Mynd’s Doug Brien on Investing, Renting and the Future of the American Dream

Welcome to the Top of Mind podcast from Altos Research. This is the show where we talk to real estate industry insiders and experts about the trend shaping the market today. Enjoy the show.

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Mike Simonson here. Thanks for joining me today. Welcome to The Top of Mind podcast. For three years now, we've been sharing the latest market data every week in our latest Altos Research Weekly market video series with the Top of Mind podcast. What we're looking to add the context to the discussion about what's happening in the market from leaders in the industry each week, of course, Altos research tracks every home for sale in the country, all the pricing, all the supply and demand, all the changes in that data. And we make it available to you before you see it in the traditional channels. People desperately need to know what's happening in the housing market right now. The market was frozen so solid last fall, and then this year, the, surprisingly, the landscape changed again. And, and, you know, we wanna know what's happening around the corner.

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So if you need to communicate about this market to your clients, go to altos research.com, book free consult with our team, and we can review your local market, how you use market data in your business. Alright, let's get to the show. I have a great guest today, Doug Bryan. Doug is the c e o co-founder of Mind, a company that's on a mission to make remote real estate investing more accessible for more people. Doug got his start in real estate following the collapse of the housing market in 2009 when he and Colin Wheel founded Waypoint Homes and began buying single family homes to renovate and rent out. They built, we Waypoint to a $3 billion portfolio with over 17,000 single family rental homes over the years. Then in 2016, they launched mind and expect that to hit 20,000 homes by the end of this year. So we're gonna talk about mind, we're gonna talk maybe a little bit about Waypoint. We've had Gary Beasley from Roofstock also on the podcast before. So, uh, Doug, Doug is also a, a Super Bowl winning n f l place kicker. So I'm not sure we're gonna talk about the N F L today, but maybe Doug, welcome to the show.

Yeah, thanks Mike. Uh, great to, to be on the show. I mean, I think the first thing we need to talk about is the name of your show, <laugh>, uh, mind, I have mind you have top of mind our, our every other week open mic question meeting. We, we actually call that meeting top of mind. So we may have to get our, our lawyers together and sort out trademark rights, but it's a great name. It's a great name.

Yeah. Your, uh, your top of mind has a a y in it, right,

Right. Yeah. To get some some real estate online. We had to switch the I for a y

Yeah, for sure, for sure. Well, top of Mind is a tertiary brand for us. It's a label for our podcast, but it's really, you know, it's what, you know, what's interesting is what we're, we talk about the data a lot and you know, we're, when we're in the data, the housing market, home prices are doing this and inventory's changing and, and these are the leading indicators. And, and, uh, so what we wanna do with top of mind is like talk about what people are understand about their market and what they, their perspectives about what's happening in the real estate market around the us. And so that's why, you know, it's fun to have people like you on, on the and, and why. I'm gonna dive in and see what your take is about. And we're not just gonna talk data, but we're gonna talk about, you know, like your, your, uh, gut feel for the future and all kinds of things like that. So that's where the top of mind comes. So, so let's start there though. Let's tell us about mind and why Andy. Um, tell us about mind and, and what you guys do in the world and what you solve.

Yeah, so, you know, in some ways Mind was born outta Waypoint homes, like you mentioned, we'd, we ended up buying and managing 17,000 homes. But as we dove into the market and just saw how big Single Family Rental was, saw the impact that tech could have on the ability to kind of operate at scale with a scattered site model. Like we truly believe, like there would be companies, if not a company that managed ultimately a million homes in the US. And after seven and a half years with Waypoint, we got to 17,000. Like that's a lot of houses, but it's a far cry from a million. And so when we merged with Colony American Homes, Colin and I decided to step away and think about our B H A G, which was a million homes and like what we would do differently to actually get to a million homes.

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And there was two, well, really three big changes that, that we looked at. One was, um, being asset light. Like we spent half our time raising capital to buy homes. And in some ways that's a distraction from creating an operating system that can, can manage a million. Um, the other big change was investing more in technology. It's very clear, like there's just no systems really. No software system is built specifically for single family rental at scale. And, you know, even Invitation Homes still struggles with that. Like we had a bit of a Franken system. We use Yardi, which is built for large multi-family as our backend accounting. And then we built our own proprietary software around it. And we said, okay, let's, let's go asset light. Let's not own any homes and let's, instead of raising private equity, let's go raise venture capital and invest in an operating system that would allow others to more easily invest in the asset class.

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'cause we had a sense that it was gonna become an institutional asset class. And so we, we've basically built software and built a tech enabled service. So people, process and, um, technology, we do it all. We help both retail and institutional investors buy, renovate, finance, insure and manage homes, single family rental homes in 30 different markets across the US and we do it all in one platform. So we have all the data in one platform, and we can like stitch together those different activities that need to happen to, um, successfully deploy capital in single family and harness, you know, that data to the, to the betterment of both mind and our efficiencies, our capabilities, but also to, you know, decision making for our investors.

