Apartment Investing Lessons: Bad Management, 87% Vacancy, and a Full Recovery

Micah Haworth (00:00)
Our vacancy went all the way up to eighty-seven percent vacancy. Insane amount, which is when, you know, right around when we fired him. And he kept on calling me. He’s like, man, you know, I’ve never had issues so many issues with turning units. And so one of my partners went to swing by the place, and it turns out that he had several tenants who he who had dogs and they would defecate in the units and he wouldn’t, you know, give him no notice to clean it up or vacate all the sort of stuff. And because of that, when my partner went and walked through the the building, it smelled like urine. It smelled like poop.

Meghan Escobar (02:10)
Hello, everyone. Welcome back to the show, *Real Estate Pros Podcast*. I am your host, Meghan Escobar, and today I have the pleasure of sitting down with a pretty incredible guest, Micah Haworth. And I’ve been looking forward to this conversation. He’s got a lot going on and he’s got a unique perspective at the way he is inserting himself into the property management world. He’s also has he also has a background as an investor in a couple of units here. And so I think our audience will walk away with some great insights from your journey and the way that you’ve built your business. So, thank you so much for taking the time to be here with us, Micah.

Micah Haworth (02:48)
Well, I’m happy to be here.

Meghan Escobar (02:50)
Absolutely. So let’s go ahead and dive in. First and foremost, for those people out there that are listening in and they might not be familiar with your world, like what a property manager does or what an investor is, in a 30,000-foot view, what is your main focus these days and what markets are you operating in?

Micah Haworth (03:09)
My main fo—focus is purchasing multifamily real estate and then managing multifamily real estate in the Des Moines metro market. So and anything around within about an hour of the Des Moines Metro is kind of within my buy box. I look for properties that have some value-add need. I do a lot of capital raising. So I’m a part of a couple of syndicated deals and looking at doing a little bit more of that. And also just looking at some doing some JV deals. So the kind of the big difference there is kind of size and scale of how many investors you have. My preference is grab a deal, a smaller deal with a couple of investors and dive into it. Similar to I have about a 12-unit that I I’m currently a part of, but I also have a 60-unit hotel that I’m also a part of. And I I I really do enjoy kind of the working with just a handful of investors on the smaller deals. It’s a much close close-knit group of individuals and it’s something I really enjoy working with.

Meghan Escobar (04:01)
Thank you for sharing that. You know, one thing that really caught my attention was something you mentioned prior to hopping in here. You know what to look for, you know how to execute, and you know how to underwrite. So I think all of those things are really important, but they’re not easy, you know, especially in the climate that that we’re in. So what do you feel has been the key to keeping your machine running smoothly?

Micah Haworth (04:32)
Just my underwriting or and kinda getting these new deals under contract or what?

Meghan Escobar (04:38)
And just and in general, like what what what gives you that I guess that passion for creating these these deals, creating these relationships and you know, making sure that the deal that you’re getting into is going to benefit you.

Micah Haworth (05:47)
Like the the passion behind it is just pursuing financial freedom and independence. It’s just what that desire that got me into wanting to invest in real estate. in 2020 I worked in live events and I still do some work in live event lighting and concerts. And I did that during COVID and I had a full-time job and COVID the company I was with downsized and I was part of that downsizing and it was one of those things where I thought I had it made. And I realized I needed kind of multiple pillars of wealth. And so each of these properties that we’re looking at buying is a pillar of wealth or pillar of income that I’m able to rely on when times are tough. Maybe if one of them falls down, that’s okay because I have multiple. And that that’s definitely how I’ve kind of changed the way I I see things of building rather than just having one pillar of the W-2, you have multiple pillars. And each of these properties I look at, you look at things that are stable, you’ll think look things are long term. I don’t like looking for deals that you have to get out of in five years. I like looking at deals I want to buy and hold for a long period of time. Because I want to continue to build on those those streams of passive income. And then I personally think the best benefits of real estate come by holding it for the long term when it comes to fixing your current costs. You’re fixing that acquisition price, you’re fixing those debt costs and then being able to pay it off over the long term. Not everyone’s super into paying off their real estate, but for me, when I retire, you know, later in life, I would like to have some paid-off real estate. That’s kind of the goal. And and that way it keeps kind of that network a little bit s little smaller. So my responsibilities are a little bit smaller rather than having five thousand units. That sounds incredibly stressful. I know I only have eighty-three units currently and and that that’s already starting to get like, dang, that’s a lot of stuff. I gotta keep track of a lot of things. And so being able to be more efficient with the units that I have and the money it creates. So that’s definitely something I look for.

