called, acting like a potential tenant, and said, Hey, I'm interested, asked some questions, and said, I have a dog. And he says this is a no pets policy. There's another apartment complex that allows pets and they're like, oh, actually, it's an emotional support animal. And he still referred, Hey, they have some dog amenities. You had to go apply over here. And five different times, he referenced that, Hey, they shouldn't apply. They should do something different. And, anyway, the Department of justice came back and sued them. They started out at something crazy, like 240, 000 because they took each time,, each time that he had said no and compounded it. So every time it happens, it gets bigger and bigger. they ended up settling for 62, 000, out of pocket for that owner. and anyways, and it's stories like that have made property managers just say, Hey. if they have documentation, we'll approve them all. And that's what led to this problem of these online websites being able to sell documentation because everyone's accepting it because, if they don't have a good way to verify it, they'd rather accept it than not accept it because of that liability.

[00:11:14] Tim Little: Okay, now that makes sense. And I guess my question is, who does certify it? is there an organization, is there multiple organizations that can, say, Yea, verily, this cat provides emotional support? Whatever the case may be.

[00:11:30] Logan Miller: Yeah, so for emotional support animals and even those, non-observable, service animals, It needs to be a healthcare professional. a licensed healthcare professional that could be a social worker, a counselor, a doctor, or a nurse. Anyways, we've even seen some from an eye doctor, which seemed interesting. but anyway, so a licensed healthcare professional. And to that point, it's someone that can be held responsible for. they have ethics, they have to follow, et cetera. And, so anyone can write them, but there is no registration service. but there are companies out there that will say, Hey, come register your animal here and you get a card, an official card, and they make it seem like there is an official registry. And so they sell these, but it's all self-reported. So for 50, I can go add a picture of my pet, call it a service animal, and there's no verification process. And so those documents, tenants feel like they should be legitimate and they'll turn them in and it's, and so it's part of that's just educating them, letting them know, Hey, there needs to be a healthcare professional that can verify this.

[00:12:31] Tim Little: Okay, and that makes sense, because then, like you said, you can refer to that. Health care professionals if there are any additional questions or just hold them responsible I guess there are any guidelines when it comes to species? because I've heard crazy stories about oh, this is my emotional support bow constrictor This is my you know, emotional support alpaca Whatever. It's just like all over the board. Is there any standard for the species of pets that qualify for either one of these? categories

[00:13:06] Logan Miller: Yeah. And common household pets, and so you're, which, cats and dogs are the most common, but that also covers, A rabbit, hamsters, et cetera. And so they have a list of them in the HUD guidelines, but it specifically excludes farm animals. And pot belly pigs, peacocks, you see some of those, those are all excluded from it and not allowed, in some circumstances they can request to have an exotic animal. And so we've seen. like a ball python, isn't listed in those common households on pets, but they are commonly sold at pet stores to be in a, and so there are some of those that, you can follow up with the healthcare professional and say, Hey, is there a specific reason that this specific type of animal needs to be used? And if they confirm that it is, there can be a reasonable way for him to have it. in the unit, then, then you do need to work that out,

 

[00:14:27] Tim Little: Yeah, and so I keyed in on that. There are HUD guidelines associated with this. Is that right?

[00:14:33] Logan Miller: correct? Yep. In 2020, they came out with some guidelines. What was interesting? So the airline industry started tracking it really well, the number of emotional support animals and flying on airplanes and the issues that were causing. And it started all the way back in 2012. And so there were under a quarter million emotional support animals flying every year. And then these online websites come on and start selling all these letters, for, hey, 49, you can purchase this letter. It'll work well for your airline. We're good for housing. or they'd sell them separately, right? Hey, 49 for, airline, 49 for housing, or buy them both together for 80, right? And they're all based on, basically a questionnaire. And then some of them will have a short interview. To try and make it seem more legitimate, but in 2019, it got to where there were over a million of these flying on airlines and causing lots of problems where the airline industry came out and said, Hey, no more of this is out of hand. We can't stop the fraud and they shut it down. So even people with legitimate needs for an emotional support animal to deal with the anxiety of flying couldn't have them. And The fraud ruined it for everybody else. And HUD, I think, saw the writing on the wall. So in 2020, they came out with these guidelines saying. Hey, here are some guidelines when it comes to emotional support animals. And they put a thing in there about documentation being purchased online and how, if it is based on, it's a website advertising them for sale and it's based on a short, on a questionnaire and or short interview that by itself isn't considered reliable information. And so that's where we can go in and say, Hey, we can prove that this was purchased from a website that was advertising these ESA letters. Based on a questionnaire and or short interview that's not considered reliable by itself. Do you have reliable documentation? that we can put on file to approve this request? Otherwise, it needs to be considered a pet.