Yeah. So I have a lot of questions that that come out of that. Uh, first, uh, let's, let's talk about the, the B H A G, the million homes, the, uh, million homes managed on the platform is really the vision.

Yeah, and I would actually insert the word, and Mike, this is very in intentional, we, we inserted the word powered. So instead of ma you know, managed is, I mean, to me, sort of a 20th century, like I'm a pro, like we don't think, like we do property management, but we don't think of ourselves as a property manager. It's something, it's something we do. What we wanna do is power a million homes and there's lots of interesting ways that we can do it today, we're managing them, but I see a day where, you know, homes that are owned by homeowners who, the thing they think back fondly about from renting was, I got to just call somebody and they like managed everything about the house. Like why shouldn't that be a service for people that own homes? And if we have a, a concentration of homes in an area and when, and they know when we're out there and we know the work that they need, like, we could actually do it probably more efficiently than anybody else. Now we're not there yet, but that would fit my definition of Powered.

I like it. So, um, powered by Mind a Million Homes, powered by Mind. And that actually gets me to the question of, uh, one of the other things that you mentioned there is if it's a platform, a technology platform, you're in 30 markets, uh, is like, there's a, is there a a reason that you wouldn't be in, you know, Kalamazoo or, you know, something like that, that like, that uh, that, like why does, why does that that overlap, uh, happen or that concentration happen?

So it's a tech enabled service, right? People process and software. So we, so we have the software, but it's also our people. And to execute buying or managing or renovation for single family rental, you have to have people in market. So there actually it, I mean there are some like logistical economies of scale challenges that, that we still have, even though we have, you know, this great software platform. Like this'll be a business that will always need people. We can make our people more productive, allow them to do, you know, higher value work. But at the end of the day, that does constrain us from being in Kalamazoo or, you know, like we, we want to be in markets where we have a path to at least 500 homes.

Okay. So a path to at least 500 homes that are powered by mind

And demand to buy. Like, like we don't wanna be in, in a market, even if we could get to 500 homes if we're just like not seeing demand to buy in that particular market. So it's really an overlap of those two criteria.

I see. Okay. And so in, and we can talk about specific markets, uh, in a little bit, but, but in general, we know which of the markets around the US where investors wanna buy homes, uh, and there, uh, and, and so those obviously, uh, they have, they have growth, um, reasons for that like that, that investors are interested in it. But then, uh, there's also, I suppose some synergies that you then find because, because that's where people are buying, that's also the places where you have your people.

That's right.

Do you find that there is investment like arbitrage opportunity that maybe gets left on the table for, for areas where that don't have current, like, you know, that, that aren't Phoenix or, you know, central Florida?

Yeah, I mean, I think there's always like, you know, so we're, the single family rental industry really is, is, you know, we'll describe it as the Smile belt, right? So sort of like used to be some in SA Southern California, but now California is so expensive. It's really Arizona through Texas and the southeast, you know, Atlanta kind of up into the Carolinas, that's kind of the m the smile belt. So I think, you know, there's always questions around what's the next Austin, what's the next Nashville? And so y you know, there's always some of that. I don't know if you can clearly call it an arbitrage, um, but I mean, I think, look, I mean, look, you can talk about real estate nationally, but the story is always about the local markets and you know, there's always gonna be, you know, the next wave of markets. And look, c o did some interesting things to, to different markets and it's a little bit unclear still on whether those are gonna hold permanently, but it certainly opened up, you know, work from home. Ha has had a, you know, pretty meaningful impact on, on single family. And I think still has, I mean, the excerpts are still, there's a ton of demand for homes in those areas because people can get bigger homes and more land.

One of the things I know that you, that you do at mind is have analytics in the product. You have some data driven things to help your, your investors understand. Um, are there, uh, are there things in your analytics, either by virtue of managing 20,000 homes or you know, by virtue of your experience, are there things in there, uh, that, uh, is there there signals that, that you are seeing now that we should know about or that, that are different from the rest of the country?

The biggest, I mean, you know, kind of the most interesting thing that we're seeing right now is just a huge discrepancy in California would actually be an overgeneralization. I'd say really the Bay Area. The Bay Area is just really struggling. And um, you know, when you look at the amount of cashflow that our investors are generating, I mean, we have investors that are getting $4,000 a month and just not generating cashflow. And by the way, in some cases in the, in San Francisco and Oakland, like really rents have not recovered since Covid. Like, they're just, they're still down. You're not seeing that demand. The, you know, coming back to the, in the office has not yet had an impact. And so you look at like dollars invested and call it homes and multifamily in the Bay Area. And then you look at like what people are investing in the Southeast, you know, Carolinas, Georgias, Floridas, Texas, and it's dramatically different.

