Co-Living & Short-Term Rentals: Profit with a Purpose with Cliff Johnson and Atticus LeBlanc

Speaker A: Welcome to the NoBS podcast. An unfiltered look into the global hospitality and short term rental industry with a focus on founder stories, current events and culture.

Speaker B: I'm Matteo Bradford Vasquez.

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Speaker B: don't forget to check out our YouTube channel as well. While you're there, please like listen and subscribe and oh yeah, make sure to hit the notification button to stay up to date on all of the exciting things that no BS Productions has coming up. Good morning and welcome to the no BS Short Term Rental Podcast. Today we are doing something a little bit different. John is not here. And we are going to be diving into a very interesting topic looking at the intersection of co living and short term rentals with two industry heavyweights. One who is one whose family a pioneer and founder in the vacation rental industry and the other is a new friend, a new family and a pioneer and founder in the co living and accommodation space. No BS Short Term Rental Family, join me in welcoming the one and only Cliff Johnson and the one and only Atticus LeBlanc. Gentlemen, today we're going to break down the future of co living. Have a great conversation about how short term rentals and co living can coexist and whether solving social issues can also drive profitability. If you know me, I like social issues and I like making money as well. So I, I believe these things can coexist. But uh, gentlemen, welcome to the no BS podcast today.

Speaker A: Thanks so much, Matteo. Yeah, pleasure to be here and I really appreciate the opportunity.

Speaker B: Yeah, Cliff, welcome back.

Speaker C: Great to be a repeat visitor. So I don't know how many there

Speaker B: are now, but that's one of the things we like to do with. It's not a one hit wonder on the no BS podcast. We're going to bring you back, we're going to follow your story and your family. So we love having you any, anytime and we met the industry misses you a little bit. So it's always good to get a good check in. And where is Cliff now? Not the where is Waldo but like where is Clif Mountain Gets clipped doing.

Speaker C: Yeah. Never venture too far away. True, very true.

Speaker B: Atticus, let's talk about you and your story. I've had the pleasure of meeting you, of learning your story, hearing how you got to plaid split and we'll get there. But talk to me about your journey, where you come from, uh, what brought you to Padsplit, where did you start and how did you end up with the model?

Speaker C: Oh, nice.

Speaker A: Well, I had two loving parents and was born

Speaker B: the.

Speaker A: No, seriously. So I moved to Atlanta right after college. I'm here now. And moved here, rented a room because I was just didn't really have any contacts here. I'd followed a girl down to Atlanta. It has. That story has a happy ending. We, we did get married and have four kids. It's all gravy. But yeah, I rented a room when I first moved down here and interestingly, like, because I had had run in that room, like it just gave me a sense of the neighborhoods where I was really quickly and appreciated the flexibility. Went directly from renting a room to buying a house. Even though at 30 grand a year and maybe a five, uh, hundred ninety credit score, I didn't really have any business doing it. But it was 2003 and 100% financing was available and nobody really cared too much about credit. And so I was a strong beneficiary of those loose underwriting standards.

Speaker C: Right.

