Podcast Host / Interviewer (8:39)

Renters in good shape, if there's any.

Jay Parsons (8:41)

Impact from slowing job growth and weaker consumer confidence appears to be on the new lease side. And then prospective renters being more cautious. We hear quite the same tones from the SFR REITs, but certainly on the current renter side that seems to be the case on both sides. Invitation said that bad debt, which reflects unpaid rent was down 20bps. Tim Loebner there at Invitation said our customer is very healthy from a financial standpoint. And then CEO Dallas Tanner, he added this. He said we're not seeing any degradation to our customer. Our FICO scores look great from where our customers are coming in. Our rent collections and our bad debt are exactly where we wanted them to be. Our collections have actually been quite better than what we've seen historically. So there's nothing in the customer profile in our current customer base that suggests big changes are on the horizon. And then at amh, they didn't give this topic as much attention on the earnings call, but they did just address this in September at a BOA securities real estate conference. And so that was, you know, end of Q3, obviously. But at the time AMH, AMH's Lincoln Palmer said this, he said residents are coming to the platform. The still have strong incomes north of $150,000, five times multiples on rent. Two income earners. Residents are coming in with still high incomes. Credit scores are not suffering. All right, so good news from all the reads on this topic. Renter incomes are of course still up. Renters are still paying the rent. Renters in good standing are renewing their leases. We're not seeing a lot of lease breaks because of job loss. And of course, you know, it's worth noting that the REITs, both SFR and Multifamily, are generally catering to middle and upper income renters. If we do see cracking, it's more likely to be at the lower end of the market. And class C and more affordable housing, there's more price sensitivity in that part of the market. Of course, we don't have a lot of data on that part of the market around this topic, but that's where I would expect to see it happen first. And that is something to watch. Now of course, in all fairness, you know, obviously we're being fairly optimistic here, but if the job market stays weak, that's going to put pressure on all consumers at some point, whether homeowners or renters, you know, class A, class B, class C. And so we'll see how this plays out. Hopefully the job market picks up. All right, number three, REITs keep building, but are not buyers of existing housing at today's prices. Okay, so anybody listening to this podcast for more than a few episodes, you probably already know that this has been true for a while, despite all the conventional thinking and headlines on this topic. So you're not gonna be surprised by this. But still some interesting numbers to share here. AMH said they're on Track to deliver 2,300 new BTR homes this year, much of that funded through dispositions selling older properties to a group that SFR players like to call quote end users, AKA individual home buyers, owner, occupants. AMH reported some positive trends on their dispositions. This may be a little bit of a surprise. Brian Smith said despite the headlines of a slowdown in MLS activity, we continue to see great success selling nearly 1,200 homes to end user home buyers year to date. This enables us to accretively deploy disposition proceeds into development, driving residential leading earnings contribution outside of our same home pool while also continuing to improve the quality of our portfolio. All right, so Brian said AMH expects to do similar numbers in 2026. He said they're actively looking at thousands of assets each month across our markets, but bid ask spreads are still too wide considering the current cost of capital. So again, a lot of new construction, but maybe not a lot of buying activity of existing single family homes and existing single A rental homes. So what he's saying is that, you know, a lot of talk about being home homebuyers being priced out of the market. Brian's basically saying even the REITs are basically priced out of the market right now for existing single family homes. You know, both AMH and Invitation, a lot of other institutions by the way, have been net sellers of existing homes in recent years. Brian was also asked for the potential to acquire smaller SFR portfolios and he offered up some interesting color building upon something he shared when he was on this podcast a few months ago on the rent roll. But he said this in the earnings call. He said, I think there's still a little bit of a disconnect with owners expecting to be able to get end user homeowner pricing in terms of their market value expectations. So we haven't seen a lot of changes there. What we've looked at is generally characterized by high 4 caps, maybe 5 at best. But there still is a little bit of a gap between their pricing and what would need what we would need to be able to achieve anything at scale. So he's basically saying that smaller SFR operators are not wanting to sell at a discount even for these bulk purchases. And then an Invitation. Dallas Tanner and Scott Eidson made pretty similar comments. Dallas talked about how Invitation continues to recycle capital, selling older homes, reinvesting the capital into new construction, which for Invitation means buying from home builders. Dallas said this. He said, I feel comfortable saying that our disposition strategy where we can continue to sell homes between a 4% and a 4 and a half percent cap rate and accretively reinvest either into share buybacks or new acquisitions that are in the call it 6% cap range with really good revenue growth profiles in front of them, will continue to be accretive to create shareholder value. And then CIO Scott Eisen and of course another shameless plug. Scott was just on this podcast as well. You could find that in in the archives. Here's what he said on the earnings calls. He said, it's been widely reported the home builders have had a lot of inventory and they've been trying to sell homes, have deliveries in 30 days. And so I think for us it's been a great opportunistic way for us to not only pick up homes at a 20 plus percent discount to market value, but also get a home for almost immediate delivery that we can put into the market and hopefully get leased within 60, 90 days. So invitations trying to be opportunistic as well, which again, selling older properties, buying new ones and while are not seeing opportunities, buying from the REITs, aren't