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I mean, you're actually seeing rent growth, um, in those southeast markets and we've seen rent shrinkage in the west. So if you're like, you know, thinking about markets to invest in, I mean we're, we're still seeing a lot of good things happening in the southeast. I mean, I think a general theme right now, just 'cause people are nervous about the economy, when that happens, everyone's like more focused on renewals, you know, investors wanna stay in properties, we're actually seeing people wanna stay in properties. So renewal rates are really high. But I think that that discrepancy between, call it the Bay Area and the Southeast is pre pronounced and as a property management company, you know, as you can imagine when investors like are having a hard time jetting enough cash flow to pay their mortgage and property taxes, it just, it just puts a lot of pressure on the system and, you know, we measure all of our activities through cases and customer service surveys, et cetera. And like we just see a lot more noise in Bay Area as a result of the conditions that I just described.

Yeah. And that's actually really in stark contrast to 2009, if I understand the, the Waypoint story, right? Which is you guys are sitting there going, wow, these are Bay area homes that are at these prices are gonna cash flow phenomenally in 2009. And sort of where you started buying in some of the waypoint, the early waypoint things. Is that true?

Yeah, I mean it's why we wrote the book The Big Long, you know, everyone is kind of, I don't know, either a real estate investor, they like wanna be a real estate investor, they watch the shows. And I just, I can't tell you how many people have said like, gosh, well that was happening. I like, in the back of my mind, I knew this was a buying opportunity and I I just didn't do it. And it's like, how did you guys know to go do it and not just do it, but like, go buy 17,000 houses, not like, you know, one or two. And I mean, that's really why we wanted to, to write the book. And it was like, it really was this case study. And Stanford actually did a case study on, on Waypoint. 'cause it was so interesting 'cause like we were kind of looking around going like, like we were getting nervous after like a year.

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Like what are we missing? Like no one else is piling into this. And it's like, we're buying Bay Area real estate near Bart at 50% of replacement costs and buying 10 caps on current rent. Like rents really didn't fall. You just had a game of musical chairs, people lost their homes in a foreclosure and then they would go rent a house in the same neighborhood. And it was like the most unbelievable business opportunity ever. And yet people were just so blinded by, you know, the headlines and, and, and the anecdotes and the fear. Fear was driving the day,

You know, and I remember at that time like, you know, I, I was, you know, we're early in Altos research and we knew exactly what's happening in the housing market and, but, but you know, the, I remember one of the fears is, uh, of that time was that, is it possible to manage single family homes at scale, single family rentals at scale? Like, that was unclear. And so, um, uh, that's sort of the big risk maybe that you guys had to prove, uh, that, that it could be done and that you could get economies of scale. Uh, that, that it wasn't just, you know, you have 17,000 houses, so you have 17,000 plumbers, you know?

Yeah. And you know, it, it really was a, about tech. I mean, what people forget was that cloud and mobile computing were brand new. And so whatever, you know, in the multi-family investors heads, it was just like that they could not get their heads around it. 'cause they're like, okay, 300 units, five full-time employees, like they're onsite, they can do all this stuff. Like if I have three or 400 homes <laugh> and they're scattered across, you know, like let, let's say like a five or 10 mile radius. Like how do I, how do I manage that? Right? And so that's where we went and built our own system and we did it, um, on the Salesforce, um, platform and built our own customized workflows. And we made it so that anyone in the field with an iPad or a phone could see all the data they needed to see about a particular home.

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And we had workflows around all the activities and they could, they would input data into the system and then we'd have centralized teams doing things like leasing in an office. But they had access to all the data too. 'cause it was all in the system. And what, what what we realized was if we created like a tech enabled service and had our own people with our own software and you really like leverage technology in every imaginable way that you could actually make it work, the best example is leasing, right? And that would actually come up with conversations with apartment investors when we were trying to bring money into the business. And it's like, you know, we have people come in, we have traffic come in, and then we have leasing agents in the office and they walk 'em upstairs, like, how does it work if they have to go drive someone 30 minutes and maybe, you know, 25% of the time the prospect doesn't even show up.

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And like, that was real. Like that was real. We used to have our leasing agents would do 10 leases a month. Like that was average. And again, like we really had to lean into tech to make that work. And so at that time, you know, smart locks had just come out and we basically created and innovated around self showings this idea of you could have a smart lock, you could have an intake mechanism, you could screen them, give them a code, let them go at a, at a time of day when they wanted. Truth is like most people don't want a salesperson breathing down their back anyway. I mean, you can go on Google and find out everything about a neighborhood. People have eyes and they can see it's a stainless steel stove. It's, and you know, they can visualize their own furniture. And so we started inserting tech and automating the whole process from getting, from finding a house to actually seeing it, to signing a lease.

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And all of a sudden we had people doing 300, I mean, sorry, 30 leases a month. And today in mind our leasing agents do, I think our record is like 120 leases in a month or something like that. Like it's just unbelievable what we've been able to do with self showing technology and just continuing to iterate on making it more and more efficient. And to me that's the clearest example of like what we had to do to make that business work. And now it's interesting 'cause multifamily is borrowing our playbook now in multifamily. It's not uncommon to instead of having, you know, two or three leasing people on staff in the office at any time, they actually do self showings. And there might be one person there that can assist someone who really needs some help, but they do self showings even within apartment buildings. Just a, because the experience is better and two, it's more efficient for the operating company.

