Latest / Real Investor Radio Podcast / Ep 88 | Big Data & Real Estate, Institutional Investing, Rental Regulations with Sean Tierney

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Ep 88 | Big Data & Real Estate, Institutional Investing, Rental Regulations with Sean Tierney · Real Investor Radio Podcast

• Craig Fuhr (00:12) Hey, welcome back to real investor radio. I'm Craig Fuhrman joined again by Jack Bavier and Sean Tierney. Listen, if you didn't have a chance to listen to the previous episode, covered a lot of ground there with Sean and Jack talked about projections for the five year treasury, which is important for anyone who's doing DSCR loans over the next 12 months. We talked a lot about sort of the state of DSCR and single family. as an institutional asset. So just a great conversation with you, Sean, can't thank you enough for spending another episode with us. We I want to, you know, see if we can focus on we talked about your amazing trajectory from college to Morgan Stanley to then going out and working for a firm to raise $453 million. And can't forget the three. And the question I have is, So how do you go from that, which was, that was Haven Brooke Holmes, correct? How do you go from that then to Entera? You mentioned that Entera was founded in 2018. When did you join the company? Sean Tierney (01:12) Mm-hmm. I joined in 2019. So I'm coming up here on my sixth year anniversary. I joined right after it was our series A or seed round funding. Sorry. You know, just to make sure I did. Yes. So and Jack may know him too. My CEO current CEO Martin Kay, he had been involved in the SFR space as an owner and an owner operator and as a buyer. Craig Fuhr (01:33) Did you know the principles in the company and that. Sean Tierney (01:47) For a lot of groups a lot of the institutions what I would refer to as SFR 1.0 in Texas and so using his companies and he had always been in technology and big data and he really saw the opportunity that to combine these two spaces of big data and SFR and to provide a platform and a system for the large institutions because they had still been so you know, algorithmic in their acquisitions. And so that was sort of where he came up for the idea. And I have known him, you know, at my acquisition days from Sullivan Road, you know, we would, you know, I'm Jack's mentioned these IMN conferences and you guys have done recaps on them. You know, we would meet at those sorts of conferences and, you know, just got to talking over the years. Craig Fuhr (02:32) So what was the puzzle piece in the company that you filled when you came aboard? Sean Tierney (02:38) Product knowledge and Rolodex, right? I think with all sales, right? There was an ability for me to, there is an ability to go out and talk to large institutions and going out and saying, hey, look, we have this amazing product. And I had gone out and after we raised the capital, as Jack was indicating in our prior podcast, you gotta go deploy the pod, that capital, which is very, very hard and then operate, which is the hardest. of all of it. So I had experience doing that as well and was able to kind of communicate with all the large owner operators out there and show them that there was a, that potentially there was another way to do their acquisitions at the time. I'm using this. Yeah. Craig Fuhr (03:15) So explain the platform, how is it that Nterra fills the void? And then my second question I'll come back to. Sean Tierney (03:24) Yeah, sure. Inter really is a SaaS and service based platform, right? So this SaaS based of an entity is how we can digest large platform or large portfolios, understand what those portfolios are going to look like. We can go out and also on the acquisition side, we can absorb large amounts of data from the MLS and from appended data sources. So you can underwrite properties. decide whether you want to buy that property or if it's in your own portfolio, sell a property using all of those. And then we can go up and either using what the, we have access to our own marketplace, we have access to builders and connect some of those dots. And then we have a transaction based team that's geared for high efficiency closings, negotiations and transactions. So it's really able to the full circle. of both acquisitions and dispositions, both on the long-term hold side for groups who, large institutions and enterprise and mid-market groups who want to do that. And then on the fix and flip side, And encompassing some of the models on an ARB side and saying, this is how I want to buy a house and these are the areas I want to be in. And it allows them to be confident in their acquisitions and dispositions. And then with the... Craig Fuhr (04:37) And even even some of the operations as well. You mentioned that like, you know, we have access to contractors and things like that. You actually help out with that. Sean Tierney (04:43) Yeah, so we partner. Yes. So, you know, not only through our kind of long standing relationships, but because of the, you know, the demands that we have in both the acquisitions and dispositions, have partners that we talk to all day long in both insurance and in construction, you know, and in title, right. And I think that this is kind of one of the, you know, one of the coolest areas I've seen in the progression since Jack and I first started back in the day was there were no national providers of anything. Right? There was no ability to go out there and say, Hey, I want to go buy in, you know, Texas. I want to go buy in Florida and I want to go buy in Charlotte. Well, shit, I got to find a property manager in all three markets. Then I got to go find a title company and then I got to go find an insurance. Now you can actually find very high quality, best in, you know, best in class offer or best in class partners for all of those. And we work with all of those groups. and then at the end we can help you with the data and reporting. all the analytics you need to do to make sure that you're buying and selling the right homes as well. Craig Fuhr (05:42) So who's a typical client for Enterra? Sean Tierney (05:45) Yeah, so typical clients range from the big three large enterprise groups all the way down to anybody who's going to be buying or selling more than $10 to $15 million of real estate a year. And that's who we're really targeting. That's where it makes sense to, I think, mitigate from using your brother-in-law as an agent and looking at an Excel spreadsheet to saying, I really want to superpower my operations. And how do I go do that? Well, I have this platform that allows me to go do that. And so I think that that's where it starts to make sense. If you were gonna go buy three homes next year, I think again, go hire your, use Zillow, a very, an agent, go out there, underwrite. Craig Fuhr (06:29) Yeah, local help. mean, obviously, if you're buying three, five, 10 houses, you're probably not, you know, spread across the country, I would think. So you mentioned that you guys operate in 13 markets. Is that still true? And then Sean Tierney (06:33) Mm-hmm. Right. Sorry, no, we're in 33 markets, 19 states. So we've grown over, since that was almost our original footprint. So we've had, and that's all been client driven, right? And which is great to see them expand and to see our client footprint expand across the new markets, right? And so it's all the, your typical core markets, Sunshine States, Denver, Phoenix, and then we get into some of the yieldier Midwest markets. So, which has been phenomenal for us. Craig Fuhr (07:07) Yeah, good Jack. Jack BeVier (07:09) What's, um, so how has the market changed from your perspective since 2018 in terms of particularly amongst like the crowd that you're trying to serve, like, know, the institutional or the, you know, the, the higher volume buyers, um, both from the pro, you know, property pricing perspective, financing perspective, like what are, what have been like, what's the, what's the wave felt like from your perspective? Sean Tierney (07:20) Yeah. Yeah. That's a great question, right? And I think that all of those, it's that three-legged stool that has really kind of ebbed and flowed. One is kind of the service partners becoming more adaptable, right? So whether it's insurance or construction, two, it's that lending, right? As we've seen and talked about earlier in our prior episode with the agencies entering and then removing from them space and large and... large groups being able to finance portfolios in the securitization market, watching them go. And then just the good old fashioned supply and demand of housing over the last eight years has been probably some of the most interesting things we've seen, I think, right? Like where you've seen just supply going down to MLS listings going down to 400,000, 380,000 nationally. in 2001, right, causing just a huge, you know, land grab or grab for every asset that was out there. You know, and