Speaker A: But buying that first house out of foreclosure really changed the rest of my life and the rest of my entrepreneurial career certainly. So now I've been a real estate entrepreneur for 20 years. I only held down, uh, a full time job for two years after the purchase of that home started. About my abandoned next door neighbor's house in 05. Always a commercial broker. Just in time getting my feet under me to see the whole floor fall out from underneath me. In 2007 and had just had our first child, so was looking for something to do. And I had no pipeline of deals, no real great job prospects. Um, but I had this house and I had some equity in that house that I could borrow against. And when I recognized that the. There were a lot of houses in Atlanta in 2000, late 2007, actually early 2008, uh, that were a lot cheaper than they should have been. That's when I got into real estate investment just wholesale. And we were buying lots, uh, of houses for not that much money, which was good because I didn't have much and didn't have that many people I could go to that would give me money to purchase. Mhm. But it exposed me to this world of how the other half lives. And I was raised to believe that if you were working a full time job that you could find a reasonable place to live here in the United States. And it wasn't until I was 28 and on the ground in a lot of these communities doing real estate investing that I came to recognize, wait a second. Uh, I see a lot of people who are renting these really crappy rooms in terrible houses, uh, because they don't qualify for anything else. And here we are in the worst financial crisis in my generation, and no one on Social Security income could qualify for anything in the city. Pretty much nobody on minimum wage could qualify for anything in the city. And that just struck me as fundamentally wrong. Wanted to see, uh, if there was something that we could do to address that problem. Uh, I started with housing choice vouchers and was buying houses and renting them out to folks with housing choice vouchers. I became a public private partner with the city of Atlanta, using some federal money to build affordable housing and redevelop affordable housing in Atlanta. And it became clear pretty quickly that neither of those programs were sufficient to address the problem in a meaningful way. And I got to a point where, all right, like, I was building my business, first and foremost was, how do I go from earning literally $10,000 total in 2007 with a new baby, to getting on my feed and providing food and security for my wife and my kids, uh, to how do you leave a legacy for good and actually pay. Pay forward what. What we've gotten and solve this problem in a meaningful way and just make sure that the people who were serving our communities had an opportunity to live in them. And, and that was really the question I kept asking myself was, uh, like, the answer to the question, do your. Do the workers who serve your community deserve an opportunity to live there? I think we all acknowledge the answer to that question should be yes. And unfortunately, the deeper you dig into this, the more you realize that that was not the case. And so when I got to a Point in 2016 where I was in a much different position financially and just with my own independence, I, uh, decided, all right, let's go do something about it. I ended up in an affordable housing ideas competition and started marrying these ideas of this rent by the room model with the success that I had seen Airbnb have and thought, okay, I've been buying houses and apartments and operating those, but there's not a world in which I'm ever going to buy all the property that is going to solve the housing crisis in the US and give anyone, anywhere an opportunity to move into a, uh, safe, clean place. That, that they can be proud of. So how does one do that? And Airbnb had 6 million listings at the time. So it was pretty clear to me that as I had watched over the last 7ish years, how Atlanta had changed fundamentally. As you probably remember, uh, from there were sections of town that were pretty much just abandoned that over a couple of years changed dramatically. Not because of one major investment or any large federal sum, but because of the decisions of, excuse me, hundreds or even thousands of individual investors, both people investing for themselves and buying their own homes and fixing them up and as well as just traditional mom and pop real estate investors, was excited to tap into that energy and decide, all right, let's create a marketplace for affordable housing. And if I can demonstrate for those individuals, for those real estate investors, mom and pops, that affordable housing can actually be more profitable than your other alternatives, then they would go do it independently. And that was just an incredible force that I thought we could leverage and started with, gosh, I did the first one in 2017, got our second host in February of 2018, and we're now over 19,000 units across the country. The mantra has been one room at a time. And we really believe that you just, you take each individual case and, and you trust those, those individuals and investors close to those problems and who wanted to solve them and do good and do well.

Speaker B: Now, for those who are newer to the idea and don't know a lot about padsplit, um, it is a platform, right? It's, it is a platform. Your listing rooms, you're empowering investors and others to maximize the use of their assets. Correct. In terms of not having to build, which we will get into in a minute, but also utilizing assets that are already in place to solve a specific need. And this isn't, uh, this isn't necessarily a forever thing for these people. There is a time limit on these, not time limit, but there is a window in which the people who are using your platform are using that platform to springboard into other things. Right? So when we look at the short term rental world and what that looks like, whether it's your traditional vacation stays, your midterm stays, your longer term stays, the path split platform actually plugs into that in your vision. But what I've loved and what I've learned is, you know, it is truly the springboard for people who are struggling with housing needs, uh, getting them into more permanent solutions, getting them upwardly mobile. Was that from the beginning? Was this something that was just anecdotal, or was this your Vision.

Speaker A: Yeah, it really was there from the beginning. Our mission is to help solve the affordable housing crisis while leveraging housing as a vehicle for financial empowerment. Uh, and so I saw really early on how this model could be the first rung of the housing ladder. And again, like I had experience, I rented a room when I first moved to Atlanta. So like I'd seen how even just six months I was in a better spot. Right. And, and I'd seen for some people how it could be really long term. The first house I converted to co living in 2009. Uh, I still have one of the first three people that moved in that's still there today, living in the exact same room 16 years later. And so it's a, I'd say it's a flexible choice.

Speaker C: Okay.