seeing opportunities to buy existing SFR portfolios. Invitation did mention their opportunities to buy from home builders. All right, takeaway number four from the SFR REITs. REITs are looking to buy back some stock. Okay, so this was a big topic for the apartment REITs as well. No one likes to see their stock trading at 10, 20, 30% discounts versus net asset value. So when your stock collectively is worth less than the sum of the parts, it gets more attractive to buy back stock at a perceived discount. So, you know, and plus, of course, investors, you know, investors like to see, they see it as a positive signal when you're putting your money where your mouth is and buying back stock. Invitation announced its board had authorized a stock repurchase program up to $500 million. Dallas Tanner said, quote, we certainly want to be this to be one of the tools in our tool belt if the stock price is going to stay in these ranges for some period of time. So we'll obviously look for opportunities to use it. And then he said this, he has some good color. He said, we've been obviously as frustrated as probably most of our residential peers have been in terms of the dislocation between public values and private values. We're certainly seeing private transactions trade at a much lower implied cap rate than where the public market valuations sit today. But we've been in this business long enough and in and around real estate long enough to know that there are cycles to it and sometimes things don't make sense, especially in the public space. And so we keep our heads down and we'll keep recycling capital in a way that's meaningful. And over at amh, they said they're considering buybacks, but also called it a double edged sword. Their cfo, Chris Lau, he said stock buybacks are definitely something that we're watching very closely with. That said, we are mindful that stock buybacks could be a little bit of a double edged sword as we think about that in terms of increasing leverage and then reducing future capacity to create value through incremental growth. But look at the right levels, buyback definitely makes sense. I'd remind you that we have had an active share repurchase program already in place. We've been active on it for years past at the right levels. All right, so we'll see where all the REITs go with this, both apartment and SFR in coming months and where the stock prices go as well. All right, takeaway number five from the SFR REITs earnings calls. REITs are cautiously optimistic about 2026. All right, so this is another repeat of what we heard from the multifamily REITs. Again, probably no surprise, I'm sure you think, well, of course they're going to say that, Jay, but nonetheless, it's worthwhile to understand their rationale at amh. The amh, their exec team said that an intense focus on lease expiration management and in particular shifting expirations, more expirations out of the cold weather months, will better position them for 2026. I alluded to that a little bit earlier. Just expanding on that, Brian Smith said he would, quote, expect to see those benefits on the occupancy side. The rent growth will return in the spring leasing season next year. So again, he's not offering specific guidance, but he's suggesting that if occupancy stays tight, we should they should be better positioned to be able to see more pricing power when the spring leasing season starts. And by the way, just if you're not familiar with this concept, what he's saying is that the lease expiration management strategy allows them to maintain higher occupancy going into the spring leasing season because they have fewer leases expiring in the cold weather months when leasing is soft. And so if occupancy is higher going into the spring, that could in turn boost pricing power. So I hope I didn't gloss over that much. I know for some folks I'm probably giving you more than you want to know. You already know a lot of these things and for other folks, maybe sometimes not taking the time to explain what these concepts mean. So I'm trying to strike the right balance here. Imitation Homes Dallas Tanner, he said this, he well, first of all, he caveat a little bit. He said it's hard to tell the weather perfectly when it's that far out. Speaking of 2026. But then he added that he still feels good about the renewal side of the equation in particular. And that's important because that's three quarters of the leases. And he said, quote, we don't see Anything that suggests that changes going into next year. And then he said, you know, given barriers to home purchase, the essential role of housing, the strong financial shape of the resident base, low turnover rates, et cetera. But he did add another caveat. He said supply is hard to forecast. And then of course, going back to our combination earlier, while you could track build to rent construction, it's much harder to track that shadow market of individually owned rental properties and properties that go in and out of the rental pool based on the whims of individual owners choosing to hold on as investment properties or to sell. And so that is a bit of a wild card, as Dallas mentioned there. On a related note, I want to highlight one more thing that Dallas said. He said he wants to see more home buyers in the market next year and he thinks it'd be a net boost for sfr. Anybody knows my take on this and heard me talk about this for I obviously agree with him. He and I talked about this on the podcast. Well, keep plugging these guys as past guests. We have such good conversations with them when they're on. And this is something we talked about how historically SFR rent growth and apartments as well have seen better rent growth. When there's more move outs to home purchase and a healthier home buyer market, we tend to see a better rental market as well. So Dallas said this on the earnings call. He said candidly we'd like to see more homes selling on the market. That transaction volume is a good proxy for home price appreciation, obviously, but also a good proxy for rent growth going forward. All right, before we move on, I want to quickly dive into one more REIT highlight. This is a bonus here. A couple things to share from Camden's earnings call. I mentioned earlier that Camden, they actually had their earnings call much later than the other big apartment REITs. And it was also after last week's episode came out. And so let me just quickly highlight a couple things there. Broadly very similar themes were from the other parent REITs that we covered in last week's episode. So check that one out if you want a deeper dive. You didn't see it already. You