then back to where we are now, you know, inventory levels are settling in around, you know, 800,000 to a million on the MLS, right. And starting to see supply cluts in certain markets. ⁓ You know, and I think that, you know, groups are also becoming smarter, not just institutions. Craig Fuhr (08:44) Mm-hmm. Sean Tierney (08:52) But everybody, whether they're getting their data from us or from whomever, or I think that groups are just becoming smarter the way they operate, they'll be able to improve their NOI margins. And because of these service providers becoming smarter. And I think that people are becoming creative, which is always cool to see. how they're, you don't just need to go buy a home. put it in a portfolio and hold onto it, right? I think the groups are trying to do, whether they're successful or not, they're at least trying new things, whether it's shares in homes, whether it's like with Atticus LeBlanc over at co-living opportunities, right? I think there's all these unique ways that groups are looking at the space, short-term rentals, right? That's providing everybody an opportunity in the space to do unique things. And so that's kind how I've seen. So it started everybody doing the same thing. Things got better as far as financing and the service partner things, which allowed groups to do more fun things in the space, inventory tightened back up. You needed to get creative and find the ways to make it work. Jack BeVier (09:58) you seeing things open back up? Given that since inventory is increasing and continuing to increase, has increased and is continuing to? Sean Tierney (10:06) Yeah, I think that from our side, I think it's still for every acquisition, we're probably at 1 and 3 quarters selling homes, meaning so dispositions is still outpacing our acquisitions front. The large institutions have started to come back in. The key component to all of this is understanding and having some in the right environment and having some stability. in that rate market, whether it's at, you I look at the 10 year versus you guys on the five year, but if we can stay in that 420 to, you know, four and a half range on a 10 year for that foreseeable future and groups can understand that, then they can go out and start making acquisitions. Our clientele typically cannot react to volatility, right? I know long-term volatility is fine. If you're always going to say, okay, it's always going to be some sort of way, but for the most part, they need stability to go out there. And, you know, as we were indicating, having those, going to their capital partners and saying, all right, we need to go deploy. And then by the time that's out there, is that opportunity still there? So they need stability on their side. But the acquisitions front is starting to open back up. It's very market specific, right? I think that there are pockets in the world or them, you know, across the United States that are very interesting. We continue to see Charlotte, Dallas outperform as far as acquisitions front, the very stable markets. Then you have markets like Port Charlotte, Lehigh Acres that you have 10,000 homes on the market in each of those alone, whereas you only have 10,000 homes in Charlotte. If you just look at the populations for those markets, you can start to see some opportunities. Jack BeVier (11:51) What's, what is, I've heard a lot of speculation from a lot of different people and I've gotten a lot of different, opinions on this idea, but I'm wondering from your perspective, I think you've got your perspective as more credibility than most in terms of the thinking behind it, like the feedback from institutional real estate investors as to why they were buying so much in 17, 18, 19 and Sean Tierney (11:56) Yeah. Jack BeVier (12:18) why that pace has declined. what, like what combination, because we've continued to see, you know, the, theory that I heard 10 years ago was that everyone's was that wall streets. Well, there was one camp of their bunch of knuckleheads that are going to fuck up operationally. And then another camp that was no, they understand what the true value of this real estate is. And they're, know, and they're the smart money. Sean Tierney (12:31) Mm-hmm. Yes. Jack BeVier (12:41) And then another was that it's okay. They know that they're not making money on a current basis because the data that they're going to get is going to lead to some other revenue models. And this is like a longer, more evil genius 40 chess play. so I heard, you know, I heard that about their behavior 10 years ago. And then when they stopped buying, you know, everyone blamed interest rates, right? That was like the easiest thing to do, but home prices have continued to increase. So like, Hey, where'd the evil genius go? Right? Like if, you know, like if, know, just because, know, and they're not buying with as much leverage as your average main street investor. So like from a deploying, you know, return on equity perspective, had institutions continued to buy in 2022, they would have done well. Like they would have done just fine. Um, but they stopped was, is like, has it always just been a cost of capital? Hey, I can borrow money at. Sean Tierney (13:11) Mm-hmm. Jack BeVier (13:38) I can borrow money cheap enough and I, and like, they purely looking at it on a levered basis and not taking much home price appreciation into consideration or is that a market by market idea? You get what I'm driving at. Sean Tierney (13:40) anything. Yeah, I do. So I think that you were spot on into kind of that 2015-16 group spot with such velocity that they ended up with stockpiles of homes that were sitting vacant, getting just absolutely crushed, and they had to improve their NOIs. they also didn't know how to, you know, I'm not going to fuck up, but they definitely needed to learn how to operate more efficiently. And they definitely were making some learning experiences, you know, and they would come through there, right? But Most recently, I think in 2020 and 21, right? It's easy to say that, the rate increase really brought that upon themselves and that that's why they couldn't buy any more homes. I think the other component to a lot of that is that the entire CRE market was imploding and what groups, when you have to go say, okay, go hit up your average investment manager and say, I'd like $150 million more. to go deploy into single-family rentals. Well, in order for them to go do that, they have to go sell assets. And for you to go convince a large institution to go sell a Class A office space in New York at 40 cents on the dollar and take that hit so they can go buy SFR, I think was a very tough argument to make and still is to this day, right? So I think one component that people were missing was that redeployment of assets and asset allocation. to this. it's easy to say, you know, if money was just sort of this thing that you could go grab and you know, off of a tree and then yes, I think the head, the tailwinds one always support SFR, right? That there is, you know, there is moderate, you know, home price appreciation, there is moderate rent growth, depending on the markets, right? It's a good asset class to own in the long term, right? Those sorts of tailwinds always support it. I think it was just the asset reallocation. became very challenging for large institutions to go say, sure, I'll give you that, even though it's small, right? Like, and I think this is always the funny part in our spaces. You know, we're talking in our last episode of large numbers, you know, the 300, you know, the 300,000 homes that all the large institutions own, right? It's such a small, small component of it. And we talk about going and raising $150 million, you know, there's large CRE shops that are going to go close on $150 million deal today, buy one asset. And it's like, I just bought 2000 industrial square foot portfolio and I spent a billion dollars. I think that there is, it's those sorts of things, when those markets are falling, they have to go sell that billion dollar portfolio at $600 million, which becomes very challenging. And I think that that was one of the biggest ⁓ misses. Jack BeVier (16:27) Yeah, that's, that's an interesting perspective. That's something that I really don't think that I had thought about as much like the idea that you're going, if you want to pull somebody into the space, that's an effort and it and that's a long term effort. You don't do that with a pitch deck, like a single pitch deck. You do that over a year or two and get them comfortable with the space. But then once they're in cool, they're in they're interested, but then you're part of their portfolio and their decide and their assets under management are relatively stable. Craig Fuhr (16:29) Yeah. Sean Tierney (16:40) Mm-hmm. No. Jack BeVier (16:56) And as a result, if you want, you know, a port, you know, you want to increase your allocation within that portfolio, it's