That's terrific. So would you, would it be fair to say that that not just the market being ready at the time, the, the, the great financial crisis market, but also the technology was ready at the time that actually made those two, that made that, uh, innovation possible at that?

Yeah, it was absolutely a confluence of events. I mean, the economic catastrophe and the massive price dislocation was the impetus for like people to be curious and go, huh, like I can buy a 10 cap house. Could I buy a hundred of those? Could I buy a thou if like you, like you have a lot of incentive to make it work. And then the fact that that tech was there, you couldn't have done it back in the yellow pad paper days. Like you send someone to a house with a list and then they write down some notes and they come back into the office and they put it in this, like that would not have scaled.

Yeah, yeah, yeah. So that the fear, that initial fear that how, how are you gonna ever get the economies of scale, uh, you know, that, uh, for that, that was happening at that, that question that was still a avail at that time when you guys were public and obviously buying lots of houses still early, like most of the country hadn't started its recovery. Although we could see in our day in the Altos data, we could watch, you know, we could watch that January of 2011, we could see that, you know, the, the, the first time home buyer tax credited expired eight months before. It was cool at, at the end of 2010. And then we could see 2011 a year before the, the accepted uh, bottom of the market, you know, which they, people could talk like, we could see it. And it was driven from all I think a lot of demand like yours.

Yeah. And you know, I mean it was interesting 'cause we raised, I think we did six or seven high net worth funds. We probably started talking to institutional investors in 2010. And you know, our first institutional investor was the Columbia University endow. I think they came in in 2010. I give them a lot of credit, they did all equity, no debt, and they absolutely crushed it. But what ended up starting to, you know, create the uptick in the market was all the institutional capital coming in. 'cause as soon as they saw that it was possible from companies like ours, like, you know, maybe we had three or 4,000 at that stage, it just became clear it was possible. And there was like such an incredible buying opportunity and money flooded in. And I mean like literally I have graphics of like, you know, the hockey stick that ensued kind of post 2011. And you know, it's interesting 'cause it really hasn't stopped <laugh>,

You know, I'm interested in talking about the, the next phase. But, but one thing I'd like to say is, is, uh, and I said this to Gary Beasley, who is also on that, on that Waypoint team, uh, when you guys decide to start buying apartment buildings, like I wanna be on your phone call list <laugh>, like when, when you sitting and that's the, like when you see that opportunity is turning, you let me know when that one happens. <laugh>.

Yeah, yeah. That is sort of the untapped middle that like, is waiting for us.

Uh, did I say apartment buildings? I I actually meant office buildings. Oh, office

Buildings. Someone's gonna figure that one out. I don't, I I got plenty of gray hair trying to figure out single family.

Yeah, yeah. Okay. <laugh>. But like that one's, uh, now the scary one. Okay. So a couple other things though. Um, your book The Big Long, so I was reading it the other day and it's, it's great. It's a, i, you know, love the history of the time. It's super fun. It is. I love the contrarians to, you know, the counterpoint to Michael Lewis and the, you know, the whole perspective of the time. But really the, it seems to me the thesis of the book is that we wanna be long, we be invested, especially in real estate. It's a long-term view. So, you know, the, the thing that we face now is a radically different era, perhaps a whole era of the cost of money. How do we look at the next era? Is it a blip? Is it an era? Is it, and and what does it mean for all of the things right now? Tell me, tell me how to, how, how I should be looking at the world right now.

Yeah, I mean the, the low, the low interest era, you know, that really did fuel single family rental. But like all of real estate <laugh>, I mean all of real estate and you know, I mean it like we have put unprecedented, the feds put unprecedented amounts of capital in into the system and you know, that, that that money has just driven up asset values and I think made buying real estate pretty easy. I think the era that we're back in now, I mean if you look at where interest rates are today, I mean it's historically like pretty average. Now that doesn't really matter as you look back over the last, you know, five years, it's, you know, the relative, I mean the pace at which interest rates went up I think was the fastest, the fastest they've ever gone up in a, you know, short period of time ever.

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And so that is massively disruptive and it's certainly disrupted our industry. I mean right now the math is upside down. It's very hard to invest, you know, and buy like, let's just say a five cap when you're cost of debt is 6% plus. And, you know, most people are, um, leveraged buyers now. It's interesting 'cause we are seeing some interesting, um, buying opportunities. 'cause I mean there is, there are good homes out there, there are less investors that are active in the market, but ones that are, a lot of 'em are just buying all, all cash and they're just buying all equity. And I think there's a belief that they'll be able to finance those, you know, may maybe with a five percent-ish interest rate in the, you know, next year or so. So I mean, I do think it's changed. I do think like, you know, this is probably going back to what investing in real estate normally is.

