Atticus is the Founder of PadSplit. A seasoned entrepreneur with a deep understanding of housing, real estate, and construction, and […]

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Atticus is the Founder of PadSplit. A seasoned entrepreneur with a deep understanding of housing, real estate, and construction, and he’s always seeking ways to improve neighborhood schools or governments. 

For about 20 years, and has been in housing for the last 14 years, he started his career in commercial real estate, site collection acquisition for some major developers around the country and pivoted to residential construction and acquisition, rehab, renovations, and rentals. Starting in 2008, in the financial crisis of own and manage about 550, affordable rentals pretty much run the gamut across different affordable housing programs.

 

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The Fundamental Issues of the Affordable Housing Crisis with Atticus LeBlanc

 

Brett:

I’m excited about our next guest because he’s an expert in this. He’s a seasoned entrepreneur with a deep understanding of housing, real estate, and construction, and he’s always seeking ways to improve neighborhood schools or governments. He’s now in Georgia, and he has an amazing company that’s we’re gonna be talking about but we’re first going to dive into all things. The housing crisis, please welcome the show with me, Atticus LeBlanc. Atticus, how are you doing?

Atticus:

Doing great. A pleasure to be here.

Atticus:

I got to say your name is might be the coolest name for anyone who’s been on the show so far. Maybe talk about that more in the future than later in this episode. But in the meantime, would you give our listeners a little bit more about your story and your current focus?

Atticus:

Being in being in real estate here in the Atlanta area for about the last 20 years, and been housing for the last really 14 years of that started my career in commercial real estate, doing site collection acquisition for some major developers around the country and then pivoting to residential construction and acquisition, rehab, renovations, and rentals, starting in 2008, in the financial crisis of own and manage about 550, affordable rentals pretty much run the gamut across different affordable housing programs, and really seen it from the front row and from a pretty high level. It’s been a wild ride.

Brett:

We’re going to dive into again, the fundamental issues of the horrible housing crisis here in a minute, and but before we go there, I want to take one other step back, help our listeners get to know you a little bit better, and also myself. I believe we’ve all been given certain gifts and these gifts that are given to us to be a blessing help to others. Some people call them superpowers, some people call them strengths. I’m curious, what are those one or two gifts that you believe you were given? How does it help how you help and bless people today?

Atticus:

For me, it’s definitely creative problem solving, I think I’ve historically had a unique ability to assess problems from multiple angles and figure out solutions that a lot of people either haven’t thought of or maybe just are really outside the realm of accepted practice, to be able to address that head-on in a new way.

Brett:

I think that’s perfect, why you’re probably in the space, and by the way, you can learn more about Atticus LeBlanc and what he does at PadSplit.com. Atticus, let’s dive into the first part of the biggest challenge or the biggest thing to try to understand when it comes to the housing crisis. Maybe you can define it in your words, and how you see it, and perhaps how people aren’t seeing it today and how you’re seeing it, and then let’s talk about some solutions after that.

Atticus:

That sounds great. Really two major problems that folks need to be aware of one I’m sure if anyone’s been paying attention, the news they’ve seen, we have a massive supply problem, and so this boils down to basic economic fundamentals of supply and demand, and for the last 12 years, we really just haven’t produced nearly enough supply of housing, to be able to maintain affordability in any sense of the word. The second problem, which is equally as significant, but much lesser understood is access, and as we look at how housing providers mitigate risk through qualifying criteria, such as minimum incomes at three times the monthly rent, minimum credit score’s minimum deposits, all of these things ultimately create barriers to access and it’s at a point now where there’s a huge portion of the population really look at anybody earning less than $40,000 a year simply cannot qualify for the many apartments or most of the traditional housing options in their areas.it means that the people who are serving our community literally and working there cannot afford those traditional housing options.