got to come from somewhere else, or you got to bring a new player into the market. And it's a tough sell to bring a new player into the market when, know, you know, when there's not as glaring of an opportunity, that's interesting perspective, I hadn't really considered that. Sean Tierney (16:56) Thank You got it. You got it. Craig Fuhr (17:14) That is. Sean Tierney (17:16) And I think that that's why Build to Rent has had some excess, some successes over the last, you know, two to three years or three to five years, right, is that it's an asset allocation from multifamily that they're still able to convince groups of. And so that asset allocation is, you know, is able to go to there. Jack BeVier (17:33) Yeah, gotcha. What's the what have you seen in terms of like, you've added a lot of markets? Has that been I mean, I was looking at your website, the markets are, you know, cities that everyone's heard of the what has been your perspective there? Like has it has there been a shift from home price appreciation into looking for better gross yields? Or has that been a demographic play? Like adding the you know, adding Ohio ⁓ Sean Tierney (17:44) Yep. Mm-hmm. Jack BeVier (18:00) Is that like, because we think that climate change is going to be, you know, there's going be Ohio's going to a beneficiary to climate change, or just because you think you can still get a 12 gross yield there. Sean Tierney (18:10) Yeah, I do think that it's as simplistic as the gross yield play, right? And how do we balance our portfolio to have, we need some 12 so we can go buy in Dallas, not that Dallas is a bad-marked Dallas, you can get a gross yield of 9.3, right? Or Houston 10, but your net ends up being pretty low due to some insurance and taxes there. So I do believe that there is... some of the, it is just going and buying those markets. And they're also cautious, right? They're not just gonna go into a market that has a high yield. They are definitely blurring in the economics factor, right? What's the migration patterns looking like? What are the big employers doing there? I was always, and I was always wrong, but I always thought that Orlando and Vegas were going to be deathtrap markets because they're single employee cities. And you know, they, you know, and that we even saw it during COVID. I thought Orlando and Vegas were going to be toast and they performed well still. And so there is enough opportunity in those markets still that I think that, you know, those markets will survive. But I do think that in, you know, the higher yielding markets, they're more cautious, right? And saying, all right, what's our employment looking like here? What is the migration trends there? And something else too, I think that, you know, you are asking about the the ebbs and the flows, I think that why people stopped buying. it was a, we talk about spreadsheet performance versus actual performance. I think that what people were underwriting to became not true, right? And I think they were seeing it a lot on the built to rent side where they were anticipating 10 % rent growth year over year. And all of a sudden that dropped to 1 % and those assets were not performing the way they thought. And so I think that that also caused a pullback Jack and you know why they were not allocating as much capital to it was just the actual performance of their underwritten that they said, you know, they took some data point that they read or they looked at some, you know, some home price appreciation graph and said, you know, and we'll just do this over a Kager graph over the next five years and we'll be awesome. And that was not the trailer. Jack BeVier (20:16) Yeah. Craig Fuhr (20:17) So I keep getting these little trickles of info about markets that are sort of cooling. ⁓ You mentioned two of them, like Dallas inventory increase year over year is 50%, Orlando's 76%. Is that an opportunity for your guys or is the bid to ask like just still, you know, doesn't make sense? Sean Tierney (20:23) Yes. That's a great question. And it's really interesting. It's something we're watching very closely. We were watching in Port Charlotte, for example, or Lehigh Acres or some of these other just incredibly saturated markets. Craig Fuhr (20:51) Jack Jack, we we we tried to do a loan for a guy that was building 10 houses scattered site in Port Charlotte. He did build them. We didn't do the loan, but dying right now. Cancel. I mean, cannot get rid of him. Almost he was like he was like it's going to be 375 on the back end. He's at 345 330 325 and they're just like hell with it. We're going to turn it out and you know, maybe hang on till. Sean Tierney (21:01) Yeah. No. So what's the interesting thing is that the prices have not come down. So if you look at all this inventory, and this is the really interesting piece to all of those markets right now that we're watching, is that even though inventory is going up, prices have yet to go down in any meaningful fashion, right? Craig Fuhr (21:20) Yeah. Yeah. Absolutely. That's the exact data that I have. I mean, if there's any decline, it's negligible at best, but it's really still sort of sideways. Sean Tierney (21:36) You know? And I think a lot. Jack BeVier (21:42) Hey, can I, can I, can I offer a, can I offer a theory there? ⁓ so I had this conversation within ex, public official in Baltimore, cause they were, we were talking about what's going on in, in Baltimore, like community development perspective. and, and so here's the, because there's been a big run up in prices, because, and then a lot of flipping activity and, in tougher parts of the city. Sean Tierney (21:46) Yeah. Jack BeVier (22:07) And that's been great because a lot more houses have gotten renovated because we're, know, because folks have been successful and they're setting comps. And then now there's something, you know, comp to, to, you know, kind of like, you know, springboard off of. And my point, and they were like, what, know, how's this happening? Like, you know, is, that, you know, what, what, what, are the public policies? What, is the department of housing and community development done that was so genius that has resulted in such a significant community redevelopment activity over the course of the five past five years. And I'm like, no, no, no, no. Like this is, you have nothing to do with any of this. But, and so I know we bring up this a lot and I don't want it to sound like we're talking our own book, but it's kind of the thing that we're like, the DSCR product has been really, really impactful to the industry. And so we got into the DSCR product. Not that I'm just like talking that I'm trying to make the DSCR product sound like like God's gift to everything real estate investing. But I think that it has really had a significant impact. Craig Fuhr (22:39) Like literally. Jack BeVier (23:04) on the calculus of, for your average real estate investor, because back in 2018 and all time before that, you, if you, if you were a flipper and you went and you flipped a house and you couldn't get it sold, you, you didn't have a backup plan or your backup plan was call up your banker and deal with a four month refi process. If you had global debt service coverage ratio, and all of your shit was tight. Then maybe you could get a refi. And as a result, that was a crappy backup plan. Like a really not, that was a pro, you know, that was, and for a of people, it was just not an option. Like they weren't going to get, that wasn't going to happen. They knew they weren't bankable. There's a lot of real estate investors that are not commercial local bankable. you know, if they had the stomach for the awful, you know, service level that we get from, from our local bankers these days, but, So there was really no backup plan. So you dropped the price. So when you didn't sell it for 2.25, you dropped it to 2.10 and then you dropped it to 1.90 and then you dropped it to 1.85 and you let it go. And as a result, the market set a new comp at 1.85 and everyone else who didn't drop got kind of fucked, right? Because you know, all of a sudden there was this comp that you had to talk this appraiser into ignoring. But now you don't get 2.25, you don't drop it. You just say, fuck it. I'll keep it as a rental. And you refine into a DSCR loan. And if you got a 680 credit score, you put a tenant in there and you refine into a DSCR loan. And that's your backup plan. And you get a liquidity event and you live to see another day. And that never existed before 2020. That was not an option. That was not a thing. And as a result, prices have stayed up because the flippers who can't get it sold become landlords now. Like that's all they're doing is they're just becoming landlords at a much higher frequency. Sean Tierney (24:49) Mm-hmm. Jack BeVier (24:51) So we don't, so in those, your point, like in those potentially declining markets, you don't really know where the number is. And, and