know, still good absorption, but even more supply, continue to put pressure on new lease rent growth plus economic uncertainty creating some headwinds, but at the same time strong retention, strong renter household rent financials and this disconnect on public pricing versus private pricing. And Canada was among the REITs doing a round of stock buybacks. But I wanted to offer a little more detail on topic. We didn't really get into in last week's episode. And Canada CEO Rick Campo offers some really great color. He always does good color on the market. And so we'll talk about the transaction market a little bit. Cause I didn't talk about that last week. Camden did sell some properties recently, which I'll touch on in a second. But just speaking of the transaction market broadly, Rick said this. He said there remains robust demand for multifamily. Speaking of investor demand here, he said, in fact, if you look at the amount of dry powder that there is by asset class, multifamily absolutely leads all asset classes. And so everybody's looking for assets. The challenge is there's not a lot out there to buy. But then he had this interesting point here. He said there's definitely been more sales in the coast than there have been in the Sun Belt. And the reason being is that coastal revenues, you can predict better in terms of positive growth. You can predict that easier than you can the Sun Belt, given the supply issues that we're facing there. And when you think about sellers, the seller in the Sunbelt is looking at the market saying, we don't know, I'm sorry, is they're saying, we do know that supply and demand will be in balance at some point. The question is when? And then the lenders are not pressing people to sell. So why would you sell into a market when underwriting future growth is more difficult today just because of what's going on in the marketplace? In other words, you know, buyers are bullish on the Sunbelt, but so are sellers. And that makes the, you know, then that makes it harder for buyers to get deals done through investment committee until these markets have already turned and we started to see some growth again. And Rick did think, did imply he expect to see better conditions for transactions by the middle of 2026 and beyond as supply drops off and as the revenue growth outlook becomes clearer and plus potentially more lenders willing to or starting to push current owners to sell. Now, I did mention Camden had sold a few assets in Q3, three older properties, average age of 24 years, two of them in Houston, one in Dallas as it continues its capital recycling strategy. And it used some of those proceeds for stock buybacks. All right, if you want a deeper dive on the SFR and apartment re takeaways, I've got newsletters out, one out last week on the apartment REITs go in a lot more depth when we cover in the podcast. Give you 10 takeaways instead of just the five we cover in the podcast. And there'll be an SFR issue edition of the newsletter coming out this week as well, and you can find that@jparsons.com all right, next up, rental housing trivia. All right, today's trivia is sponsored by Authentic. If you've got a property that's underperforming and you can't quite figure out why, check out their multifamily leasing and marketing audit. They'll dig into your pipeline, your leasing funnel and comps and tell you exactly where things are breaking down, plus strategies on how to fix it. Listeners of this podcast get 50% off, so head to authentic ff.com click on the banner to learn more and claim the offer. All right, so today's trivia question is excluding coastal markets, which MSA has the largest premium to own versus rent a single family rental in terms of all in monthly costs? Okay, so five choices here. I've taken out the coastal markets to make this a little bit harder. Is it Austin, Dallas, Denver, Nashville, or Salt Lake City? Which one has the largest own to rent gap for single family rentals? Give that some thought and we'll come back to that in a minute. But first in the news. All right, in the news when we cover headlines that touch on rental housing themes. We got three of them to touch on this week. The first one is about that New York City election. And here's an article from 4 Chance, a good read that says Mamdani's signature housing policy is widely loathed by economists. Here's why. And it goes into rent control and how ultimately it, it backfires and the very people it's intended to protect. And economists don't like that. And so obviously opposing rent control is not merely pro landlord, it's pro science, it's pro affordability and it's pro renters in the long term. But let's talk about for a moment this election in New York. I mentioned earlier being asked about this a lot and you know, I, I can tell you a lot of, I guess the normal things about why rent control is bad, but I think I want to add a little bit of historical context to this and hopefully maybe equip everybody listening to have more informed conversations with some skeptics as well. So obviously the man who won the election, he campaigned to freeze the rents on stabilized apartments as well as to expand public housing. Now again, I'm not near the fact I'm likely preaching to the choir here in this podcast, but make a couple of points. Okay, so the narrative around this election in New York has been that voters are Saying that the free market's not working for them. And I want to be sensitive to challenges in New York, but at the same time, I got to say it's a bit ironic in terms of housing, because New York's rental housing market hasn't even resembled a free market in at least 80 years prior to World War II, and really even longer because the first versions of rent control. We first saw rent control in New York city back in 1918. New York was the first city in the US to adopt rent control back in 1918, but that didn't solve the problem. And so rent control was expanded and or rebranded multiple times over the last hundred plus years, notably in 1943-1950-1962-1969, 1997-2003-2011-2015 and 2019. And then none of that was enough. That still didn't work. So then they expanded and rebranded further with the passage of the so called Good cause eviction plan in 2024, just last year. And good cause eviction, of course, is a name befitting a Madison Avenue's marketing prowess. And there's actually now multiple different rent regulation programs in New York. You have rent control, you have rent stabilization, now you have Good Cause eviction. So at least three different major flavors. And guess what? None of that was enough. More than a century of rent regulation.