(25:55)
Like, you know, if you can get like a 50 basis point to a hundred basis point spread between your cap rate and your cost of debt, that's usually, you know, that's positive leverage and, you know, usually considered great, you know, not, you know, two or 300 basis points of spread. Like that's unusual. So, you know, I think that really when, when, when the market is tighter, I mean it really puts pressure on operating costs. And I think that's where, you know, mind and our focus on leveraging technology and just doing things more efficiently. Like we can typically charge a little bit less than other management companies 'cause we can do things more efficiently, like those basis points start to really add up to, you know, current income for, for real estate investors. And so yeah, I mean, you know where things end, I mean, I guess I'm, I'm hopeful that, you know, we're close to the end on, um, increasing interest rates.

(26:51)
I know, you know, the, the, the market is definitely betting on that, you know, whether that's actually the case or not. I mean, I was not like active in, you know, the market at all in the early eighties. I was, you know, in like fifth grade or something like that. But, um, you know, everything I've read about that, that that period was, you know, people got a little bit too excited about getting inflation under control before it actually was. And that, you know, the, you know, the story or I guess the analogy I've heard is that like, um, inflation can be like a campfire. Like you can't just like put it out and pour some water on it and, and walk away. Like you have to stand there with a bucket of water and wait for it to start smoldering again and then dump some more water and sit there and wait and sure enough it starts smoldering in this corner. You gotta pour some more water on it. So I just think we just are gonna have to be patient in this, this process of sort of getting inflation back to where the Fed wants it to be. And playing with interest rates might take longer than some people think

Then they hope. Um, so you work with a lot at mind. You work with a lot of individuals, right? That are doing individual investing on, on single family home properties, right?

That's right. Yeah. We have I think 5,500 investors.

Okay. And 5,500 and, and um, do you, does the opportunity change for some of them or do you like in, in this, uh, higher interest rate world is, or you, you mentioned that you have cost efficiency, so maybe you're just gaining market share during this time. What, what do you tell to the individual investors? We have, we have a fair number of individual investors who, who, you know, listen to altos and pay attention to the data and, and, but we also have, uh, you know, the, the housing bubble crew really loves us and they love to go after us hard, you know, um, what do you tell to the world? Like those risks? Uh, and, and like, you know, how do, how what should we be looking at there?

Yeah, I mean my belief is like, there's not like one message to investors on like, you know, the ultimate truth of what you should do. 'cause the reality is like, I mean, with both institutional and retail investors, we serve both, like everyone's got their own goals, objectives and criteria. Like it's really unique and different. And so I have to really listen to like, you know, what's someone trying to accomplish <laugh>? Like if you're a long-term investor and you're trying to put cash to work, um, and you're willing to be one of these all cash buyers, like, I think there is an interesting opportunity to go buy properties that are gonna have a little bit less competition maybe than in certain markets than they would've a year ago. Certainly. Um, and that can make sense. But I mean, you know, if if you're a leveraged buyer and you need to go use debt, it's just, I mean, you have to be very bullish on appreciation and rent growth.

(29:48)
And, and by the way, I am like, I mean, I am, I mean, I look the supply shortage is, is is real <laugh>. I mean, whether it's, I mean, you, you probably know better than me. I'd see anywhere from like kind of four to 6 million homes short in the US That's real. And it's hard to see how that doesn't continue to drive both rent growth and home price appreciation. But, you know, there's, that's somewhat of a speculative bet. Like exactly when that happens and the shape of that curve, I don't know. But you really have to make a big bet on that to go, you know, buy a five cap five, five and a half cap home and finance it with six, six and a half percent debt. So, you know, we've seen a big slowdown in, um, retail investment also. And I think for a lot of people it's a, it's a prudent thing to do.

(30:33)
I mean, a lot of people have been pretty aggressive. Like I personally bought a lot over, over the last several years and haven't bought anything in the last year, year and a half. And I mean, this is kind of how real estate goes, right? It's a cyclical business and we're in the, you know, painful, harder part of the cycle unless, you know, you were one of the fortunate people that locked in really cheap, long-term debt. 'cause the truth is, there's a ton of loss to lease out there in the market because rent growth has been on such a rampage. Like most investors, most assets portfolios have not been able to keep up with it. So, you know, you're able to continue to grow your cash flow and have like, really low cost of capital on the debt side of things.

Got it. So you see folks, you see a lot of people with portfolios out there who's, who's maybe slowing down their purchasing of homes, but their cashflow on their existing portfolio continues to increase.

Yeah, that's right. Yeah. I mean, I own homes in the southeast and that's absolutely true for me there. And when I talked about in California, I'm unfortunately, you know, a victim of that too. I have a building in Oakland and you know, it's not going as well there.

Yeah, yeah, yeah, for sure. Yeah, I own, I have investment properties in Seattle and I'm in the same <laugh>, same boat. Um, so, uh, okay. So let's talk really quick about, about some of those markets. So, um, which markets in the country are you most excited about? Or like where do you see either from you personally or like maybe you see surprising action on the mind platform, uh, that that is something that you'd like to point out?