Hey, you know, it's not as if there's like some convention where all the real estate investors are getting together and being like, nobody sell at the low. Nobody set a lower complex. It's not as if this is like a concerted effort. It's just that the economically rational thing to do is to go get a DSCR loan and not set a lower comp. And as long as nobody sets the lower comp, the appraisers keep using the last cop. At two 25 and no one knows that the real number is one 90, but it is right. So like, I'm nervous about that from under our underwriting perspective. Like I think about this a lot because of our RTL underwriting business. need to know where V actually is. And so this is something that I think about a lot. but anyway, that's my thesis on like what's really going on there and why we haven't seen why we're seeing racks up and like increases in inventory without corresponding declines in, in, Sean Tierney (25:20) Mm-hmm. Mm-hmm. Yeah. Jack BeVier (25:47) clearing prices because they're not clearing, they're just becoming rentals. Sean Tierney (25:51) Sure. And then also more comfortable, right? think that, no, no, I think he's actually probably spot on for a decent percentage of it. I also think the remain, let's say that constitutes of 60%, 50%, I don't know. But I think that there is the component too of days on market, people just pull the listing and they'll just pull the listing and so it never gets sold or dropped. just pull that, they'll pull it because they're not forced Craig Fuhr (25:51) Sean, blow holes through all of that, Sean. Go ahead. Sean Tierney (26:21) There is no economic event right now to force them to move. They would throw it on the market for $220,000, and it sold a $210,000, great, they're out of here. They're going to go live their life in Indiana. But there is no reason for them to sell, so they pull it right off the market. Jack BeVier (26:39) Yeah, I'll just I'll continue to work remote. Fuck it. You know, like, yeah. Sean Tierney (26:42) Yep. so I think that's one of the more interesting things. it's that opportunity. It's coming. Right. You can't sustain that. That will not be sustainable to there. Right. Now, the flip side is that the builders are slowing down, too. So I don't know how much those guys crushed Phoenix, Florida, with a lot of new build inventory. Right. And permits are kind of down. You've been the build to red side. right, they're starting to slow it down. So I don't know if that inventory, new inventory is going to play into effect as much as, you know, the existing inventory. Craig Fuhr (27:14) So then getting back to my question, is there not an opportunity yet in these markets that we've spoken of with just a pretty substantial increase in inventory? mean, 50, 75 % is not, we're not talking small numbers here. So there's no real opportunity for your clients yet in those markets to go on a buying spree. Sean Tierney (27:20) Hope. So our clients are still focusing on the core high performing markets. Charlotte is always an outperforming market for us. Dallas, Houston, Kansas City, Orlando, all of those markets continue to outperform. They're good gross markets. They're easy to operate in. They're limited natural disasters, Houston aside. They're resident friendly. They're also own. owner operator friendly, so they have that right mix. So I think that those markets are our groups are staying, you know, they're staying right in that core. I think that what's also interesting in the last kind of three years too, is we've seen institutional buy box switching, right? Meaning that, you know, groups are trying to buy newer assets. And you know, they're staying away from kind of the existing 1950s to, you know, that 1990s stuff. Craig Fuhr (28:18) Yeah. Sean Tierney (28:22) right? And so for various reasons, even though, you know, if you look at a 2005 built home, that home is now 20 years old, and it's just as expensive to remodel it now, because it's going to need a new HVAC, new, you know, new plumbing, all of the new kitchen, right? It's got that weird angle design from the mid 2000s that you're going to try and remove. And so I think people are just trying to find their sweet spot of acquisitions, you know, and it's probably not in the you know, the 1950s type asset, yeah, which can provide a huge opportunity for the smaller retail investor. Craig Fuhr (28:58) Absolutely, but but to your clients I would think with the slowdown on the on the builder side because they're just seeing less sort of you know retail demand I would think that that would be an opportunity then for an institutional You know be to our company to go in and just you know, we're gonna buy 50 homes from you in Florida or Orlando or I'm sorry Charlotte like if you're seeing if you're seeing because I look I've been I've been looking at Florida as a place to go live And we've been we looked in St. Augustine, Sarasota, you St. John's County. Dude, there was no lack of building going on. mean, like, you know, hey, we're doing we're doing 9000 houses in this one, you go one one development over, we're doing 5000 houses in this one. And the question is, if they're slowing down because they're seeing less consumer demand, isn't that an opportunity for the bigger guys to like go in and buy up some new new assets that they really want? Sean Tierney (29:29) Mm-hmm. You would think and it's starting to happen. Now this gets into another whole other sensitive subject, but you know, the home builders love their margins, right? And you you saw, you know, Pulte the other day, you know, they like to hang around that 26 to 27%, you know, margin. And so anything time you start to affect that becomes difficult for them to sell. And so they, they can hold onto it because home builders, you know, Jack was talking earlier about like IH and their cost of capital. Craig Fuhr (30:03) yeah. Sean Tierney (30:22) Home builders have the cheapest capital in the world, right? Like they can raise money from the equity markets. They can get cheap debt because they're all, know, A rated companies, you know, and so they can sit on an asset for a while, you know, and so they don't need, now the small regional guy or the small, you know, home builder, he may be forced to sell. And that's where we do see some of our institutional clients picking up. then that being said, you know, our Craig Fuhr (30:25) Yeah. Sean Tierney (30:46) institutional clients do buy from directly from the home builders as well. They have, you know, they've got some tight relationships with, you know, the top five home builders out there, but the rest of them, you know, there's opportunities to be picked up. Jack BeVier (30:58) Hey, want to make sure, Sean it's in Tara for those. It's E N T E R a N Tara and Tara and the website is an Tara.ai. What's the AI about Sean Tierney (31:04) Yes. And Tara dot dot. Correct. the artificial intelligence, and let's get into the tech and the modeling. so, right, so there's a couple of different components. And I think this is more of a just like how natural language and AI is going to help all of us. But there is opportunities when we're identifying properties for the machine. Let's use the collective machine to become smarter. I.e. when you look at a home and you say, this home is a good home for me, I want to buy it. Craig Fuhr (31:11) Yeah, let's get into the tech side. Yes. Sean Tierney (31:38) the machine can start to recognize more of those versus also when you reject, what is the reject reason? I don't like it on this side of the street. I don't like it with power lines. I don't like this, this, and this. So they can get smarter and smarter. So when acquisition volumes are really picking up, that becomes a matter of seconds to underwrite a house versus a matter of 20 minutes, which is very, very crucial when volumes are going high and you're underwriting and sending out. a lot of different offers. That is one of the key components, is identifying assets too is on the dispositions, right, where you're identifying your properties for best use scenarios and not having to go through and underwrite individual properties, but being able to look at a portfolio in a matter of an hour versus days, right? And so trying to do some of that first glance work. It also works throughout the company and various closing. I think is going to make huge strides and how does that look for documentation. It's very hard as Jack, I'm sure, is very familiar with every state as their own state promulgated form for the National Association of the There's no similar form, so you have to be familiar with all of these forms. And I think that our technology can be valuable there. And that's how we're starting to implement it. Jack BeVier (32:52) So do your clients have within their login, they set up their buy box and then is there like a machine learning and ML that, that, that, you know, attached to that account. so based off of