Podcast Host / Interviewer (26:41)

Later.

Jay Parsons (26:43)

New York somehow thinks the problem is a free market system that very few New York voters are old enough to have actually experienced inside their city. And so also, of course, the mayor wants to expand public housing. And you know, some people are hotly opposed to this. I think conceptually it's totally fine because in theory it's just additive to supply. But here's the problem. New York's public housing agency has $80 billion in deferred maintenance. That's a billion B B as in billion, not m. $80 billion. And they're also running a $200 million plus operating deficit according to the city itself. So a government run housing program has not worked particularly well either. And then obviously there's reasons for that, but bottom line just hasn't worked. So I certainly wish New York City the best. It's a great city in many ways. And in fairness to voters, they did pass multiple pro housing development ballot measures, you know, yimby measures, and that's good. But you know, at the end of the day, development capital goes where it's wanted. And if you incentivize and encourage and celebrate investors for developing, but then still demonize them and hamstring them when they actually operate, then you're not going to get a lot of housing built. And so I suspect you know, just a handful of conversations I've had. I suspect a lot of investors are going to take a wait and see approach before betting tens of millions of dollars on new housing developments in New York City. All right, next headline comes from Bloomberg Saunder to file bankruptcy and liquidate after Marriott cuts ties. All right, so many of you know Sonder offered furnished apartments and short term stays, had a major partnership with Marriott, but that has now ended and now the company is filing for bankruptcy. Here's what Bloomberg wrote. They said Sonder Holdings Inc. A boutique apartment rental company, said it's going to file bankruptcy after the cash strapped company lost a key partnership with Marriott International. And it went on to say that the Saunder went public in January 2022, peak valuation of $2.3 million before quote, losing most of its value. All right, so, so there you go. Tundra was obviously a lot of fanfare around that name a few years ago and now filing for bankruptcy. All right, our third and final headline this week comes from the Wall Street Journal. It says Blackstone is offloading A flopped $1.8 billion investment in senior housing. Investment giant is selling off portfolio about 90 properties, in some cases at over 70% below their purchase price. All right, so senior housing, let me just reel up in the article. Okay, so it says senior housing proved to be a considerably more complex turnaround project. The business is much more operationally intensive than other forms of commercial real estate, requiring large staff, payrolls, food service operations and attention to residents health needs. Then during the pandemic, demand plunged and costs rose for new equipment and additional procedures to keep facility residents safe. Blackstone began substantially unwinding this bet in 2022 and has already sold about 70 of its 90 or so senior facilities. Public records show the firm is in talks to sell the remaining senior facilities, say people familiar with the matter. All right, at some point I knew I need to do a deeper dive episode on senior housing. You know, it's, it's interesting because everyone talks about the demographics and they have been very, very favorable. There's lots a lot of things to like about senior housing, but there's also, there's a lot of flavors and nuances and types of senior housing. And, and so it's really important to understand how those differ. And, and I think just lastly, while there's been a lot of, you know, good demand drivers, we just haven't seen the sector be as hot as a lot of people thought it would be for various reasons. And again, there's a lot of nuance there. I'm painting a broad brush. One of these days we got to do a deeper dive episode on senior housing. We'll do that at some point. All right, let's get back to today's rental housing trivia question sponsored by Authentic. Check them out@authenticff.com the question was excluding coastal markets, which MSA has the largest premium to own versus rent a single family rental? And this is according to data from John Burns Research and Consulting. Give you five choices here, Austin, Dallas, Denver, Nashville or Salt Lake City. And the answer is Salt Lake City. The average, the Premium to own vs rent SFR is $1,670 according to John Burns per month. So that's obviously a wide gap. It's big everywhere, but that's the largest among non coastal markets. If we did include the coastal markets, the biggest gap would be San Jose in Silicon Valley. And get this, that gap, according to John Burns is $8,185 a month when you look at all in monthly costs for new home buyers. So that's pretty wild. And that'll take us to today's interview sponsored by funnel, the AI and CRM software trusted by four of the six major REITs and many more leading operators like BH and Cortland. To learn how Funnel can help your help your property, centralize operations, automate everyday tasks, check funnelleleasing.com Our guest today is Dave Feldman, the CEO of the nation's largest single family rental owner in the US Progress Residential. I'm going to ask Dave his favorite myth and SFR and how he navigates myth busting from his social life to professional life. We'll talk about the advantages of operational scale and how scale, when done right, could benefit not only investors, but renters as well. And I think this is an important topic. It's one that I think we've, the industry sort of lost the narrative on. But there's, there's, there's clear benefits to everybody when scale is done right. So I'm going to ask Dave about that and also ask about SFR growth strategy moving forward. So here's my conversation with Dave Foreign.

Podcast Host / Interviewer (32:48)

Welcome to the interview portion of today's podcast and I am absolutely thrilled and honored to welcome in the CEO of Progress Residential, Dave Feldman.

Jay Parsons (32:56)

So, Dave, thanks so much for being here.

Dave Feldman (32:58)

Jay, it's good to see you. Thanks for inviting me on your show.

Jay Parsons (33:01)

Oh, it's my, my absolute privilege.

Podcast Host / Interviewer (33:03)

So Dave, before we get into the kind of the. I want to do all that myth busting with you.

Jay Parsons (33:07)

I want to talk about the current state of the market.

Podcast Host / Interviewer (33:09)

But first, tell us a little about yourself. How did you get into the SFR business?

Dave Feldman (33:14)

Sure. I mean, look, I've had the great fortune of having some really good mentors and some good luck along the way. Maybe the quick hits. I grew up in Southern California. I went to the University of Southern California and graduated with a degree in business from the entrepreneurial program at sc. Began my career in sell side M and A in a middle market investment banking shop. From there I I moved into commercial real estate. I always had a desire to get involved with income producing real estate and I thought no better than to just get right in the middle of the market. I linked up with Marcus and Millichap and spent almost nine years there. The first half of my career as an investment sales broker, principally on the apartment side. And the latter half of my career there on the management team leading our capital markets teams in the Southeast and in Washington D.C. that brings us through the GFC 2008 through 2012. I spent in Atlanta and in the D.C. market and I was really anxious to get back to the west coast and my wife and I moved back to California. I linked up with a very dear friend of mine who happened to be in the space early innings. We were able to raise capital with Apollo and we began to build a business investing in housing throughout California, Nevada and Illinois. And it was through that process I was introduced to Don Mullen, the founder of Pretium and the owner of Progress Residential. I Met Don in 2013 and had no shortage of amazing things to say about him and his vision. And fast forward 2014 I was invited to join the management team here at Progress Residential and from there, alongside a really wickedly smart and talented team, we were able to build something very special here at Progress. So I've been here for over 11 years today and it's a true privilege and honor to be in the role I'm in.

Podcast Host / Interviewer (35:33)

So I gotta ask if you go back to, you know, you mentioned you want to be an income producing real estate. Think back to college, early days in brokerage. Like did you ever think at that time like SFR would be the thing? Because like that was probably the days when institutionalized FR was barely even a thing.

Dave Feldman (35:48)

Right, right. I had no idea. No idea. Not until I met a good friend of mine, Sudaretti, did I have any clue what single family rentals was on an institutional scale.