[00:16:21] Tim Little: All right. No, that's good context. So please walk me through, in practical terms What your service looks like from start to finish when a property manager calls you up and says I'm having You know issues or concerns associated with These people and their pets, etc. What do you come in and do? And walk us through an example of, say, one tenant whom they had a specific concern about and what actions you took, and what the resolution is at the end of that,

[00:16:53] Logan Miller: Yeah, and so what we do is we'll get set up On all the properties or all the units and so as soon as an applicant comes in through their application process, and they'll just, we make sure that they disclose whether they have an animal or not, whether their roommates have an animal or not. And any of those animals, we collect all the information, the picture, the breed, the weight, and the rabies record. And if it's an assistance animal, we collect that documentation and we verify it and we let the resident know, here's why it is considered reliable, or that it is considered reliable, or here are the specific reasons why it's not considered reliable. And we're having that communication with the resident and so we take on that liability. And anyway, so basically we get to protect those property managers, at that point from making the wrong decision, right? And anyway, so we let them know, hey, it needs to be converted to a pet or, it is a legitimate emotional support animal. We have it all documented and it's transparent to where the property manager can go on there and they can see where we verified it with the healthcare professional, and the methods that we used to verify it. and so it's 100 percent transparent that, oh, this definitely is legitimate or, we've explained the reasons why it wasn't legitimate.

[00:18:01] Tim Little: right? And I guess, does the tenant or potential tenant have recourse at that point? say, if they found out maybe even unknowingly that, the documents they got are not legit. They can now go ahead and get legit documentation from a healthcare professional so that they don't lose, potentially, that spot.

[00:18:24] Logan Miller: Yeah. Yeah. And so if they have a, and we let them know it needs to come from a healthcare professional, that's worked with them and, in their disability, And they can provide a reliable, reliable treatment option. And so if they have a health care professional that has done that, and some of them, and there are, a certain percentage of the tenants that do purchase the online documentation, they did it because they weren't scheduled to go in, get into their health care provider. sooner than later and they needed it for that, and so they're like, oh, I'll go do this other option since it's easier. And so we do have some of those that will provide reliable documentation. And once they realize that the online documentation isn't legitimate, yes, we walk them through it. Here's what's considered reliable documentation. And if you have reliable documentation, we can put it on file. If not, it needs to be considered a pet until there is reliable documentation.

[00:19:12] Tim Little: Alright, and what is the cost structure associated with this? Is this a monthly service for the property managers or is this a case-by-case basis?

[00:19:23] Logan Miller: Yeah, so we have several different options. There's one where the tenants with pets can pay a subscription fee for using our software. and then there's a small fee for the property. or there are ones where, especially with multi-family properties, the property will absorb the whole cost. not add an extra layer of fees to the tenants. But as long as you're charging a pet fee and you don't have really restrictive breed restrictions, like you were saying, a 30-pound weight limit is going to restrict 75 percent of the dogs coming into the property, right? And so we'd be turning more of them away than we would be converting them to pets. As long as your breed restrictions aren't restrictive, we'll guarantee a return on investment. And we'll be able to prove to you that we're making more money than we're costing, or we'll dial our price down until, until we are showing, Hey, you're doubling your money here.

[00:20:09] Tim Little: Yeah, and I guess that's where I come in again from the owner's side. How big of a problem is this and, how much of a return can property owners expect to earn from this? Because I get what you're saying about, not wanting to pat, you don't want to nickel and dime tenants, right? Because that's just going to turn them away. They're going to, they're going to be like, okay, I'll go check out another place. So if you have, a pet, pet rent, pet fee, and pet verification fee on top of that, a plus there. the application fee eventually is going to be like, I'm done. I'm going somewhere else. So how do you often see it being implemented by the owners? And, how much of a financial benefit do you see owners really getting from this problem?

[00:20:55] Logan Miller: Yeah. And, so it does go back, like I was saying to, which animals you do allow, the more restrictive you are, the less financial impact you're going to see, increase. but yeah, so we have properties that before we rolled out on. they'll have three times as many emotional support animals as they do pets paying the fees, right? As far as reliability goes Nationwide we see less than 50 percent of all emotional support animal requests are reliable. The larger majority of them are being purchased online. Some of them are submitting documentation that's a couple of years old, and when we follow up with the healthcare professional, they say, no, this documentation is too old. Don't consider it reliable. They would need a reevaluation. Anyway, there are several things in there that would cause it not to be reliable, but we're seeing it, somewhere between 40 and 43%. depending, on, the size that we pulled from that. but that's what we're seeing currently as far as being reliable with that, six, 57 to 60%, being not reliable.