like, here's your original buy box and let's feed you stuff. And then based off of how you select the ML will refine and try to serve you stuff that you, it thinks you'll like. Sean Tierney (32:57) Mm-hmm. Yes. Correct. that's it. And so it's geared towards each and it's tailored towards each environment. It can be tailored towards a strategy as well, not just a client. I want to identify homes and good school scores, but very refined that in this zip code that performs this way with, so it's not just a simple filter. but you're adding layers upon layers and upon layers. And so it all of a sudden looks like something that would take you days now can take you moments. Jack BeVier (33:45) And that, and that it'll, and you're feeding your clients, the MLS available inventory. And then if they've got a portfolio, you if they've got an off market portfolio, you can send that portfolio through also. Sean Tierney (33:57) Off market, yep, builders, we've got relationships with the builders themselves. Yeah, and so all of this digestible, we're source agnostic at the end of the day, right? We can, we'll take leads, we'll digest those, we'll work with the various groups and we're coming out to broaden our marketplace, which I think is gonna be exciting. And so how can we work with various groups to keep groups. from the inventory flowing through in the investor community, I think is a huge opportunity because that tail risk of the investor world is actually so large. I mean, if we indicated that institutions only own 3%, there is a huge, huge tail to go out there and try and capture. Jack BeVier (34:38) So like of the houses that you guys are selling, are they mostly to homeowners or to other investors? Sean Tierney (34:42) Yeah, 100 % actually. would say not 100%, but I would say if we did that, I would say our institutions are selling probably 95 to 97 % to retail and retail buyers, first time home buyers. So those inventory, again, you can take what you want, but those homes are going back that have been remodeled, that have done to an institutional spec, those are coming back into the market as well. Craig Fuhr (34:56) Wow. That's interesting. I always thought that like it would, you know, we we've crossed the Rubicon and you know, institutional buying of SFR. And I always had this theory that like, these houses will never hit the market again. They'll just like, you know, be traded amongst the institutions, you know. Sean Tierney (35:26) So I think what's happened too is as groups have become sophisticated over the last call up three to five years, it's really taken on a more of an asset management approach that you see very similar to your stock portfolio, right? Where you are now trimming, you if you call up your stock broker and whomever go to your Robinhood account, right? It's not just suggesting you sell the, you know, the total dogs, but it's also suggesting, Hey, look, you've held Apple for three years. It's up 9,000%, you know, making it up. probably time to take a little bit of the chips off the table and go reinvest in something else. And that's exactly what's playing out with our groups as well. It's all right, let's go sell. I think that that theme will be, they'll look to sell 2 % of their portfolio for the foreseeable future. that takes some effort too. They've had to learn and we're helping them learn on how to get smarter on the disposition side, also working with the lenders. Right. And, you know, trying to get release, you know, early release penalties removed and out of the securitizations. Right. And what are the tax implications for the REITs? So there has been some of the learning. There has been a pretty good learning curve on the disposition side as well that we're starting to see. But, yeah, I think that those homes will, you know, and where prices are right now. Right. Like there is a dislocation from where, you know, invest if an investor wants to go sell it, you know, investor B. we'll buy it down here, but retail is still gonna pay up here for it. So it's not that it's just gonna be not horse traded, it's just that the retail pricing, that national average of home prices keeps going up, they continue to pay for it. Craig Fuhr (37:01) So getting back, go ahead Jack. Jack BeVier (37:01) You mentioned, you mentioned a little bit just to dig into about the methodology behind the dispositions. You mentioned that it's not just the dogs. It's also the, you know, sometimes, Hey, this has been an area of rapid home price appreciation. And so your opportunity cost of the capital that you could unlock there could be better spent like sell that and go buy two more. You'll get twice as much. Like the, like what, yeah, I'm curious to dig in a little bit more to the mentality around the calling of the portfolio. Sean Tierney (37:19) You got it. Mm-hmm. Jack BeVier (37:29) ⁓ it's something that we do, but like my, you know, my initial, you know, the initial temptation is like, right, pull out all the performance and like rank them best to work, you know, worst to best and like show me all the dogs at the top and wherever I lost, wherever I had minus $8,000 of cashflow, get rid of that shit. But then when I would dig into those situations, it would be like, Sean Tierney (37:40) Mm-hmm. Mm-hmm. Jack BeVier (37:52) Yeah, but like they were all situated. Those are all stories, right? Like I'd be like, Hey, I want to sell these 12 houses, everyone cool. And then I'd get 12 stories where it was like, well, that was really, you know, the, know, we found the sewer line was an old terracotta pipe and we cracked it and we just spent the $9,000 digging up the backyard and now it's got a brand new pipe. So that shouldn't happen again. Or the HVAC went out or that was just a really bad tenant because, know, remember like three years ago, we were stressed about our vacancy rate. And so we like started flexing on the tenants, green criteria. Sean Tierney (38:20) Yeah. Jack BeVier (38:21) And like they're all self-inflicted, you know, they're either stories or self-inflicted wounds, but I shouldn't. And as a result, I shouldn't hold it against the house. Like, you selling, are they selling any dogs or is it all just the opportunity cost of capital idea? Sean Tierney (38:28) Correct. Yes. No, no, no, it's a combination of both, right? And so you're trying to get rid of both, you know, the barbell of your portfolio. And so they are selling, they're definitely selling some of the underperforming assets, whether that's underperforming because of, ⁓ yes, I was just going to say property, right? They can't, you know, it's not in the school score. You know, it's not in the school they thought it's, you know, it's got challenges regarding this, that, or with the other. Jack BeVier (38:48) It's on a double yellow line and having a hard time releasing it. Sean Tierney (39:00) Or they're selling them because you know, they did take you know, 10 % HPA over the last two years and it that may not continue So let's go take that off the plate and go buy two more homes. And so I think that that's exactly it You know and that's going to continue You know just like everything right you've seen in the multifamily you've seen it You know, you see it in your own stock portfolios, right? it's just understanding both the you know, the goods and the bads and having the Jack BeVier (39:14) Interesting. Sean Tierney (39:30) conviction to actually sell, right? Like as you were indicating, you'd you rank those high to low, you're going to only sell the ones in the red, right? And but it's actually having the mentality and understanding that you do need to sell some of the ones in the green to to maintain that. Jack BeVier (39:44) That was always the story around like, why sick, know, in the, the, the, the 12 years ago debate about is SFR and asset class or a trade that was, this was always part of that narrative, right? Where, ⁓ Hey, and here's the upside. It's even better than multifamily because you can, because you've got the optionality to on the turnover, renovate it and sell it to homeowner. So you can call the dogs and, and, you know, where you've Sean Tierney (39:53) Mm-hmm. Mm-hmm. Jack BeVier (40:11) fortunately had some home price appreciation that you didn't even know was going to happen. But all of a sudden this neighborhood is gentrified. You'll be able to like, you you know, sell those and harvest those gains on a granular basis on a more granular basis than multifamily where you can't make a decision to sell unit three F or unit one C like you're it's sell the whole asset or sell the, you know, sell the hundred units or don't sell the hundred units. It's a binary decision. Sean Tierney (40:27) Mm-hmm. Jack BeVier (40:38) have you guys, so you're seeing that, right? Like you're actually executing on that optionality, which was part of the pitch 10 years, 12 years ago. Have I'm just, this is a total, you know, you can be like, no, we haven't