Yeah, again, I mean, it really depends on the kind of investor. 'cause different investors just wanna be in different markets for different reasons. But like, Atlanta's been doing really well, a lot of positive, um, job growth there in migration. You know, we've seen rents continue to grow and prices are still pretty darn affordable. Um, same in the dallas-Fort Worth metro. You know, Nashville prices went up quite a bit, but, um, Nashville's a great market. Really. All of Florida's been on a tear. You know, we're not in, um, south Florida, but we're in both Tampa, Fort Myers and Orlando. Those markets have done really well. And then the Carolinas, um, Charlotte, Raleigh, Durham, those markets have continued to be strong. And you know, it's, it's the things that I think you might have mentioned earlier, it's like there's some real, I mean, there's a reason why people are moving to those markets or like low tax, business friendly, lower cost of living and good weather.

Yeah. Yeah. They're, they're nice to be there. Although this week I don't wanna be in, you know, Texas, but you know, <laugh> it's 115 degrees, but, uh, <laugh>

Yeah, yeah, Atlanta too, I think is pretty, pretty hot.

Pretty hot. Um, okay, so, so that's really that, that's, I appreciate that, uh, that view of those. Um, uh, and you've talked a little bit about your long-term bullishness. Um, and, and of course the book the Big Long, like, is it, it, it sort of talks about a long-term, but I'm, I'm interested in, and I asked this of all my guests, like your view of the longer term future, second half of this decade. We've had, we had, you know, a real one directional market for a long time. We had millennials growing into their biggest earning and home buying years. What do you see for the market and, and for, even for Mine's opportunity and the, the second half of the decade, anything, anything that, that, like the headlines are getting wrong or anything like that, that we should pay attention to?

Um, yeah, I mean, I don't, I don't know that I have something that the headlines are getting, well, I guess something that's been controversial in the headlines, which I actually, I mean, I do kind of think that, that some are getting it wrong or at least getting upset about something that maybe they, they shouldn't. And, and that's the American dream of, of home ownership. And I just think, you know, like our position on that, my belief on that is that the American dream of owning a home is evolving. It's not dying, it's evolving. I mean, the truth is for a whole bunch of reasons. One is that, like, you know, renting a home used to be a really hard thing. You had to go to Craigslist, it was entirely mom and pop. You'd have to like, get someone on the phone and see if you could see their one house and then you go see it.

(35:05)
And if it's not a fit, then you're back dialing for dollars. It's just a really bad experience Today. Renting a single family home is a lot like renting an apartment. It's a professional industry with customer service and portfolios and choice and, and it's a lot less painful. So it's made it easier. I think a lot of people got burned or saw people they know or love get burned during the foreclosure crisis. I mean, to me, it never made sense to like put all of your money into a house, to buy a house. That's just, I mean, you, if you lined up a hundred financial wealth advisors and said, Hey, should you put all your money in any one asset? I, the answer would be a pretty quick no. But that's kind of what a lot of people did to kind of sustain this American dream.

(35:52)
And I think for those reasons, plus just people want more flexibility, maybe need more flexibility with the way the job market is. We're just seeing more and more people choose to rent. Like maybe even in some cases they could buy, but they're like, I want the flexibility. You know, I'd rather own a couple of less expensive rental properties maybe in a market I don't even live in. 'cause it makes more economic sense than owning, putting all my money into the one house that I own. So for a, for a variety of, to me very healthy reasons, the American dream around home ownership is evolving, it's changing. And I think people, every, um, survey I've seen people say they want to own a home, it's just later in life. And I think a big part of, you know, mine's value proposition is really enhancing that experience, making the service as easy and, you know, seamless as possible so that as more and more Americans rightly choose to rent, we can do a better job of, of making that experience more seamless.

(36:56)
You know, I think in terms of, you know, the supply shortage that we talked about, I mean, that's gonna continue to fuel home price appreciation. I mean, I do have this fear that like home prices and wage growth just, you know, are outta sync and it's gonna become actually harder for people to buy homes. But what we're seeing in our, in industry and kinda, you know, the really new exciting sub-asset class within single family is, is build to rent, right? And so the idea of build to rent is, I mean, I, I remember that I got invited to the big, um, P C B C builder conference in San Diego. I mean, I think it was literally like 2010, 2011. And they wanted me to come talk about, in those days we called it B two R, B two R, build two rent <laugh>. That got changed to B T R.

(37:45)
And I was talking to these home builders and they were just like looking at me cross-eyed, like, why in the world would we build a house to rent? Like that makes no sense. We just, we sell to homeowners. But like that has really taken off. And I think part of it is as institutional capital has come in, you know, even though we've shown that there are real efficiencies and that the single family, the scattered site, single family rental can work, there's still more accustomed to investing in large apartment buildings with economies of scale. And it's interesting 'cause Bill to rent is basically a horizontal apartment. 'cause you end up with, you know, maybe a couple hundred homes and one community and they're all rentals. And we just can't get enough rental homes to meet the demand of the market without building our own supply. The truth is, you just can't buy, you, investors can't buy enough already built homes and convert them to rentals, to supply demand.