Podcast Host / Interviewer (36:02)

Yeah, it was just A mom and pop business. Yeah, totally. All right, so one of the things I'm very eager to ask you about is. So let me preface by saying I recently I was at one of my son's baseball games and I'm talking with the dads and he makes a comment about rental housing and their neighborhood. And immediately I'm like doing like the social calculus in my head. Like, do I really want to. Like, he's saying a bunch of dumb stuff and I'm thinking, do I want to engage this guy? And of course, I can't help myself. I do it in a very friendly way. I'm like, actually. But in your role, I got to imagine, does this, this has to happen to you? Do you run into people in your social life, maybe assume things about SFR that just aren't true?

Dave Feldman (36:43)

Totally. By the way, I love your approach. You are unapologetically bold and on point and we are all better off for it, so.

Podcast Host / Interviewer (36:54)

Well, thank you.

Dave Feldman (36:55)

Kudos to you. It happens all the time. There are a number of common misconceptions out there around our space, but the reality is that there are true barriers to homeownership and they're principally centered on supply and affordability. We've underbuilt since the GFC, I think, by third party accounts.

Jay Parsons (37:15)

I don't know.

Dave Feldman (37:15)

We're short by 3 to 5 million units today on the supply side. Yet we have a growing demand stream of younger generations starting to form houses, household formations, families and the like. And they need a place to stay. But that gets right into affordability. And you take a look at what interest rates have done since 2022. I don't know, depending on where you sit on the credit spectrum, I mean, they're up 2 to 4x. Right?

Jay Parsons (37:44)

Right.

Dave Feldman (37:45)

From low twos to sixes plus. But you've also seen really big moves in insurance, in taxes, and even homeownership association dues. And so there's a lot of cost that goes into owning and caring for a house. And so, you know, I find myself getting into these conversations at baseball practice, just like you.

Podcast Host / Interviewer (38:10)

Yeah.

Dave Feldman (38:10)

And, you know, depending on who the audience is, like, there's a willingness to listen, learn, and unpack. You know, a couple of things that most people don't know. But ultimately this gets back down to supply and affordability. And, you know, we play a critical role in this continuum. So, yeah, it happens regularly.

Podcast Host / Interviewer (38:30)

Yeah. And thankfully, we know people in social life. They're probably more likely to listen and have a conversation about it than some of the Yahoos out there. But I'm curious to ask you, Dave, so what myths? Obviously there's no short. We could talk for two hours about just myths, but which ones do you hear the most and how do you handle them when they come up?

Dave Feldman (38:49)

Well, geez, they run the gamut. I mean, first off, I'm passionate about what we do. There are three reasons why I continue to do what I do, which is one, I'm surrounded by great people. Two, I love to build things. And three, it feels really good to have the impact we have on the people in the communities we serve. And so pretty passionate about telling a story and always happy to engage in myth busting conversations. I mean, the reality is we have invested in communities that provide access to aspirational housing for many and we do so in a very intentional way and we do so on a very, very small scale. So we don't push home buyers out number one. And then number two, you know, look, one in three Americans rent like this is an important part of the housing fabric of this country. And so, you know, we're, we're, we're, we're focused on providing that living experience for some people who choose to rent or need to rent for whatever duration that might be. So, you know, the myth busting of squeezing home buyers out or raising rents, they really, the facts don't line up. I guess on the rent side, turnover is not good for anybody. It's not easy to move, it's costly for the investor who owns the house. There's a lot of logistics that need to come to play to refresh the unit or turn the unit and prepare it for the next resident household.

Podcast Host / Interviewer (40:23)

Yeah, I'll give you another one that I Just before our conversation here, I heard somebody respond to one of my posts I had. They're saying that they keep getting this phone call from someone from block number wanting to buy their house. They would ask their person's name, the car would hang up and the guy posting this says this is institutional. SFR groups are making these calls. So how many of your peers you think are anonymously robo dialing homeowners to source deals?

Jay Parsons (40:50)

Zero.

Dave Feldman (40:52)

I take the under on one.

Podcast Host / Interviewer (40:54)

Yeah.

Dave Feldman (40:54)

No way.

Podcast Host / Interviewer (40:56)

Right, right. The things people say are just sometimes too, too, too, too crazy. All right, so speaking of myth busting, there was a really interesting academic paper by Raj Shetty who spoke at the Pretium conference on. But this, you know, fully academic stuff and really interesting on how to access, I'm sorry, how access to single family rentals and high opportunity neighborhoods was Linked.

Jay Parsons (41:20)

To improved long term outcomes for kids.

Podcast Host / Interviewer (41:23)

Better education, better health, better lifetime earnings as an adult. We've previously seen a lot of research on how SFR helps diversify neighborhoods, people who may not otherwise be able to afford to live there. But I thought this was interesting because.

Jay Parsons (41:37)

This study went even further than that by studying social impact.

Podcast Host / Interviewer (41:41)

And so, so Dave, I'm curious, like as you saw that presentation and read that research, does, does, does that research.

Jay Parsons (41:48)

Does it impact your investment strategies, your operational strategies in terms of where you.

Podcast Host / Interviewer (41:53)

Build or buy future sfr?

Dave Feldman (41:57)

Absolutely. Look, Raj's study absolutely validated what we've long believed, that access to stable housing in high opportunity zones can radically change the trajectory for one's family and future generations. It's weaved into intentionally so and has been since I joined the firm, into where we invest and how we invest, locations, neighborhoods, house types and so forth. So to shorten it, it absolutely validated what we long hypothesized and frankly knew.

Podcast Host / Interviewer (42:36)

So just for those listening haven't seen the study, high opportunity zones, these are areas with better quality schools, access to grocery stores, things like that.