Speaker A: Where our average stay is nine months for some people like me when I moved to Atlanta. You're new to town, you want to get the lay of the land. You need to get your feet under you, get a job and then you'll probably move on. But in other cases, if you're on fixed income, for instance, or you're making $15 an hour, there's a good chance, like if your income generating opportunity is capped at 15 bucks an hour, this is probably going to be a lifelong housing option for you. We know that 94% of people who live with us ultimately want a place of their own. But uh, yeah, it's just, it's not tenable in a lot of cases. But it's absolutely designed around more long term living or certainly midterm at the minimum compared to a short term rental. Like you don't see a lot of people joining PadSplit for vacation rentals. I'll say that. So it's, I'd say it's a compliment to the short term rental market. Higher occupancy, steadier income. But if you were going to measure it on a nightly dollar amount, it's certainly a lot lower.

Speaker B: In our industry, you've seen a lot of professional managers transition Right. To those midterm stays, to the professional stays, to more, whatever it may be, whether they're housing insurance claim, other things of that nature. Right. We're seeing the industry diversify in terms of the use cases for short term rentals.

Speaker C: Right.

Speaker A: Not just vacations, it's just more stable. Right. As you think about the size of the rental population in the US that is going to need some level of affordability, especially in this environment.

Speaker C: Yeah.

Speaker A: Uh, it's just a massive population of folks that are attracted to this model, as we're the most affordable option in pretty much any market. And, uh, I think as you look at your pool of renters, it's not seasonal, truly, in. In the way that vacation rentals are. And so in a lot of cases, you can generate a higher income even though your nightly rate may be significantly lower.

Speaker B: So, Cliff, I want to bring you, when we talk about you, my friend, you've had tremendous experience in the vacation rental space. You're successful at Vacasa, what you're doing with the One Estates, and you've never really had your hand outside of hospitality. But we've seen you transition from your position at Realtor into housing. You, uh, and I have always had conversations around housing affordability and accessibility. What drew you to padsplit? Why was now the time to. I remember we were talking about this model when it first started. It rented a long time ago. What was the reason that drew you to padsplit now?

Speaker C: Yeah, it was definitely, uh, the mission, like, getting close to the solution. Because I would say my experience at Realtor is that we had an opportunity to activate affordable housing, but we weren't close enough to the solution. So it was us trying to get other people to do something. I had split first. Atticus did it and then created a platform to make it easier for other people to do it. And I think that's the key for me, the other was that I knew that it was authentic, is I lived in Atticus's neighborhood when I lived down here in Atlanta and got to know him personally before really digging into the business. And so, so much of any business is the people behind the business. And so I would say the thing that, for, uh, what I've been really impressed with since I joined three months ago is just the quality of character of the team that we have and the work ethic. I'm more excited now than I was the day I was joined, and I was pretty excited then.

Speaker B: I love that. In from your experience in this market, seeing how a lot of people, when even discussing kind of the model with other people within our space, sometimes people see co living as. Even with the. The shared room examples that Airbnb uses as competitive within the space and not really things that work together. How do you see it, Cliff, coming from the str world, how do you see these two worlds converging not as competitors, but as compliments?

Speaker C: Yeah, it's a timely question because that's something we were talking about internally as well, is just where do we fit within the broader spectrum of players? Not probably surprising you, Mateo, is I see an opportunity for all of us in this. I think padsplit is pretty unique in that we've chosen to serve a, uh, category that most people are not serving at all right now, which is lower income members to us, tenants to others. So I think that's something that puts us in a position of being a friend to everyone. We all need to work together to solve the affordable housing crisis. And part of that is unlocking supply. That doesn't make sense as a vacation rental. And so you and I have both seen this a lot is there's a lot of inventory on the market that's going to struggle to be a good vacation rental or it could be a wonderful place for someone to live. And so how do we convert as many of those properties as possible into affordable housing then? Really trying to get to the highest and best use of every property that exists in the market. So if something's a million dollars plus, it's probably not affordable housing in most markets. It could be if it's like a 10 bedroom in LA. Yeah, but something under 500,000 in most places is probably not going to deliver a great vacation on all experience. It's probably not in a neighborhood most people want, it's probably not high enough amenities, uh, those types of things, but it could be an amazing place for someone to live. And so I think the more we can understand the data around what is the total housing stock available in any different community and what's the right mix of vacation rental, owner occupied, traditional rental room for rent? I think that's where we need to get right now. There's a lot of unutilized space and so how do we activate that?

Speaker B: No, I love that. Since this is the no bs, I've done a little digging and I, the advocate questions that I seem to get a lot are around the kind of stigmatization of affordable housing and low income. Right. That scares people, scares investors. I have seen what you guys have been doing to combat that tremendously. What are you doing differently that's changing the narrative around that? Because you're working with investors, the investments are paying off, you haven't changed the demographic. You seem to be changing the narrative of oh, investment just has to happen with these million dollar homes or these beautiful condos. We're working with actually populations that need this housing but tend to be stigmatized based on their socioeconomic status.