(38:38)
And so what we're seeing is a massive amount of build to rent, um, construction happening, companies being created, the capital is attracted to it. 'cause it looks more like, um, apartments. We call it the, we call, um, build to rent the gateway drug to single family rental. You know, build to Rent is just one flavor of single family. And our, our our belief is they're gonna try it out with build to rent 'cause it looks more familiar. But then once they get into it and see the dynamics are are safe, then they're gonna want to get into scattered sites and, and, and build a portfolio. So I think more build to rent is gonna be something that you're gonna see. So like lots of really amazing choices with like brand new rental homes with amenities, much like you'd see in an apartment building.

Yeah. And, and you said something interesting in there that I wanna touch on. You, you, you, we've talk about the shortage of homes that are available on the market, uh, to buy. We talk about shortage of homes that are, uh, you know, we've been under building since the great financial crisis. And then, uh, but you said that you really feel a shortage of homes, uh, that available to rent. Like you feel a shortage, you have more renters, uh, people who want to rent single family homes than are available for them to rent. Is that, is that true? You feel a shortage of those as well?

Yeah, I mean it, I mean, look, it's always like a market level conversation of supply and, and demand at a certain time in a certain market. But I mean our, I mean our average days to lease has been around 15 days pretty steadily throughout the year. And, you know, in my time in the market, like that's, that's that, that's pretty fast. And so, yeah, I mean, it, it got challenging last winter. But um, you know, kind of the, at the same time that we saw, you know, the housing market pick back up, we saw, you know, demand for rentals and rent growth pick up as well

At the same time. Sure. It's, it's people, um, have a, a misconception that that purchases and rental is countercyclical to each other, but it's really like people are buying houses, they're moving out, they're creating households, they're doing both at the same time. And we see very often them move in tandem. Look, that's really interesting stuff. I appreciate your, your view of the future. Um, and it sounds to me like the, um, this, uh, vision where the, the, the, the American dream is shifting, um, that the American dream is, uh, what you saying is sort of like, it's about the autonomy of having my home, uh, where I have, I either I own that home, but if I choose to rent it because it's now easier to do. So like that can be part of the American dream and a of a good lifestyle, uh, a good quality of life. Yeah,

And I think, you know, the opposite side of that is like the renter, right? So like another way of saying it is we're trying to decouple the house that you live in, necessarily having to be the house that you invest in. Like why can't it be that like renters choose to live in a certain area, maybe they wanna rent 'cause they can, you know, afford to get into a school district they, that they want to be in. But that doesn't mean that they shouldn't own a home, like work with mind. We can help you buy a rental home and, and, you know, we'll manage it for you, help you pick a market that makes a lot of sense based on rental demand. And so people are owning homes, they just might not be living in the home that they own. And I, and I just think, you know, when you read the headlines, there's just a lot of consternation about like, what's happening, you know, the erosion of the American dream. And it's like, I think if you really double click, it's like, it's a pretty healthy evolution of the American dream that makes a lot of sense. And we're just trying to be a part of helping people to, um, you know, make that move forward.

Yeah. Um, the headlines also can be critical of the, uh, institutional capital in single family homes. And, uh, what do you, what do you say to that, uh, to those, to those criticisms? What do we talk about? How, how should we look at that?

Yeah, I, it it's a super, you know, easy, uh, criticism to make. There's, there's two pieces to it. One is, and I was there, I was on the ground level. Institutional capital may have saved housing in America, maybe even save the economy because now, like what happened during the foreclosure crisis, what happened in the book that we taught, you know, in the big long, it won't happen again. It can't happen again because now you have this like massive amount of institutional capital that's basically creating a floor. As soon as prices get too low, that capital is just going to flood into the market. And so it's actually stabilized the market and saved the market. I mean, we used to get hugs from neighbors. We'd come in and buy these dilapidated homes, which were nice homes. Now they were, you know, being lived in by people who were basically, um, you know, trying to steal the house <laugh> and, and, and live in these homes illegally with, you know, that were all boarded up.

(43:52)
We would come in and we would buy them and put 20, $30,000 in 'em, nice landscaping. The neighbors would literally come out and thank us for like saving their neighborhood. So that's one. Two is, I mean, I'm yet to have a conversation like we just don't get our retail investor. So like the mom and pop landlords who, you know, many in the media feel like, well, that is who should own these homes? They're never coming to us and asking to us about service levels and like upfront saying, what are all your policies and procedures? How do you deal with X? How do you deal with X, Y, and Z? They like that. Those are just not conversations. We, but with every single institutional investor, they want to know, they want to be sure that we are providing a good service and that we're taking care of our residents.

(44:41)
We're treating everybody fairly, like they want to see our manual, they want to understand our policies and procedures. They really care about it. And so it's like single family rental is hard. Like there's all these scattered homes and you know, it's not like an apartment building where you can very, like super clearly see issues. Like there are challenges to it and it's never gonna be perfect. So it's always easy to find an outlier example of like where someone didn't get it right. But what I can say is institutional capital wants to get it right. And people also have to remember, you know, institutional capital is pension funds for firefighters and teachers, and you know, this isn't, they're investors. Like, we're basically, you know, managing investments for teachers and firefighters and police. I mean, this is what we educate our team at mind about so that they, you know, get excited about the fact that we are representing institutional investors. I just, yeah, I don't think that they're the villains that, um, they're often portrayed as in the paper.