[00:21:56] Tim Little: Yeah. And I guess just clarification for me. So if someone has either, an emotional support animal or a service animal. Are they one or both of those exempt from additional pet fees?

[00:22:10] Logan Miller: Yeah. So both of them are exempt from pet fees. whether that's a pet deposit a monthly pet rent or a non-refundable fee, they're exempt from all of those. You still can collect damages from it, right? So if you do a mid-lease inspection. that they've created damage and this goes back to having a good, really good property management, company. one thing I think, your listeners will find intriguing. So we were trying to find data on how much pet damage occurs and most properties just lump it in with damage, right? And so they don't separate that damage from tenant damage. but we found 90 different companies that have what's called a pet guarantee. To where the property managers keep some of that pet rent in exchange for guaranteeing that if there is damage above and beyond the security deposit, they'll cover 1, 500 of it, 2, 500 of it, 5, 000 of it. and so we went and, and pulled their information and said, Hey, out of the last two years, how many times have you had to pay out on this? How much did you have to pay out? And how many animals do you have enrolled in your pet guarantee? And we found some that had 300 pets enrolled in their pet guarantee, and in the last six years, had never paid out on it. And we all know that there's pet damage, right? And so we were like, hey, what's your secret sauce here? And they said really good mid-lease inspections. And when they do find damage, they get it quoted immediately and they give the tenant an option to say, do you want to pay for it all now and fix it now? Or do you want to increase your security deposit, until your lease is ready to renew to where it can be fixed then and we have that pool of money sitting there to do And because they're doing that, they'd never had excessive, pet damage in that regard. And it never had to pay out on it.

[00:23:52] Tim Little: Interesting. Yeah, I, obviously, like I said, can attest to the damage that pets are capable of doing, but I think the big highlight there is that, I probably should have questioned at the beginning of the show that you cannot charge pet rent or pet deposits to emotional support animals. Or, service animals, because that's a huge piece right there. Okay, hey, we do have to transition to the turbo round now, so get ready for that.

[00:24:20] Logan Miller: Okay.

[00:24:21] Tim Little: I'm gonna ask you three questions that I ask every guest I have on the show, and I just ask for a quick, honest answer. Are you ready?

[00:24:28] Logan Miller: Ready?

[00:24:29] Tim Little: All right. First one. What is one red flag every investor should look out for?

[00:24:34] Logan Miller: yeah. When it's too good to be true. Yeah. The,

[00:24:38] Tim Little: we hear that a lot. All right. I absolutely agree with you. and I've probably been a victim of that myself. but yeah, it's too good to be true. It probably is. alright. What is a myth about this business that you would like to set straight?

[00:24:54] Logan Miller: Like a lot. So we find companies with 90-plus thousand units that aren't verifying these ESA letters because they don't feel it's worth their time. And so one thing we've gotten down and proven, especially in a multifamily property. It's definitely worth your time, right? And so we're able to show those returns on investments and the money gained from that. And so I'd say that's the biggest myth,, in my industry anyway.

[00:25:17] Tim Little: Yeah, no, that makes total sense. Alright, final question. What does success look like to you?

[00:25:24] Logan Miller: Yeah, the amount of input or the amount of effort, put in, is a lot less, than the benefits that you get out of it or the reward that comes from it. And so whatever you're doing, I look at those two and that will determine the success.

[00:25:38] Tim Little: Okay, yeah, we haven't heard that one before. Nice. Alright, hey Logan, this has been really interesting. I think you probably dropped some knowledge bombs on some owners and tenants. who just hasn't really heard this topic discussed before, right? Please tell our listeners how they can get a hold of you, and if there's anything else that you'd like to share with them.

[00:25:58] Logan Miller: Yeah, reach out to us, at our pet policy. support@ourpetpolicy.com or my personal email is logan@ourpetpolicy.com. You can find me on LinkedIn as well. And, anyway, I'd love talking to pets. I love hearing other people's stories and looking at the data. So I'm a numbers-driven person. Anyway, I appreciate you having me on here, Tim, and asking great questions. And yeah, I feel like, hopefully, your listeners get a lot of good value out of this.

[00:26:25] Tim Little: Yeah, they definitely will. we'll have all that information in the show notes, so they can get a hold of you. I appreciate you coming on, and I definitely look forward to continuing to see you do big things on your journey.

[00:26:37] Logan Miller: And same for you, Tim. Thank you.

[00:26:40] Tim Little: Alright, have a good one.

[00:26:41] Logan Miller: You do.