done this yet, but have you been able to quantify the impact on returns that that optionality has provided on, you know, relative to. Sean Tierney (40:41) Mm-hmm. Correct. Mm-hmm. Mm-hmm. Yeah. We can't all the time because we're not provided with the cost basis all the time, right? And so, or the performance of each and every asset, right? So we can say, hey, look, we believe, you know, we have some cost basis information, right? But we do say, all right, versus this, we do think that you're up here. You know, there's some component. We also don't have all the financing that plays into it, right? And so, but we do make some, you know, what we can do. Jack BeVier (41:02) Yeah, yeah, yeah, sure. Sean Tierney (41:28) is we take a lot of the market demographics and say, is this improving? Is this not improving? What's the HBA? We can look at it that way. We also can go into these houses and say, look, if you were to sell these five houses, what's your repair schedule going to look like? Do you want to go into this house and put in $12,000 to get in $120,000? Or should you not even? You could sell these three houses right now as is. maybe give a seller credit of $1,000 and move on and you'll actually take some profit. So that's where we're getting smarter as well with some of these groups and helping them not only what assets to sell, how to sell them from an asset management point of view. Which has been very interesting and fun to watch over that because I will say the dispositions is a lot of art and science too. It's not only. Jack BeVier (42:07) Right, how to them. I go, I go to, I go to every, I started doing this like two years ago. I, uh, cause I was getting out of touch with like what was going on in the field. Like we'd have properties that would turn over and then, you know, they do the turnover and I'd be like, it was a $27,000 turnover. Like what the hell was that? You know, like, dude, we're getting, we're murdering ourselves from a cashflow perspective. And I was like, if we were going to sell 20, spend so 27,000, we should have spent 38,000 and sold it to a homeowner. Like, why did we spend $27,000 to end up with a rental? Like exactly what you're saying, right? Like I was being kind of lazy about asset management and ⁓ Sean Tierney (42:49) Mm-hmm. Mm-hmm. Well, and I think it was, you know, it's an evolution of this industry, right? Where we are not used to, you know, we were so focused for 10 years on just buy, just buy a house, perform. And then if it doesn't perform, if it burns down, get rid of it, right? And so the actual asset management, think is an evolution of it. Hopefully we're providing people. Jack BeVier (43:14) Yeah. And, the same considerations you're talking about, like, Hey, this, you know, what, what is retail now? Oh, wow. This neighborhood's way up, but you know what I do have, you know, 30 year debt on it at 4%. So, you know what? I'd have to give up that and that's an asset. And so, yeah, I'm doing all of those, doing, you know, taking all those things into consideration. So I started just like literally going to, so every two weeks I hop in the car on Saturday and I just drive, you know, the drive, the six turnovers that have happened in the past two weeks. And. Sean Tierney (43:27) Right. Mm-hmm. Mm-hmm. Jack BeVier (43:42) send a little message to my team being like, we're keeping this one as a rental or we're going to like add a, add central air to this one or like just paint it and put it on the market. ⁓ and you know, making a case by case decision on, on every turnover, because it's an, you know, it's an opportunity to do exactly what you're talking about. Be smarter about asset management. Sean Tierney (43:48) Yep. ⁓ Yeah, it is, is, which is cool. Craig Fuhr (44:02) So getting back to the tech, Jack has talked at length about how Demian Financial is an early adopter of AI. We've spent a considerable amount of money on building it out. But I still believe that it's just so, you can do a lot with it these days, a lot, but it's not quite at a place where it's making decisions and sort of like really helping your business yet. Sean Tierney (44:19) Mm-hmm. Mm-hmm. Craig Fuhr (44:26) How is it? So what type of lift was it for you guys to implement AI? Did you bring people in house for it? And then how do you really see that changing the business in like six months, 12 months? Sean Tierney (44:41) So we have a very, so like, you know, half of our company is based, you know, is based in technology and data science, you know, on that side and, you know, development. So we are very tech heavy on our employment, which provides us the opportunity to come up with some really creative solutions and driven by product, right? And so how does that, you know, how does that fulfill the customer, right? And go, what can we implement? Craig Fuhr (44:54) Mm-hmm. Sean Tierney (45:07) from that stage, the AI component of it was obviously a big push for us. and allowing, you know, it really does allow the underwriting to become more efficient and faster, for our, for our clients. And that's really where that comes. I don't think we'll ever become a hundred percent automated to your point, right? Like I think that there always will need to be some sort of human overlay. ⁓ and I think that that's our goal. Craig Fuhr (45:32) Yeah. Sean Tierney (45:33) right, is to say, OK, if there is, you know, do we say, 875,000 homes on the MLS out there today and I want to go underwrite them, how do I do that in efficient manner? And that's what the question we really started to solve. Right. And say, OK, you 875,000 homes. These are the characteristics of both a physical and from a financial characteristics. Right. And the machine can get a digest there and produce 12 homes. that you can go actually say and do confirmation analysis and go boom, boom, boom, boom, right? And then go focus on your day of asset management or coming up with other things, you know, and identifying other markets that you want to be in, looking at other strategies, right? So the actual acquisition part becomes almost seamless, you know, but I would never want to see it become fully automated. you know, I think that you can look at, you know, there's still Craig Fuhr (46:06) That's crazy. Sean Tierney (46:28) There's still really good bond traders and stock traders out there who are sitting at their desks every day, crypto traders, whatever asset you want to trade. You're never just putting on a machine and letting it go and having full success. You may have some algorithms that are saying, hey, these are your buy signals and these are your sell signals. So those are what we're helping identify through the machine. Craig Fuhr (46:49) Anything to add there, Jack? Jack BeVier (46:50) Now, I was just curious like the, when I've done that on a very, even, not nowhere close, but just like, you know, set up, set up a buy, when I've set up a buy box and like had, you know, set up a fancy buy box, right? Like spent a whole bunch of hours trying to set up this buy box and get me, you know, all the stuff that I want. ⁓ One of the things that I found is that I'd have to, it would start over representing certain locations. Sean Tierney (46:57) Mm-hmm. Mm-hmm. Jack BeVier (47:13) that were like, just because it happened to fit the buy box, was feeding me everything in this particular town home community. and it turns out that like, I dunno, there's, there's some, something wrong with that community or some like, you know, like, you know, that the gang have, you know, the gang has taken over that community. And as a result, like everyone's a seller there and it keeps popping up on my buy box because it fits my buy box, but I don't realize that the boys are there. Sean Tierney (47:31) Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Jack BeVier (47:38) sell, you know, sling in. And as a result, if I bought everything in there, I would all of a sudden own 20 % of this, like, you know, not great spot. So like that human overlay idea still like matters, right? You still got to put the boots on the ground to like, make sure that you're not, you know, some reason the algorithm hasn't just like, invested you into a bad situation, because it'll do it right? Like, otherwise, it'll do it. Craig Fuhr (47:48) Been there. Sean Tierney (47:49) Mm-hmm. You got it. ⁓ Right, until you click on that first reject, why don't you want this area? Why not? Well, because there is, you know, it's... Jack BeVier (48:03) Right. Yeah. Yeah. Yeah. You're feedback. Yeah. You got a feedback loop. My, don't have a feedback loop. Yeah. Sean Tierney (48:13) And that's what the vital part of that is, right? Is having that feedback loop into the machine so it then learns, right? And doesn't over allocate you. You can even program it to say, I do not want an allocation of more than X percent into this zip code, right? And so it's only gonna feed you the 20 best opportunities