Dave Feldman (42:47)

Absolutely. I mean just to distill it down to its simple form, can I live there and would I choose to live there to raise my children? Right. Proximity to employment so I can provide for my family. Access to a good quality school so I can get them an education. Access to established retail corridors so we have things to do when we're not at home. Low crime. I care about safety. These are the things that most people care about and certainly those looking to, to raise a family of which a significant part of our resident households fall into that category of family with school age children.

Podcast Host / Interviewer (43:27)

Absolutely. And I want to get more on demographics in a moment, but let's talk about one more thing on this topic. The policy environment as you know, is.

Jay Parsons (43:40)

Not aligned with the research that we've.

Podcast Host / Interviewer (43:42)

Seen and fully active not progress research, Jay Parsons research, I mean truly unaffiliated academic research. And it feels like these myths around sfr, you know, I tell people time it's like, it feels like, it's like oddly uniting people from both the left and the right, calling for limits or bans on institutional investment, single family homes.

Jay Parsons (44:01)

Despite the research that we see.

Podcast Host / Interviewer (44:03)

And, and by the way, I, I, I'd argue that SFR actually accomplishes goals, both the left and the right, but.

Jay Parsons (44:08)

They get distracted by these myths.

Podcast Host / Interviewer (44:10)

So how concerned are you about that kind of policy environment we have today?

Dave Feldman (44:15)

The reality is, is that professional managers of single family rental like progress totally benefit residents and communities. I mean, this, as we said earlier, is a critical part of the housing fabric and continuum. And so it's, it's these pressures that I think are natural, but they're intended for us to do better. We want to be at the table with policymakers. We are at the table with policymakers and we're making great strides on being present and local. Jay so we recently kicked off a whole new level of engagement in Charlotte, in Atlanta, and with policymakers and frankly with people who as they walked into the room would have said we are on the totally opposite side of the table as it relates to this topic. And you know, when you really unpack some of the narrative and you really look to understand what people are focused on, there's actually a whole lot more in common with local leaders, nonprofits, policymakers and the like and folks like us, professional managers of single family rental housing. And so really it's about engagement and then understanding the challenges and how we can work together to solve some of those challenges. And I think it's going to come down to public and private partnerships. And we're very much open to those, really.

Podcast Host / Interviewer (45:46)

So what does a public private partnership look like?

Dave Feldman (45:50)

Well, you know, we're exploring this today. We're starting the conversation, understanding the problem, understanding how we can be a part of the solution. We've leaned into the housing choice voucher program. Today we have well over 3,000 Housing Choice Voucher houses in our portfolio that we manage. And so working very closely with public housing authorities and the like to find access to voucher holders who are looking for a high quality place to live. And so we're starting to build that out today and find other ways to be part of the solution as it relates to providing access to good locations, as we talked about, and quality homes that are affordable and, and also being sensitive to the affordability challenges each of us face.

Podcast Host / Interviewer (46:44)

Yeah, that's well stated. You know, you made your comment earlier about how just to not you still want, you want to do it, better.

Jay Parsons (46:50)

Not not get out of it.

Podcast Host / Interviewer (46:51)

It reminds me of something that Dallas Tanner imitation told me a while back in this podcast. He made a comment that stuck with me. Know if you have 100,000 homes and there's an issue with one of them that makes a news headline, you that's 0.001% of of your portfolio. But that doesn't matter. Like that's the story. And so there's unfortunately, there's going to be challenges, but it's how you handle those things when they come up that, that hopefully, you know, show that, that you're really trying to do things right.

Dave Feldman (47:20)

We are so building on what Dallas said. You know, my team, my team will attest to this. We tend to look at percentages, but in the context of centering the resident behind every percent or every number is a household. And typically we see three to one occupants to a house. And so there's a person or persons on the other side of that edge case or escalation or, you know, unforced error or otherwise unfortunate gap in the way we serve the customer. And so we want to be sensitive to, you know, managing a very low incidence of those types of outcomes, but at the same time empathizing and understanding that even with one, you've impacted people in their lives and you want to make sure you get it right.

Podcast Host / Interviewer (48:11)

Absolutely. I think any good leader of any good business should say that one outlier incident is too many. Right. You want to deal with all this. Yeah. So let's talk a little about kind of where you guys are in kind of investment strategy right now and also I think touch on some of the, some kind of relating to some of the things we hear out there. How active is progress these days in buying off the MLS versus buying existing SFR portfolios, building btr and do you.

Jay Parsons (48:40)

See that changing anytime soon?

Dave Feldman (48:43)

Sure. So we manage houses that are acquired through a variety of channels. We are relatively less active today, as one could imagine, given the environment, than we were earlier innings of COVID and even pre Covid. But we continue to see very compelling and interesting opportunities out there across the spectrum of acquisitions channels. As you cite, the MLS stabilized portfolios from subscale operators, build to rent, which comes in a number of different flavors. Right. Purpose built communities all the way through, new homes that are part of a scattered site inventory tape from said public private, national, regional builder. So for us strategically, so we built a platform that enabled us to see the universe of opportunities on the acquisition side of things and position ourselves on behalf of our investors to make the best relative value decisions at the time. And so, you know, relatively less acquisition activity today, but continue to see certainly on the mls, but continue to see interesting opportunities emerge on the BTR homebuilder spec and subscale portfolio offering side. We'd like to see more. We have capital mobilized at Pretium to.

Jay Parsons (50:06)

Do that.

Dave Feldman (50:09)

But we are active on that front.