Brett:

Got it. The first one is just supplied. That’s pretty obvious. We’re just there’s too much demand, not enough supply being created, and that’s a challenge if you can maybe dig into some of those ways to solve that. The second one is just access that it’s difficult for people to even qualify for even to rent the rent, or, of course, the house. Because of the three times the monthly rent, typical minimum requirement, and the minimum credit score, so if you’re making less than $40,000 a year, good luck getting qualified. Is that a fair summary so far?

Atticus:

Exactly.

Brett:

Let’s dive into the first one. We don’t have enough supply. I live in California, you’re in Georgia, but this is across the nation. It’s we’re challenged different areas are, are better or head of head than most. But if we just focus on two things that if they were to change in your mind, what would they be for the supply side? You could talk about the government side, you could talk about the developer side. What would those two things be?

Atticus:

Zoning and trust. From our standpoint, if you look at the housing supply that we’ve created, over the last 60 years, it’s a huge mismatch in terms of the housing supply that exists relative to the demography that we see today, and what I mean by that is, you’ve had single-family homes has been far away from the predominant source of supply for the last 60 years. Meanwhile, we’ve seen family size that has declined precipitously and far away. If you look at the makeup of households across the US today, it’s around 73% singles single adults, or couples, no kids, whatsoever, and yet, if you look at the supply of studio or one-bedroom units, those are 12 and a half percent of the existing housing stock. Huge mismatch there, and consistently, those single-family homes have been getting larger and larger, basically tripling in size, if you look back to 1980, and it just leaves a lot of room and existing space, and really means that a lot of supply that we need is already there, folks just don’t trust that they can split up their house and share it with someone else in their community. In the same way that it may have been really commonplace. If we talk to our grandparents or great grandparents, to rent rooms in people’s houses. That was a thing that absolutely happened not that long ago.

Brett:

Let me make sure I capture that because I think that’s really key to the fundamentals of this. The stats here are 73% of all housing right now, that has been occupied, and correct me if I’m wrong is by single couples, no kids. Is that correct? On the first one?

Atticus:

If you look at the US population, 73% of those households are either single adults living alone, single adults sharing with each other.

Brett:

Then the actual housing units, the unit mix, whether it be studios, ones, twos, threes, four bedrooms, right townhomes, all these different mixes, only 12% are actually Studio One bedroom, which it’s like reverse, let’s just say 73%. Could be if there were studios and ones, perhaps we could solve that. Is that a fair summary so far?

Atticus:

The major distinction is what’s built is built. It doesn’t really make sense to just go tear it down and start new. But it’s not that difficult, and where we come in from a technology solution is to make it feasible and to build trust and accountability, and encourage us to share that existing space that’s already out there.

Brett:

It’s basically like the Uber for housing. Is that a fair summary so far?

Atticus:

Very similar. I mean, the analogy I provide is Uber versus hitchhiking. What’s the difference? The answer is really nothing. Except that you have an app on your phone, you will get to that person, and ultimately, we’re trying to do the same thing for housing.

Brett:

We’ll get to that in a minute here too, by the way, that’s PadSplit.com if you want to go right now, because I’m already excited about this, just getting into this, and by the way, I’m meeting Atticus LeBlanc for the first time about, five minutes ago. That’s the first thing, the end of the zoning, so if they could change the zoning or encourage developers because let’s face it on the development side, they’re saying, look, if I’m going to go build something, I didn’t get the highest bang for my dollar and for my time and energy to build these bigger units to get higher rents. From their perspective of they’re saying, the environmental the permitting the the the time and energy it takes to do this, to build a studio, if I could just build, three-bedroom and it may not take that much more cost or time and energy, and I get much better profit. There so let’s talk about it from their angle like you can’t blame the contractors for building what they can actually make money on correct?

Atticus:

Sure, not at all. If anything I would encourage the alignment of incentives. The real question is you have existing zoning codes that prevent that same developer from building and if it’s a 3000 square foot house that’s in his buy or build a box, there’s really no existing zoning policy across the board that allows him to build that same 3000 square foot box and build it for four or 5, 6, 7, 8 people, he’s only allowed to build it for one family, and if there were a way to demonstrate to that same developer that it was more profitable, and it’s certainly easy to do to build micro-units or shared housing, that would be more profitable, he would go do that. But zoning laws as they exist today in most jurisdictions preclude him from doing so and really prevent that free-market type.