What a, what a surprise. But, but yeah, that's a, that that's a a that's a great perspective. Um, you mentioned, uh, they create a floor and, you know, a year ago, uh, and, and a year to 10 months ago, and I'm, I would do these conversations on the podcast with folks and, and I was asking them about what they would think of, you know, we could see the market softening in the second half of last year, very obviously. And my question was, is the capital out there, uh, going to create a floor or, you know, come in and see like, oh, our cap rates are a little better, let's go by. Or is the capital going to get afraid and everybody shut down at the same time and exacerbate the downturn? Um, we now, we had a floor this year, we could see that people were buying it. And not just institutional, but like, uh, homeowners were buying homes this year more than were for sale all year long. And it was a, it was a big surprise. So, um, in the next phase though, let's say recession hits hard, let's say, you know, at the beginning of next year, and, um, maybe rents adjust down, home, prices tick down. Um, is there risk that the institutional capital all stops at the same time that and therefore, um, exacerbates the next phase of downturn?

I, I don't, I mean, the institutional capital, I mean, is down nine 90%. I mean, they all did. They, they, uh, did stop at the same time. And it wasn't really because of the reasons that you cited. It's, it's the, it's the math not working. It's like as soon as there became uncertainty around the cost of debt, you know, these are typically leverage buyers and it, it, it is about how do you buy with positive leverage. And as soon as that became tricky, and it was clear that like cap rates couldn't possibly move as fast as the cost of debt, I think that was what made everybody say, whoa, you know, tap the brakes. Well, first it was tap the brakes, and then it's like, we just need to see where things land there. I mean, Ivy Zelman, you know, put out an estimate, I don't know, four, six months ago, like, she believes there's like $80 billion of, um, dry powder on the sidelines, not looking to get into SS f R, but with a mandate to get into S F R.

(47:58)
Like, we see that these groups have a mandate, it's like an asset class now, and everyone's kind of underexposed. And as you look at real estate, I mean, single family rental stands out as like, you know, one of the most compelling, if not the most compelling from just pure fundamentals. So I think as soon as there is clarity around the cost of debt and it neutral to positive leverage that can be achieved, you're gonna see a wave of capital come in and it'll look a lot like 2011 that you and I were just talking about as soon as Blackstone and Starwood and Colony. You know, part of it is the math working, and part of it is like, what's Blackstone doing? You know, what are these big blue chip, you know, is Invesco all of a sudden, like, they're all in buying and, you know, everyone's gonna feel like they're missing out.

(48:46)
And you know, what, what ends the, the supply shortage we have? Like, I don't know, that's hard to say. I mean, there's a lot of vacation homes where that were bought during covid with, I think outsize expectations on rents and revenues, and, you know, we've really seen those revenues and demand go down. You know, I, I mean there's millions of those vacation homes out there. Like, what happens to those? Do those owners have have to sell in some kind of distress? Fa um, fashion? I don't know, but like, I just know there's a lot of capital on the sidelines, and as soon as the math works for investors, I think you're gonna see a real wave of capital come in.

Well, that is optimistic. That's really, uh, great to know. Great note to, uh, to wrap up on Doug. Uh, I appreciate your time very much. Where can, uh, people go find out more about you, about mind? Are you social media?

Yeah, so LinkedIn's a a great place for me, you know, mind.co. Uh, we missed out on.com, unfortunately, we were raising our first round of capital, like right when it got taken. And I'll, I'll, I'll never forgive myself for not just putting up the 25 grand, so we're mind.co. Um, yeah. And we're out there on social media

Mine with a y

Yeah, m y n d.co. And yeah, I mean, if you're interested in learning more about single family rental or, you know, getting in the game, preparing yourself, and what I always tell investors is like, you need to do, like, you know, at least six months to a year of like education, finding the right partners, figuring out, you know, there's a lot of work that needs to be done. What do you want to do? What do you have time for? What do you want to have partners for? What's your strategy gonna be? Start making some low ball offers, like, get in the game. It's hard to like sit on the sidelines and know what to do. You gotta get out on the field and start making offers, and then you're really ready when that that deal comes through and you're like, oh, I've seen so many. This is the price, this is the location. I'm going for this one. And so I say, be ready, like, you know, sharpen your sword. I don't know when the, you know, what I just described of the wave of capital, like, I am highly confident of that. I'm super, I, I do not have a lot of confidence about when <laugh> timing is, is murky. But like, get ready now. So when it does come, you're ready and we're happy to talk to you about it.

Fabulous. Really, really great. Appreciate it. A lot of the, all the insight. Uh, and thank you so much for your time today. Uh, again, everybody, this is the top of Mind podcast, the top of mind with an M I N D. Again, my guest has been Doug Brian, the c e o founder of Mind. Thanks everybody.

Thanks for having me, Mike.

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