in that zip code or something along those lines, Jack BeVier (48:34) Were you guys in Terra.ai back in 2017 or when did the AI get? Sean Tierney (48:39) 18th. Yeah, I think that the whole since its since its inception, it's been in terror.ai. Jack BeVier (48:44) So that was like, so in 2000 and in 2018, cause everyone like wraps these things together, right? Like that was probably machine learning in 2018. wasn't LLM because LLM was like a 2022 thing, but everyone now associates AI with LLM because of chat, GBT and all that. But before LLM people, AI was the latest and greatest in AI was ML. Um, Sean Tierney (48:48) Mm-hmm. that Correct. ⁓ And it was the modeling and it was also like the natural language processing, right? Taking what a real estate agent has said in their, know, cute cottage needs improvement. What is that? Yes. What does that equate to, right? Like, what can we assume in a construction budget from that natural language processing? What can you assume? Jack BeVier (49:12) Yeah. Craig Fuhr (49:18) Right. Jack BeVier (49:18) Smallest yet. ⁓ Craig Fuhr (49:22) That's awesome. Jack BeVier (49:29) Make it your own. Sean Tierney (49:29) And one of the hard ones too that I still think there is an awesome opportunity for is picture identification. do a very good job of getting you there from what the current state is in a photo to what the existing state of the higher quality comps are to give you a construction budget. And that's another area where we get our modeling is very strong. What it doesn't, and I'll use Florida as it, somebody once gave me a great example that, Craig Fuhr (49:34) that's going to be awesome. Sean Tierney (49:53) The difference between a deep dock and a shallow dock is about $100,000. And that is not a picture. There is no machine. What you would have to do is take in some tidal data and some other third party sources. But for the most part, a machine just can't look at a picture and say, yes, it has a dock. Well, is it a deep water dock? Or is it a shallow trolling dock for my fishing boat? Because that is a huge difference on there. Craig Fuhr (50:00) yeah. Sean Tierney (50:19) You're also at the agent taking the photo, right? Is not always going to accurately take the crack of the foundation. It's not always gonna take the picture of the black mold in the corner. And so the machine is only as good as those. It's very similar to the data, right? We're all struggling on using assessor data, but it's only good as that data going in. And so Adam and all of these guys core law, All of them use the same kind of similar data set, but it's as, you know, we can only clean it and scrub it so much. It's still, you're still relying on a, you know, on 25 to $40,000 a year government employee implementing, you know, yep. And implementing that information correctly. And so, and also historically, right? Like what kind of a home is this? Well, it's a three one. Well, that was the one that was bought in 1942. Is it? Jack BeVier (51:01) At the clerk's office. Yeah. Sean Tierney (51:14) You know, like, was it a 3-1? Is it not a 3-1? So, you know. Craig Fuhr (51:19) So just a couple of minutes left here. And again, appreciate your time. Very generous with it. We talked briefly about sort of the regulatory environment. You mentioned that you, you, you attended David Howard's, who we had on the podcast, the national rental home council, convention or meeting. one of the things that Jack and I have talked about a few times on the podcast that I continue to keep an eye on is sort of like these local Sean Tierney (51:22) yeah. Mm-hmm. Craig Fuhr (51:44) city and state municipalities that are putting in like some kind of draconian proposals that could become law. Most of them have not. But in certain states around the country, LLCs can only own a thousand houses. Some of them say 10 houses, some of them say 50. And so my theory of the case there is that in a lot of these places, the local legislators, politicians, they'll shoot for the moon. But then they'll just keep taking a bite at the apple until they figure out where you know what what they can get across the finish line. And I don't think regulations like this on that are limiting the amount of houses that a particular entity can own. I don't feel like it's going away. I don't I don't you know, there's a lot of money I'm sure being lobbied against it. However, I just don't see it going away. What what's your take on it? Sean Tierney (52:43) Yeah, I think it's a really important subject, right? ⁓ Craig Fuhr (52:48) And Frank, and by the way, Sean, we're not just talking about your clients that like these large, we're talking about like mom and pop guys that own like 50 houses, like companies and companies like Dominion Properties that owns 800. It affects, think it has the potential to affect every investor at every level. Sean Tierney (52:54) Correct. It does. And it stems from a misinformation campaign, right? What's the easy, you know, who's the big bad wolf? And it's always Craig Fuhr (53:13) Right, it's always easy to put a target on the back of guys like Jack, right? Sean Tierney (53:16) And you know, it's easy to do after, you know, the collective Wall Street, right? Craig Fuhr (53:18) Well, no, no, no. But hold on, Jack Grimace's, if you're not watching. My point is, it's always easy to point the finger at the guy who owns the property because he's the rich guy, right? Not the tenant. And the fact of the matter is that I've walked through many of Dominion's houses. They're beautiful. The average tenancy is seven, eight years. So obviously, they're doing well by the customer. And I'll back to you on that. Sean Tierney (53:24) I have. Correct. Yeah, no, think that that's 100 right. And there it's an education thing, Craig. It's talking to local leaders. It's talking to local legislators and showing them the asset quality. Hey, calling them up and saying, hey, come take a look at my three houses that I own. And, you know, why are my being targeted as an owner? think that, you know, that becomes such a, you know, a powerful thing and, you know, where you're actually humanizing it. And I think they've probably stealing his words, but humanizing both the resident and the owner and saying, look, I own three houses. This is my livelihood. I don't have millions of dollars to go spend, but look, I am providing an affordable solution to somebody who wants to be in a good school district, who wants to be, you know, have a better quality, who can't, you know, the challenge is how do you solve an affordability crisis? And I am not qualified to solve that one, nor do I think we have enough time, but I think that Craig Fuhr (54:17) Yeah. Sean Tierney (54:41) If you can get to the local legislatures, start speaking with them, educate them, and it becomes a very real discussion, they'll remove some of that stereotyping of rentals and property owners. And all of a sudden they start to realize, the groups that we're trying to set this legislature up to go affect the enterprise or the large scale groups, but who it's actually going to affect is, you know, Bob and Sally Ann who own 12 homes, are a dentist, who have created, instead of investing in a 401k, a million dollars or whatever, they bought 10 houses. And now you're punishing them for something that they shouldn't be punished. Now, you have to find a balance, right? I think that having new squatter legislation was so valuable, right? I mean, some of the insane cases that you would read about in California or Atlanta or wherever. Craig Fuhr (55:14) Right. Sean Tierney (55:37) But there are, you you do need to have resident protections as well, right? Just knowing that some of the demographics that are being in residence, they need some, you know, some protections as well, so they're not being victimized. But I also think that the institutions have spent a lot of time trying to give the best resident experience. And you're seeing it, Jack, you mentioned, you know, the average, you know, the average tenure of some of these groups is now five to seven years. So they're providing a very good solution and saying, hey, look, people actually want to stay in our homes and you know, they're starting, you know, go look at our street. You can pick up, you know, it used to always be, oh, we can pick out the institutional owner because the long grass or whatever, that's not the case, right? Like now you go look and it is, oh, that house has, you know, two nice cars that are actually gone during the day because you know, their average income is $120,000. So they're working, you know, so I think that that removing that stereotype is a long battle and it just starts with education from the locals. Craig Fuhr (56:37) Do you think it's an issue that's here to stay? You know, this constant picking at the bite of the apple, as I call it. Sean Tierney (56:39) idea. Yeah, it is until we can reduce the affordability