Brett:

Somebody said one other side of it too. That the people that say, look, we need more prisons to take care of or to house to make sure that we do not keep the bad guys on the streets. But they say just don’t build it by my house. Now let’s take that same part of the argument. That sounds great advocates, but just don’t build out and buy in my city, or my backyard. Go do that somewhere else? Like, talk to me about that dynamic that’s going on? If there is one? ,

Atticus:

Well, no, it’s clearly an issue, and I think, listen, everyone’s comfortable with with the status quo, by and large, and anything that is a disruption to the status quo that is treated with fear and anxiety, and usually opposition, and this is not really any different. The biggest opposition that we see to share housing is for folks who are living in single-family neighborhoods who think that this is going to change everything, and the only thing that’s going to disprove a lot of those, a lot of those impressions or those fears is when one of actually exists. But at the same time, you can look back at some of the most famous historic neighborhoods in America, and they are multi-dimensional by every stretch of the imagination, and you often have a huge diversity and variety of housing types that create healthier communities over the long term. The bigger and more pragmatic question from our standpoint is if you’re living in a really nice neighborhood, do you value the services around you?

How about the grocery store or the Amazon delivery guy who comes to your door, or the person who serves your morning coffee? Well, or even the person who teaches your kids or shows up to the 911 call? Because the reality is, more and more cities are not able to house these people anywhere close to those places of work, and you’re starting to see some of the challenges now, post-pandemic, where everyone is hiring, no one can find enough people to employ and keep those jobs filled. The way that the restaurant gets to be an hour or longer than then it was pre-pandemic, because guess what, the housing costs have increased so much that those people can no longer afford to live in those areas for those wages, and who ends up paying the price for that, and ultimately, it’s all of our best habitats.

 

The Fundamental Issues of the Affordable Housing Crisis with Atticus LeBlanc

The Fundamental Issues of the Affordable Housing Crisis: “I’ve historically had a unique ability to assess problems from multiple angles and figure out solutions that a lot of people either haven’t thought of or maybe just are really outside the realm of accepted practice, to be able to address that head-on in a new way.” – Atticus LeBlanc

 

Brett:

I could agree with you more. In fact, in Lake Tahoe, we’re here in Northern California, they are talking are about to basically just limit the amount of Airbnb permits, right. Because what’s happening is they’re seeing that all of the housing is going to all the vacationers and then they’re saying all the locals are like, Hey, we can’t even afford or there’s not even available, that supply is so limited, and that means the rents are so high, that we can’t afford to work and live here at the same place, and so it’s a huge, huge crisis. This is why we’re in the fundamental issues of the affordable housing crisis. We’re talking with Atticus LeBlanc and more about him at PadSplit.com. Now let’s talk about the government’s role, and what besides zoning, but, I’m from commercial real estate background, sort of Marcus & Millichap group in the real estate industry is my dad building custom homes room additions in Fremont. He said 30 years ago, the Brett building in California was wonderful. They welcomed it as business-friendly. We could do things in a way that was quick and got things done. He was right. I would never want to start my career and ever build again in California. Part of why he kind of retired early was to he loved to build houses, he loved to you know, own rentals, but he just becomes such a nightmare to do this in California. Talk about from that perspective, what can they actually do that they’re not doing? I mean, could they, maybe California, if you’re following that at all, and that pertains to it. But what are some things that good states are doing to get out of the way to get developers and get get get housing that can be built quickly?