Meghan Escobar (07:46)
Nice. Thanks for sharing that. And you know, every operator and an entrepreneur that I know and have had the opportunity to sit and chat with there’s always a moment where or many moments, but there’s always usually one highlight moment where things got real for them. You know, maybe that is a deal that went sideways or a time that they had to pivot really fast. And I think maybe this is a piece of you that forced you to get into and and create the Grassroots Property Management company. But would you personally, Micah, like to share one of those moments for you?

Micah Haworth (08:23)
So like for me, one of the things that kind of really pushed me as far as making Grassroots was this first 12-unit deal. So in 2023, I purchased a twelve-unit apartment building with two other partners. And we all kind of put in the same amount of money, jumped into it together, super excited about it. And we hired a third-party property manager company. So this this property is located outside of Des Moines, and that at this time I was actually living in Minneapolis. And so I hired a third party. Obviously I’m not there to manage it. And that that that company opened my eyes to kind of how bad it can get. This guy just doesn’t didn’t use any consistent systems when it came to his turnover process for rent collection. You know, he d he doesn’t he does everything by hand with checks, you know, he he didn’t set any of our tenants up for ACH automatic withdrawals or anything like that. And so delinquencies, as you can imagine, were always a problem. And then when turnover came around, the turnover didn’t happen. And so our vacancy went all the way up to eighty-seven percent vacancy. Insane amount, which is when, you know, right around when we fired him. And he kept on calling me. He’s like, man, you know, I’ve never had issues so many issues with turning units. And so one of my partners went to swing by the place, and it turns out that he had several tenants who he who had dogs and they would defecate in the units and he wouldn’t, you know, give him no notice to clean it up or vacate all the sort of stuff. And because of that, when my partner went and walked through the the building, it smelled like urine. It smelled like poop. And I was like, dude, this I don’t consider myself a genius here, but holy mackerel man, like I’ll tell you why you can’t lease these units out because it smells like crap. It wasn’t an eighty-seven percent the moment he left, but a couple of those tenants we had to vacate. And so it dropped it all the way down. And so there was a period of time where I was working and paying the mortgage and then now we’ve gotten all the way back up to fully occupied. Wow. And now and the last we fired him, took over self-management, I guess you would call it. And gotten to the point where the last three turnovers we had, we’ve been vacant for less than seven days. And that’s basically the amount of time it takes for me or the handyman to go in there and repair the unit and clean it and lease it to the next person. Like we just turn those babies. Don’t let the vacancies

Meghan Escobar (11:24)
Getting yourself out of that hole. Yeah. And and just to just for my understanding and in the audience to understand now, this is a unit that you it’s a JV, is that correct? Yeah. And so now you’re a sole prop when it comes to the Grassroots Property Management, right? So now Is it is it safe to say that you’re getting an extra piece of the pie because you’re managing the property and so you’re taking kind of that venture on also as one of the investors? So you’re kind of getting to double dip there.

Micah Haworth (12:01)
And that’s kind of what I like too. That’s why I talked about like I like being efficient with the units I have. You know, because a unit, as soon as I buy it, it’s it’s takes up some mind space, you know, in the back of my mind. And so being able to be efficient with how much money I make from those deals, and you know, I’m in a point I want to be full-time real estate. I currently do contract lighting work still for live events and concerts. And so now trying to roll up third-party property management and leasing myself out to other people. That’s where I’m trying to just go full time into it. And so with with that, like in even doing like syndicated deals. So say if I bought a deal, another deal with some a couple more partners, I’m able to, yes, I make my cut, I typically get maybe a 30% of the property, but then on top of that, I get an eight percent management fee every single month. And this this way I I know that the property is managed well because I’m physically there, I’m looking at it, you know, I’m I’m working on it. And then on top of that, then I get my rental income. And so it’s it’s it’s so good for me because I’m able to spend that full time on it. I’m taking care of my family with a with a regular paycheck, but then I’m also taking care of our future by keeping like a hands-on eye on these assets.