Podcast Host / Interviewer (50:12)

One of the things I'm curious about, Dave, is that as you know, the last 10 years, up until this year, we've seen homeownership Rates actually go up. And yet in a place like Atlanta, I guess talked about a lot, there's been more institutional purchases, but a lot of it's come from exits among smaller, as you call, subscale operators. And a lot of that's just, you know, groups that would take advantage of the pricing or it's at, or they're just tired of dealing with the, you know, increasing challenges of operating subscale rental housing.

Jay Parsons (50:41)

How much opportunity have you seen either.

Podcast Host / Interviewer (50:44)

That market elsewhere of just these smaller operators who just need exit because that's.

Jay Parsons (50:48)

Where the growth's coming from.

Podcast Host / Interviewer (50:49)

Frankly, I feel don't understand. It's like it's in place like that.

Jay Parsons (50:52)

It's these lower.

Podcast Host / Interviewer (50:53)

It's not individual homebuyers muscled out. It's individual, smaller mom and pop or small groups that just say, I'm done with this.

Dave Feldman (51:01)

Right. We're seeing an accelerating amount of that opportunity. Let's. Let's make it real. As a vertically integrated professional manager of single family rental houses, we have the ability to internalize the service part of our business. What does that mean? That means that 65 to 70% of the time, we are solving the service issue, the work order, with our own service technicians who are the face of our organization. These are the people who engage with our customers, enter the home. Right. They are the face of the organization providing that service to our customer. And because we've been able to invest in this with data, with technology, with a heavy focus on logistics, as we look to be smart about how we optimize routing, for example, we've been able to drive down the cost to actually maintain the house and serve the customer. And we've been able to accelerate the speed within which we serve the customer. Right. Going back to centering as this resident renter. But if you're a subscale player, you have to outsource the service part of this business. And that can be in orders of magnitude different from a cost profile and certainly from a customer experience. I mean, I would cuff it to say that it's anywhere between three and seven times more expensive to do what we can otherwise do with our own internal service technicians if you've ended. And so there's cost benefit, there's cycle time benefit, there's customer experience benefit. And this is a hard business when it comes down to being subscale, especially if you're subscale across a number of metros.

Podcast Host / Interviewer (52:46)

Yeah, you know, let's dig in this a little bit because, you know, there's this narrative that, you know, that People like to focus on the number of homes that a given operator has in a market. But there's advantages to scale. Right. That actually benefit the renters. I think about like, you know, people.

Jay Parsons (52:59)

Think intuitively, see newspaper article, someone has 500, 1,000 homes in a, in a.

Podcast Host / Interviewer (53:03)

Given MSA, it seems like a lot, but if you compare that to an.

Jay Parsons (53:06)

Apartment that's, you know, a thousand is.

Podcast Host / Interviewer (53:08)

Maybe two and a half, three properties. And so you do have to have.

Jay Parsons (53:11)

Some scale to be efficient.

Podcast Host / Interviewer (53:13)

So how, how do we flip the conversation with this? People understand, it's like what you just talked about, that if you have, you.

Jay Parsons (53:19)

Have to have scale in a market.

Podcast Host / Interviewer (53:21)

To deliver a better experience to your consumer, to the renter.

Dave Feldman (53:26)

Totally. Look, I think we're past having to validate that single family rentals are meant to exist. They exist. I don't know what your numbers are. The last numbers I read, 15 million, 17 million single family rentals there and about. So it exists. We, as a large professional manager, manage a very, very small subset of that. So there's a customer there, demand. So now how do we serve that customer? And so the density in the portfolios we manage allows for us to invest in our business for the benefit of the customer and the investors who own the houses. And it's okay for both to win. Right. So again, I go to. Customer doesn't really care how efficient you are. They just want to make sure that you are effective at responding to their need. Right. Investor wants to make sure that we're doing right by the customer at the lowest cost possible. Right, yeah. So both can be true for these stakeholders to benefit from the scale, the density, and in turn, the investment made in creating these capabilities to serve the customer and again, service the house.

Podcast Host / Interviewer (54:40)

Yeah, that's such a great point. And by the way, that reminds you, you mentioned, like, you're a player in a much bigger industry. It's like one of my favorite stats is like, you're one of, if not the biggest SFR player and you still have less than 1% of your market. There's no other industry in the United States with the largest major industry with the largest player has less than 1% of the market. All right, so. So let's get back to the demographics topic for a moment. You alluded to this a little bit. Tell us about who's the typical resident at a progress residential home today in terms of age, family size, income, tenure.

Dave Feldman (55:14)

Yeah, it's a, it's a diverse customer. We have folks who are, you know, before getting married, before forming Households and having children to families with school age kids being the widest part of that resident curve to empty nesters. The, you know, by some measures, I would say 40 to 50% plus of the rent roll is, is a family with school age kids typically three to one occupants. A good, a good percentage of residents have pets. So. And they have a whole lot of stuff that's a, that's a little bit of feeling flavor for who it is that we serve.

Podcast Host / Interviewer (55:59)

Yeah. And I imagine these are probably typically folks too, who are probably not the high end of being rent burden and more likely to be in a pretty good place in terms of rent incomes.

Dave Feldman (56:10)

Absolutely. You know, we're typically seeing, you know, a five to one, you know, income to rent, four to one income to rent. It's pretty healthy.

Podcast Host / Interviewer (56:22)

Yeah, yeah, that seems pretty typical with what we see elsewhere. So. And do you have any idea you can estimate like what share of your residents would be able to buy a.

Jay Parsons (56:31)

Comparable home in the same neighborhood?