Atticus:

I mean, on from a policies zoning perspective, I mean, we’ve seen some recent advances in California, like maybe the poster child of that of trying to remove some of those restrictions, and the acknowledgment that, that a lot of this intervention has, has really created a significant amount of that supply crisis, and I think the biggest thing that they can do, and you hit the nail on the head, is to just let the people who are closest the problem, go figure out a way to, to solve it, and if your dad as, as an example, builders want to build, at least it unless you make it really, really difficult for them, and everyone is in business trying to maximize their gain and minimize their risk to whatever extent possible, and the more complex that you make these processes, whether it’s zoning and development and pre-development and historic review, or if it’s just as simple as, how efficient is the building process and the permit process? How easy is it for me to build, because if we all acknowledge this as a supply and demand problem, then we need to rapidly increase the supply and the ability of that supply to reach the market as much as possible, and so the biggest thing that I think government can do is to streamline a lot of their own organizations and hold it hold themselves accountable for making sure that they are processing the highest number of permits that they ever have, in order to meet the demand, which is visible? Anytime you draw from an underpass, and you see the folks who are often living on the streets that that is in a lot of cases are still full-time employed.

Brett:

Then just the cost of it too. I mean, even the affordable housing for the estimates of 250 to $325,000 per unit, to build affordable housing, and you’re going. How are you gonna make sense of those numbers, for rents and return, because of just the sheer cost and the carrying cost and everything else that’s associated with it? Streamline and accountability, for government, sometimes, especially in California, it seems like it’s just it’s you throw our hands up. I mean, it sets a mess on so many levels, and it’s so frustrating, growing up here and seeing all this happen, and you just go, you just pray for a miracle that something changes, but it doesn’t, it just keeps getting worse and more businesses are fleeing. More families are fleeing. I was talking to a good friend of mine. He’s a realtor in Tennessee, and his name is Bill Zufall, and he’s talking about how this last week, he had five new families that he has known, or five new individuals that are all moving out of California, and are buying houses does this five more every week, there’s like two, he just one realtor, and he’s an awesome REALTOR with Keller Williams, he does great work, but he’s just like, they just keep calling, but it’s like on two a week, I just closed five this month. It’s just they’re just, flipping out of California going to places like Tennessee, and in Arizona and Texas and in Florida, and in the meantime, California seems to continue to crumble. It’s very sad. Now let’s talk about some solutions. All right. Now that we’ve is enough about that before I get too, too, too depressed on all this stuff. Let’s talk about PadSplit.com, and what you’re doing there. Give us the vision and give us the practical solution for some of these challenges

Atticus:

Sure, so for us. It’s all based around that alignment of incentives, and if we can make housing that is more affordable, and increase that supply really quickly and really cost-effective, we think the best way to do that is by making it more profitable for those investors, developers, housing providers that are already in the business, and how do we mitigate their risk and essentially create a product that’s more profitable than there are other alternatives? That it’s because if you can do that, then guess what they’re going to go create that product, and if that product happens to be affordable housing, that’s the business that they’re going to be in. The way that we do that is through a technology marketplace, where we essentially handle all of the lead generations and screening primarily for low-income workers earning less than $35,000 a year that wouldn’t qualify for any other options, get those people moved into rooms very quickly, and create the shared living environment where we’re setting contracts on each individual room.

Being able to capture a lot of the space that is completely and monetized or wasted for those housing providers today. Formal Dining Room is a great case in point as we talked very earlier about just the size and the wasted space in a lot of those single-family homes. But it’s true in apartments as well and a formal dining room. Never really generated any cash flow for any investor that I’m ever aware of? Well, now all of a sudden, you can say, I’ll take that formal dining room move out the dining room table and chairs, put in a bed, and maybe if you have to put a door on the room, and now that’s five to 600 bucks a month, and you can do that with pretty much any space that’s suitable for conversion to deliver.

Brett:

Well, that’s pretty cool. Picture my mom. She lives, her two sons are older and grown, and they’ve got four bedrooms, and she’s with my grandma. they definitely seem to, but they’ve got like a side dining room there, and we’ve got the other room there. Then they’ve got like, let’s say they used to for themselves, and then they had two more, they could potentially do four. You’re saying, how much square footage on average, you need, for this, but four times 500? That’s an extra 2000 a month if they’re willing to say, we’re going to be a shared space here. Now they’re in an HOA. They’re in California. Gated community, nice community. Walk us through just the practicality or some of the challenges without or maybe it’s not as bad that as it was, someone might think for some of those challenges.