Meghan Escobar (13:11)
Yeah. It’s incredible stuff. So and and and also thank you for sharing that that horror story with us. I think that’s the kind of stuff that people don’t talk about enough, when it comes to entrepreneurship and being an operator. And honestly, it is what separates the folks who are here to just dabble and create a quick transaction or a quick turnover. To those who are here in the game long term. And Micah, it seems through your story and your share here that you’re in this for the long run. Is that safe to say?

Micah Haworth (13:43)
Yeah. Yeah, I’m building up my whole life around it.

Meghan Escobar (13:47)
Nice. So let me ask you this. What are you most focused on scaling next? Like what is the next real big goal for Micah Haworth, Grassroots Property Management and your investments?

Micah Haworth (14:00)
My my next step right now is we’re trying to get up to eighty units under management. So I currently own eighty-three units, but I currently manage through Grassroots. I manage my twelve-unit that we just took on an eight-unit apartment building and then we have a 20-house HOA community that we manage. And so trying to get that management portfolio all the way up to 80 is a goal and cause and for me that’s like an earmark of going full time. And then after that point it’s growing it to probably around two hundred would be the near end goal. That way we can take on some of those larger projects, have a full staff that you can offer great benefits to, PTO and such, and so we can help cover each other’s backs. That would be the goal.

Meghan Escobar (14:46)
Nice. Sounds huge.

Micah Haworth (14:48)
Yeah. It’s multistep, you know. Eighty units is the first step, then we can go to the other ones. The nice thing is and I I the only deadline I have is I actually have a my second baby is being born at the end of the year. We’re really going after my wife wants to go part-time and so trying to get that put together. So this is something that I can use to provide for my family. And growing that portfolio is a two-part process. One getting third party management and then two, buying my own real estate. I’m currently under contract on an eleven-unit apartment building here in Des Moines to purchase. We actually just had our property inspection today, so I’m hoping to review that report here this afternoon.

Meghan Escobar (16:12)
Incredible stuff. Congratulations on the baby. Congratulations on the the the goals. You seem like someone who’s determined to to reach them. So, you know, it sounds like the next move that you have going on here is really going to help you compound things, maybe create some chaos in between, depending on, you know, how it’s played. But just preparing yourself for all of it.

Micah Haworth (16:35)
Here to solve problems, you know. I I make that joke. I have some coworkers who work in the live event lighting industry. And so this is a very technical field. And when little issues come up with the rig, where like you know, there’s little technical problems, they get frustrated. And I’m like, I I’m I’m relieved that there’s problems. You know why? Because if there weren’t any problems, I wouldn’t have a job. And so that’s that’s my my goal is to pro I I’d solve problems in lighting. I’m now solving problems in real estate. It’s the same thing.

Meghan Escobar (17:03)
Well, that says a lot about who you are as a person. So thank you for sharing that. It’s an incredible perspective. And I think some of our listeners will be writing that down as some nuggets are dropping here. So I know a lot of our a lot of our audience, they’re, you know, very early on in their journey or they’ve been in the game for a while and they’re looking to level up, create some new opportunities. And I really think that they would benefit from hearing this, you know. When it comes to building relationships, Micah, and growing your network, what has made the biggest difference for you?