Dave Feldman (56:36)

You know, it's tough for us to have optics into that. We don't really have a good clear view on the debt burden that our residents have, but we have a view in terms of the reasons that customers cite as the reason to move out. And so it would seem, based on what I've read and what I've heard from the peers and what we've seen in our own internal data, that of the folks who choose to move out, 14, 15, 16 of them, of 114 to 15, 16% of them are going to buy a house. By the way, to put that in context, pre rate movement, pre Covid. Again for relative relationship and less about precise figures. That figure used to be 22 to.

Podcast Host / Interviewer (57:28)

24%, which even still is pretty low.

Dave Feldman (57:32)

Yeah. And I'm just using that as a relative relationship as opposed to saying that this is absolutely perfect data. But that's kind of what the residents tell us.

Podcast Host / Interviewer (57:45)

Yeah, yeah. So they're more likely renting because that's.

Jay Parsons (57:51)

Where they are in that stage of life.

Dave Feldman (57:53)

I think that's right.

Podcast Host / Interviewer (57:55)

Let's talk about the current environment a little bit. And to me it feels like obviously you have a better pulse than me on the SFR side, but my sense is that it feels like this odd market where you have middle and upper income renters who are generally in strong financial shape. And a lot of them, like you said, they're paying 20% income on rent or you know, 4 to 5%, 4 to 5 income to rent ratio. You're seeing high retention rates, people paying rent, relatively few Move outs to purchase, stall that home buyer market. But there seems to be very limited leasing activity. We see this in data from John Burns and others. So strength of renewal, softness, new leasing.

Jay Parsons (58:32)

Seems to be a theme across SFR and even more so in multifamily.

Podcast Host / Interviewer (58:36)

So I'm curious to ask, what do you think's going on and what are you looking for to see new leasing get pick or pick back up?

Dave Feldman (58:45)

Sure. As an, as an organization we've been heavily focused on building occupancy, which we've been very successful at this year, and focusing on the resident because you know, truth be told, if you drive the right experience for the customer, they're likely to continue to stay with you. And so we've been focused on retention related initiatives to continue to extend duration. Right. Length of stay and we've been quite successful at that, the leasing. And so with that comes really strong renewal pricing. The other side of it though is that when someone chooses to leave, we are in the market looking to re rent the house. And I would say there's quite a bit of dispersion across markets and regions as it relates to relative strength and relative weakness in the leasing market. The way I would characterize this today is that you've seen relative strength in the Midwest, the Mid Atlantic Carolinas and even in Georgia. And you've seen some softness in Florida, Texas and certainly in the West. Our view is that this is more of a supply driven softness as opposed to demand driven and softness. And let me explain. We've had record level as you've talked about quite a bit. We've had record levels of multifamily deliveries as well as built to rent deliveries. And surprise, surprise, most of those deliveries have been concentrated in Arizona, Texas as well as in Florida. But when you look at the demand strain, your demand top of funnel has actually been quite strong. We have actually been quite effective at converting the funnel this year, which is why we've seen really strong top line revenue growth. But we've also started to observe that there's a little bit more showing activity you need in order to convert to an app and a net move in. And I think that's principally driven by more choice for the consumer, which isn't a bad thing, but I think it's just more choice in markets like Arizona, Texas and Florida.

Podcast Host / Interviewer (60:51)

Yeah, no, that makes a lot of sense. And I think, I think for SFR investors and owners, that's, and managers, that's in some ways encouraging because when you're, when your softness is in your highest demand markets. And it's really supply that tells you.

Jay Parsons (61:03)

That as supply comes down, which it.

Podcast Host / Interviewer (61:05)

Will, that it should have a better environment for leasing. Dave, I got to ask you one last question. I like to ask this everybody in SFR because I think it's such an important topic that doesn't always align with perception.

Dave Feldman (61:14)

So yes, I will write a book on SFR blueprint first.

Podcast Host / Interviewer (61:18)

I'll buy it. Yeah.

Jay Parsons (61:19)

Okay.

Podcast Host / Interviewer (61:22)

Other question though is I've had your. I've had the good fort having your peers, the CEOs of invitation, AMH Brookfield, they've been on this podcast and they've all told me to different degrees that they think SFR would actually do better. Their portfolios to do better if the.

Jay Parsons (61:38)

Home buyer market was healthier, if it was stronger.

Podcast Host / Interviewer (61:41)

They thought, you know, they'd lose more renters to home purchase. They backflow units faster, typically at a higher rental.

Jay Parsons (61:46)

And that's typically been true historically in terms of rent growth.

Podcast Host / Interviewer (61:49)

But I want to ask you, what.

Jay Parsons (61:50)

Is your take on this topic?

Podcast Host / Interviewer (61:51)

Does SFR do better? Do you guys do better when home sales are stronger?

Dave Feldman (61:56)

Rising tide lifts all boats. So what needs to be true for the for sale market to move into what we call healthy territory? How much of what needs to be true also translates to a healthy rental market? People need to have jobs, people need to feel good and confident. So consumer sentiment is important. And if they have jobs and wages are growing and people feel confident in their circumstances, that's good for the rental market, that's good for the for sale market. So I agree with what you've heard from my peers.

Jay Parsons (62:37)

Yeah, so true.

Podcast Host / Interviewer (62:38)

That's a great way to end this. Another myth busting topic that no SFR owners, you're not rooting against the home buyer market, a rising tide busol ship. So Dave, thank you so much for your time. Thanks. Let me pick your brain and best of luck wrapping up this year.

Dave Feldman (62:52)

Thanks, Jay. I really appreciate you having me on.

Jay Parsons (62:55)

Today Foreign and that's wrapping Episode number 59 of the rent roll. Big thank you to Dave for being our guest this week and thank you to JPI Madera, Authentic and Funnel for sponsoring today's episode. And thank you to all of you for spending part of your day with us. We'll see you next week.