Atticus:

Sure,  two distinct use cases, I’d say the overwhelming majority of our clients today are investors and kind of traditional landlords who don’t have that same personal interaction with those residents on a daily basis, we do have some, and actually, I rent a downstairs room in my personal home and have for about the last 18 months to a Padfoot member. But, but those are less frequent, and I think will start to become more common. After we have scaled and really demonstrated the fact that you can, you can trust these folks in multiple use cases. But the easiest portion for us, or the easiest thing for us to do is to say, to show a landlord, hey, here’s how you can actually increase your bottom line, and really make it palatable, as you look at talking about an HOA and those types of issues, that’s part of zoning, and Hoa is not specifically but usually the definition of family is on a local level, whether it’s county or city, and they’ll often restrict how many people can live together, and the Golden Girls, for instance, would be prohibited in a lot of different zoning jurisdictions. Even though we can all look at this problem, say. This makes a ton of sense, and we have enough data within our 2400 units to show that it’s better for all parties, including the neighbors.

Brett:

Very well said,  so most of our investors, and let’s just take the study of I had a rental house, and they actually have another rental house. It’s a three-bedroom, two-bath, and they’re renting it now I think for around 2000. But it’s three business units to one family. It’s no HOA. It has plenty of parking, off-street non metered plenty of parking, and I don’t even do garage conversions to the right, they have a pretty big garage that perhaps can be converted as well. On average, what do you see on a per square footage basis, of course, it depends on where you live where you’re at, but on average on a per room what’s pad, but usually seen for somebody?

Atticus:

The per square foot ranges are going to be totally different depending on where you are in the country. But historically, you’re going to see a difference in your return on cost or your yield on levered, that’s going to go up by 2x or more, and that’s pretty much for shared housing versus taking a whole unit across the board. For us, we’ll look at if you have a call at an 1800 square foot house, you’re generally looking at about 300 square feet total per bedroom, and that’s inclusive of common areas and kitchens and bathrooms.

Brett:

Someone wants to get started, what are the next steps, and I guess the other one being who is this not for?

Atticus:

We’re don’t really work in really small units or where your units are already super-efficient. If you have a 400 square foot studio or a multifamily complex performance, Burfoot studios are going to be much less appealing, at least from the standpoint of being able to generate additional space that can produce revenue. But if you’re talking about a three-bedroom house or even a two-bedroom apartment, generally it’s going to be worth your while to at least look at renting by the room, and that’s really what we enable and allow you to scale because we’re managing all of the different movements on flexible terms as well as all The different pay schedules and we’re usually billing by the week or tied to pay period so there’s a fair amount of complexity on the back end.

Brett:

What’s the cost? How do you guys get paid? How does the I was also it was all the backend for paperwork or signing the leases and doing all of that?

Atticus:

For us we get paid almost like a property manager if you think about property management generally is the property maintenance on one half and the resident management on the other half we handle pretty much everything under this resident management category and we have service providers in the market and sometimes we’ll do it ourselves on the On Property Management itself but we doesn’t get paid unless that unit gets filled and we just take a percentage of that rent as folks come in and if they pay then we get paid and if they don’t, then we don’t but all the marketing is on our dime. We use that though to require that every room and home on our platform can meet our basic accountability standards.

Brett:

I am talking with Atticus LeBlanc PadSplit.com. You can learn more about turning your house perhaps into a rental house and or primary house. They may be able to rent your rooms Airbnb, like Uber-like maybe kind of a hybrid of the two but more a niche level. Is that a fair summary?