Micah Haworth (17:39)
Consistency. So with when it comes to like, so I I attend a networking event here in locally in Des Moines. And I when I was lived in Minneapolis, I attended one up there. And really the biggest traction came like after the first year of where these are guys I’ve been and girls who I’ve been seeing every other week or once a month or however whatever the consistency of the event is. And so you’re seeing them on a regular basis. You’re all doing the deals, you’re all doing various different things. You know, we’re not all of us were in the same niches, but we’re we have a consistent consistency over a long period of time to what where that they know now that you’re not this isn’t a fling for you. You know, you see a lot of people come and go at those events. And so the people you just see stick around and continue to be consistent. And then on top of that, if you start working with those individuals, them following through on what they’re going to do. Those are going to be the biggest things. And there’s plenty of people who I’ve met And it seemed great after the first year or so, but then there are plenty of partners I’ve worked with where even after the long term, then they just don’t follow through. And so if you could be consistent over an extended period of time, this is not the exciting answer, but if you can be consistent over a extended period of time, that is where you’re really gonna start reaping the rewards where people are gonna really start trusting you because they’ve seen you follow through. And that follow through does not have to be you know, buying a deal or whatever, it is in every little aspect of your guys’ relationship, whether it’s showing up on time or it’s being able to consistently, you know, say if you’re a wholesale, you’re you’re providing them deals. Or say you’re gonna partner with them that you’re able to raise the capital you said you’re gonna raise. There’s a lot of different aspects of that. And then I think so be consistent and then with with that you choose that niche, you choose the way you want to provide value, you keep doing that. And that that’s how you’re gonna become better at it. You know, I wasn’t great at underwriting multifamily real estate when I first got started. But you know, three hundred-plus deals later, when it comes to underwrit—underwriting, you you start to get pretty darn familiar with of what you’re looking at. And so an anything over extended

Meghan Escobar (19:47)
Practice does create some perfection.

Micah Haworth (19:49)
Hundred percent. Hundred percent. I and I’m still perfecting it, you know. Like I I I you know, there’s so much I don’t know about underwriting real estate and and even just some some of the stuff local to the Des Moines market, just ’cause I I only have the one property here. And so just ex—excited to continue to learn about that so that I can then communicate that value, communicate that knowledge on my next deal when it comes to underwriting the next property. Being able to hone down exactly what that vacancy vacancy rate is gonna be hunting down exactly how much that lawn care costs, all that sort of stuff. That’s all gonna be key.

Meghan Escobar (20:25)
Yeah, absolutely. Getting down to the nitty gritty. And and you know you you mentioned being a part of a mastermind group. And do you feel, you know, being in rooms like that is is beneficial for, you know, connecting with people who might have the experience that you don’t?

Micah Haworth (20:41)
I was just looking at a deal the other day underwriting a potential hotel conversion project, which is much bigger than I’ve ever looked at. I do own a hotel, but this would be converting it to apartment building. I don’t know really what I’m doing here. And I brought it up our mastermind and one of the other guys in the mastermind, guess what his niche is? Hotel conversions. That’s all he does. And so being able I was able to pull him aside and ask him some questions on on a separate Zoom call. It was fantastic. He was super helpful, super great. And you know, I ended up not choosing not to do it, but he he gave me the right tools in order to make that decision. And and now I’m making it knowing that hey, this is this is a bad deal. Just being able to know exactly what that cost per unit is supposed to be, what those holding costs are gonna be, and he was able to guide me the right way. But like that that’s a great example of just being in those groups is fantastic. Typically you can, you know, with the quality groups too, you can send a message saying, Hey, I need X, Y, and Z, or I’m looking at the X, Y, and Z, and somebody has had some experience in

Meghan Escobar (21:43)
A hundred percent. And you know, relationships are everything in this space. It’s something you you just can’t fake. For sure. Micah, before we wrap here, if somebody wanted to reach out to you, connect with you, potentially collab with you, maybe create some JVs or syndications, like learn more about whatever it is that you’re doing, what would be the best way for them to reach you? Is that through email, phone, social?

Micah Haworth (21:50)
So, you can reach out to me at my website. It’s grassroots-pm.com. You can also reach out to me on Instagram, @micahhaworth—the Haworth with no Y. But yeah, any either of those would be a great way just to reach out. I’m also on LinkedIn as well.

Meghan Escobar (22:24)
Perfect. All right. And you know, I really appreciate your time, Micah. I appreciate your story and more importantly, your perspective. I truly believe that the people listening in are gonna be able to take some nuggets out of this show today. So we need more people in this space who are doing things the right way and and just being genuine. So thank you again so much for being here. I really appreciate your time. And for those of you that are tuning in, if you did get any value from this. Please be sure to hit like and subscribe. We’ve got more conversations coming in just like this with operators who are out here creating real businesses in real time with real people. We will see you on the next episode.