issue, right? Until everybody can find a place to live. I think that whether it's rent or own, it's just gonna be something that's an easy issue to kind of target. Craig Fuhr (56:57) Mr. Bavir. Sean Tierney (56:59) So. Jack BeVier (57:01) Now I get frustrated with the, I get frustrated with, I would speak to my personal experience in Baltimore. So like, there's certainly like a tension with public officials, like between the landlord and tenant community. A couple of years ago, was about, it was about rent court, you know, concerns about, you know, there were just so many people in rent court. that was, you know, as being used as a kind of a collections tool, ⁓ which is true or, which was true, but, know, cause the contract was to pay the rent because we have to pay the mortgage and, you know, provide the service and, know, provide the asset at a high quality. Right. So like it requires money to do that. So I'm a little unapologetic about that one, but at the same time, as a result, they instituted a rental licensing. Sean Tierney (57:31) Mm-hmm. Jack BeVier (57:54) which they hadn't done before. I think, and we actually supported the legislation because it like a good idea. you need to, in Maryland, we have lead certificates because lead paint is still a concern. So we have, you have to have a lead certificate and the city in its infinite wisdom many years ago said that it wanted a rental registration. So we had to get to register as a landlord and pay 30 bucks a year for what I'm not sure what that has provided. You know, just that we, they know that we exist. Sean Tierney (58:04) Mm-hmm. Jack BeVier (58:21) and then they added a, an inspection of the house requirement. and you could use the, if you were working with the housing choice voucher program, you could use the inspection pass as that, or you could go get a home inspector and do kind of a health and safety, inspection to make sure that it, wasn't a slummy house, that, know, that there was GFC eyes and there wasn't water in the basement. Just, you know, normal health and safety, reasonable, good, good level of like reasonableness. Sean Tierney (58:31) Mm-hmm. Jack BeVier (58:46) When they put that in place, the rental licensing in Baltimore got put in place six years ago. The. You know what they've never done cross referenced the list of rental and so all the landlords had to go get the scramble and get their rental licenses for fear of this, you know, know, find that accrued on a daily basis. So all the good landlords went and did that right. You know what this landlords did nothing right. They did nothing. And you know what happened. Nothing. Sean Tierney (59:03) Now this is going, yep. nothing. Jack BeVier (59:14) happened. Code enforcement never showed up because they haven't even cross referenced the list of non owner occupied houses with the list of rental properties with licensed rental properties to identify in one in 15 minutes. know, some of your data scientists could do in 15 minutes, identify the list of all the illegal rentals in the city. Now, of course, there is, you know, there's a house on that list, where the owner is letting his sister stay. And it's not an occupied. He's still paying the property tax bill, but it's his sister. So he doesn't need a rental license because there's no lease in place. Yeah, that's true. Knock on the door and be like, no, no, no. And then you have the tenant be like, have the occupant tell you that they're the owner sister, but you will in one fell swoop, identify every illegally rented property in the city. And my strong suspicion, though I don't have any empirical evidence to support this. My super strong suspicion is that you will find 80 % 90 % of the negative housing outcomes and let and get in front of the lead paint lawsuits. And you'll find other crimes happening there at the same time. In those are the houses where that shit happens, right? ⁓ And we're just not we can't enforce the laws that we have on the books already. And yet the politicians want to put new laws in place to further restrict everything and I'm like, Sean Tierney (1:00:21) Mm-hmm. Right. Jack BeVier (1:00:33) Why don't you start with just enforcing the stuff that's art that's already on the books and then we'll see where the land and then we'll decide, you know, do you know, is it really the institutional or the larger professional landlord? That's the problem here. Like I I'm like super anti slumlord because I hate being painted with that fucking brush because that brush swipes across my arm from time to time because of, because I happen to be in the same business, but fuck those guys, right? Like fuck them all. Sean Tierney (1:00:37) Mm-hmm. Jack BeVier (1:01:01) But if municipalities won't go after the slumlords in their jurisdiction, it's a total cop-out to me to blame the institutional landlords and pretend that they're worse off than the folks that won't fix the toilet, the clogged up toilet, or has water in the basement. So anyway, sorry, I get all riled up because I get painted with this brush. Sean Tierney (1:01:14) Mm-hmm. No, and it's rightfully put, right? Like that is the issue we're all facing. And I think that all professional owners, owner operators of single family rentals would fall in that same camp of like, go ahead and if you wanna put us in a rental licensing program, fine, we're happy to, let's remove the bad apples that are continuously giving us the stigma because those are, I mean. It's tough. Property management is a tough business and you but they are trying to provide a valuable service and these institutional and professional mom, pa, owner, operators are also trying to provide a livelihood for themselves. Jack BeVier (1:02:01) Yeah, I have a hard time with the theory that charging a premium price for a premium product is evil. Charging a price for a product for a service that you don't provide, that's fucking evil. Like let's, get rid of all of them. And then we can argue as to whether like invitation home, they rent too quickly, you know, like that's just, it just seems like a cop. Craig Fuhr (1:02:01) One of the things... Sean Tierney (1:02:13) All A red tail cap is, yeah. Craig Fuhr (1:02:23) I'll just plug what David Howard is doing at NRHC. ⁓ think that just this brief discussion highlights the fact that like investors at every level, I think there's always been a stigma against landlords in most major cities in America, frankly, in all of them. Sean Tierney (1:02:27) Always. Craig Fuhr (1:02:42) But what he's doing is not just like, we're just sitting in an office in DC, you know, trying to figure it all out. Like he's got local chapters being set up in towns across America where, you know, everyone from every level of ownership can participate in. And if you're not doing that as a landlord at this stage of the game, I think you're really missing out. It's, you I think we talk to investors every day that wear a lot of hats, Sean, and they're, you know, they're not just like, you know, they're doing a lot. They're busy people. But to take one out one hour a month or something like just to get involved and be a voice at the local level, I think it's imperative right now. Sean Tierney (1:03:10) Well. And I also think to that point, I would struggle to find a government out there where you can't find somebody in that government that actually is an owner operator themselves. They go to your local government, and I bet you somebody in there owns a rental house. So everybody. Craig Fuhr (1:03:29) Yeah, right, right. Hey, even Letitia James owns rentals. know, like, you know, there you go. so proof of my proof. Yeah. So well, man, we've covered so much. I hope the listeners got a lot out of it as as I'm sure they did. Can't thank you enough for your time. If folks if folks wanted to find and Tara or you or, you know, tell them where they can find you. Sean Tierney (1:03:47) Yeah. No, it's been great. Sure, nterra.ai, n-t-e-r-a.ai. My name's Sean Tierney. I'm on LinkedIn. Always feel free. I love talking about this space as Jack knows. So always please reach out. All operators, fix and flip, or anybody who wants to be in this space, happy to talk to them. And so I'd encourage them to reach out. And so I'm gonna reach out to you guys as well because you guys are very knowledgeable. in this space. And so I appreciate that. Craig Fuhr (1:04:22) Mr. Bevere, any final words? Jack BeVier (1:04:24) Yeah, no, I just really, really appreciate it. I've known Sean for a long time. I knew we were going to enjoy the conversation and did not disappoint. So thanks for your time, man. Really appreciate it. Sean Tierney (1:04:31) Thanks guys. Have a great day. Exactly. Craig Fuhr (1:04:32) We'll both see you at a wedding later this summer. All right, man. Well, thank you so much. That's Real Investor Radio. Can't thank you enough for listening. Please leave us your comments. Love to hear them and we'll see you on the next one.