Atticus:

I think both are certainly kind of shaping the sharing economy and we’re certainly in that in that same space I’d say if folks are curious if you go through the for hosting section on our website there’s actually a calculator where use case and geography and figure out, I think I have like you were looking at your mom’s house I think I have this many other rooms that can be converted What does that look like in terms of real dollars

Brett:

With that being said we’re running out of time. Are you ready for a lightning round?

Atticus:

I am.

Brett:

All right knowing what you know now if you go back to your 25-year-old self with the one Golden Nugget Make sure to tell yourself to do.

Atticus:

Start writing it down. Journaling every day. That’s the biggest thing, I know that I’m getting old or I forget I forget more than I’d like.

 

The Fundamental Issues of the Affordable Housing Crisis with Atticus LeBlancBrett:

I’m with a man I get older and I get every kid I like my mind is filled up with more stuff I forget. It’s a little bit about that. Second question, what’s the number one book you’ve recommended or gifted the most in the past year?

Atticus:

Probably, Atomic Habits would be the biggest recommendation and just the necessity of building strong habits and repeating over and over and how that ultimately helps you achieve your life goals long term.

 

 

Brett:

Third question, what are you most curious about right now?

Atticus:

Most curious about right now. I’ve gotten into mushroom foraging recently as a completely random thing. That’s probably top of my list these days.

Brett:

Next question. What’s your favorite leadership core theme that you strive to live by?

Atticus:

There’s a great one. That’s if you have data, show me the data. But if we’re going to use opinions, let’s go with mine.

Brett:

Absolutely love that.

Atticus:

In gray area, where we can all sit around and watch. But you’ve got to go with your gut in a lot of cases and acknowledge that you still have to.

Brett:

Last question. If all your success, helping the people you’re helping change the industry, being a thought leader in affordable housing, and actually making a difference taking action? How do you stay centered in your values? How do you stay encouraged to charge forward to reach new heights?

Atticus:

The biggest thing is to set your Northstar to write down, write down your vision, your core values, and understand a high-level strategy, how you’re going to get there, but align your entire team and certainly with your actions each day and how does it relate to that long term decision that you’re making on a daily basis, ultimately, ultimately move you forward towards that Northstar.

Brett:

Atticus LeBlanc, PadSplit.com. You can find and learn more about what he’s doing and how he’s helping people and perhaps get the service going for you and your rentals. advocates, I want to thank you for being on the show. I want to encourage you to keep using the gifts you’ve been given and creative problem solving and looking at things from multiple angles and trying to bring all the parties together, right to solve this housing crisis. It takes entrepreneurs like you to take action and to start something and to make movement and I applaud you for what you’re doing. Because it’s at the forefront of what this nation needs. Thank you and also want to thank our listeners for listening to the episode of the Capital Gains Tax Solutions Podcast also streaming on eXpertCRESecrets.com or we believe most high net worth individuals and those who help them they struggled clarify their Capital Gains Tax Deferral or options not having a clear plan is the enemy using a proven tax pro strategy such as the Deferred Sales Trust is the best way to sell your business real estate, cryptocurrency primary home all tax-deferred so you can create and preserve more wealth, and I want to encourage you to please share this episode with friends, family, government officials, developers, everyone, everyone, we need everyone helping with this crisis. It’s not going to be solved by just one party. It’s got to have everyone coming together to try to solve this, and so I appreciate everyone listening out there, and I wish everyone well, we’ll talk to you soon.

 

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About Atticus LeBlanc

 

The Fundamental Issues of the Affordable Housing Crisis with Atticus LeBlancAtticus is the Founder of PadSplit. A seasoned entrepreneur with a deep understanding of housing, real estate, and construction, and he’s always seeking ways to improve neighborhood schools or governments. 

For about 20 years, and has been in housing for the last 14 years, he started his career in commercial real estate, site collection acquisition for some major developers around the country and pivoted to residential construction and acquisition, rehab, renovations, and rentals. Starting in 2008, in the financial crisis of own and manage about 550, affordable rentals pretty much run the gamut across different affordable housing programs.

 

 

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