D (4:35)
And so that was really the start. Interestingly, I never got to 10 on my own, but over the next 10 years, basically owned and managed over $100 million in real estate, mostly in affordable housing. And so I got to know that space really, really well. Single family rentals, multifamily rentals, market rate subsidized the, the full gamut. But in 2009, I had my first vacancy. My, my, one of the first houses I rented became vacant where she had moved out. And I got to know these neighborhoods literally like the back of my hand. Like I had every house memorized because you, the technology didn't exist to, to be able to like bid on houses really, really quickly. So it was the old fashioned way. You saw something come up and I had to know it in my head to know what price we wanted to pay for this house. And then our real estate agent had our power of attorney, so. So, because I got to know it so well, I saw these rooming houses that were everywhere. And, like, my degree in college was in urban studies and architecture, but I had never heard of rooming houses still existing. And it was something that was like 100 years old in New York City, but I saw these things that existed everywhere. And so when I had this vacant house, there happened to be a rooming house right next door. And there was this guy named Mitch who he was earning Social Security income at the time. He was on disability, made $735 total income per month. And Mitch comes to me one day as my house was vacant, and he's like, hey, our house is getting foreclosed and we're all going to get evicted. Can me and my buddy Otis come rent rooms in your house? And first of all, like, I was terrified of having a vacant house because people were stealing pipes and copper and wiring and appliances and the whole bit. And so I was like, yeah, absolutely. Like, come. Come rent rooms in this house. But tell me, how does that work? Like, how do you. How do you actually do it? And he kind of walked me through at least the basic needs that he had. And a couple things became clear to me. One was, if he was making 735amonth, and I know that every property manager in America requires three times the monthly rent as an income threshold, he's only going to qualify for 200 and change. Well, in 2009, like, the world had ended. From a real estate valuation perspective, houses had never been cheaper. Apartments were a disaster. Housing hadn't been cheaper in my entire lifetime than it was at that point. And this guy who has federally guaranteed income in the depths of the great financial crisis, cannot qualify for anything that is not subsidized. That's. That was crazy. And yet I did the math, and I had four bedrooms in this house. And if Mitch moves in, he was paying either 100, 125 bucks a week. Otis was paying the same. The third person who moved in was a woman named Linda who worked at Wendy's. Interestingly, she's still there 16 years later right now in the same exact room. But yeah, I had these four rooms, and I realized, wait a second, like, if I have four people paying me this rent on a per bedroom basis, even after I take away all the utilities and furniture, which was the stuff that they needed in order to make it work, I still make more money doing this than doing it the old way. Why the heck isn't everybody doing this and why have I never heard of it? And so that was really the first introduction to this concept. And then over the next seven years of operating a portfolio of all sorts of housing, I realized that on a profit and loss statement basis, like just comparing the P. Ls across all these different asset classes, this thing beat the pants off of everything else. Like everything. It wasn't even close. The problem was that to make it work, I would only collect money orders. Okay. This was like, well before electronic payments processing technology was really a thing, right? So I would have to go multiple times a week to collect rent from the property to make sure that the thermostat was set to the right temperature, to make sure that there weren't any like really big problems or the people weren't being filthy or whatever. And so I knew the, the reason this model couldn't scale was because there so much operational complexity that went into it. And so when I got to a very different point in my career where I wasn't struggling to pay the bills, I had four kids at that point and wasn't worried about college, had really gotten to the point where I wasn't stressing and I had, I had found financial independence through real estate. And I thought, well, like, what's, what do I want the next part of my career to be and what do I want to do with my life? And it was, hey, if I get hit by a bus tomorrow, how do I make sure that I have left some legacy for good in the world? And I went back to this idea and comparing traditional, like capital, a affordable housing, subsidized models versus this. And I was just really confident that individual real estate investors and homeowners, like just the power of the masses, was so underappreciated and was really the mechanism to solve this massive housing problem. And that if you could, if you could make this rent by the room model scalable and take away that operational complexity, then you could leverage those masses to go solve this problem independently without government assistance. And so that was like the, the impetus for the idea. And then I had seen, of course, over those years how Airbnb had just grown into this massive phenomenon. At the time that I wrote the proposal for, for what became PAD split, they had 6 million listings. And I looked at the largest single family homeowner in the country at the time, which was invitation homes. They had like 60,000 houses. And like, it's a hell of a lot of houses, right? I Mean incredibly valuable company. But I wanted to solve this problem and so I didn't care about owning the property. I wanted to solve the problem. And the Airbnb strategy from, from just an online technology enabled marketplace made way more sense than going out and trying to buy a lot more property that I didn't really feel compelled to do. So. So, yeah, that was the beginning. And then, you know, for what we do now for, for listeners who don't know us, PadSplit is a two sided marketplace very similar to Airbnb or Uber. We provide access to private rooms in these typically shared homes. They're not always. And we focus on the 50% of the American population who can't afford their rent. The, anybody who's, who's working hourly jobs, anybody works at an airport, minus the pilots, anybody works at a hospital, minus the doctors, literally anyone who works in retail. So it's a tremendous number of folks. And then we try to take that operational complexity out of it for the hosts and show, show them how through this model they can make more money than they ever could through a traditional rental or in many cases even a vacation rental, just because of the way that the economics stack up for, for renting by the room. And then we help fill the rooms, we collect all the payments and we build the technology and kind of services that, that just make it scalable so that if you want hundreds of these things, you can, you can do it. And if you want to do five, it's, it's a lot easier.