Speaker A: I don't really view this differently from any of the other criticism that we've gotten over the years, Matteo. And it's Essentially just I'd like to be judged based on our outcomes. And the reason why we've been growing at a faster rate recently, uh, and just as we've been in the marketplace for a longer period of time, is because I think we've demonstrated through our outcomes that this is absolutely profitable and if it weren't, we wouldn't have a business. And so we need to demonstrate two things. One, that just the concept alone and renting, uh, by the room, doing co living for this subset of the population can be profitable. That's number one. And number two is does PadSplit add value in the operation of those types of facilities? And based on the results alone, m like clearly that has been true. And I would say our best salespeople are frankly other hosts who are providing that third party validation to those skeptical investors where they've been incredibly successful. And it goes back to the core premise that I had when I was founding the organization, which was, look, if affordable housing were more profitable than those other alternatives, people would do it. And the only reason that we're growing is because we've done that and proven it over and over again realistically. And we see both from short term rental conversions to people who are flippers that are like, have properties that are sitting on the market that are using this just to cash flow those units that they can't sell. And then in a lot of cases, folks who have been accustomed to long term rentals that are switching over. But on average you're looking at uh, about a 2x increase in net operating income between a long term rental and a pad split on short term, short term rentals. It's widely varying. Right. We're never going to be able to compete with beachfront real estate where you're never going to be better off renting to essential workers buy the room on the beach, unless it's just a really terrible beach compared to what you could get for vacation rental in those same locations. But if you're in a, I don't know what the specific terminology would be, Cliff, on a second or a third tier vacation rental market, you can absolutely earn more money renting by the room than you can as a vacation rental. And we've seen a decent number of hosts who have converted directly from short term rental into, into co Living with PadSplit and have been very successful. I think you just got to know your market and we are very much a marketplace, not unlike Airbnb. And I think as a marketplace we have to assume that those investors and those people who are really close to, to the ground and close to those decisions. I think those are the ones who are best equipped to make those decisions and decide what's best for their investment dollars. And then we just provide the tools, information, incentives so that they can go make the best decisions that, that they can make.

Speaker B: No, I love that. And just to dig into that, I know it's been. You've had different regulatory fights you face in terms of local ordinances on the municipal level. Things such as laws that stipulate people who live together must be related, things like that. Uh, you face different challenges than the larger SCR community faces. Like you don't have to worry about other things, like you're not being banned offensively.

Speaker C: Right.

Speaker B: Uh, at the end of the day, you're actually helping an issue that other STRs are fighting against. In terms of taking housing out of the market. You're doing a complete opposite. You're adding units to the market. But I don't think a lot of people know that. What other misconceptions do you face and do you think are important to clear up about the PaaS Flip model that operators and other investors in the space should know in terms of your model?

Speaker A: Yeah, I think first two, two quick clarifications just on the regulatory side and like key distinctions between, uh, affordable co living relative to str, that I think are really important distinctions. The first is that our incentives are naturally aligned with most of those municipalities. Whether or not they admit it is different question. But you look on the front page of any newspaper anywhere in America and people are going to be talking about the lack of affordable housing and just declining affordability, generally increasing rents, increasing home prices, et cetera. Uh, and so at no cost to the government. PadSplit as a marketplace increases the supply of affordable housing and decreases the barriers to entry for the essential workers, whether it's the teachers, security guards, literally anyone who works at an airport minus the pilots. And you can extrapolate from there how many people we're talking about. It's around 40% of the city's population that struggle with housing affordability. And that's what helps solve that problem. The other thing is we do it at zero cost. So for the number of units we've created today, very conservatively, a comparable number of affordable units that a city were to build, if a city were to build them, would be $4.7 billion. So it's a massive number and we can deliver those units much more quickly than they can. So philosophically we are aligned and there's A separate question with, does the elected official in that city agree that those essential workers who are serving their communities deserve at least an opportunity to live there? So that's one thing, at least philosophically, we should be aligned. The second thing that we have on our side is there is an equal protections clause in the US Constitution, and there's only one attorney on this call, and I was only named after one. There may, maybe Cliff should be answering this one. But the, uh, the reality is, if you have a city ordinance that says that you can't have more than two unrelated people living in a house where you can have an unlimited number of related people, that's a pretty clear violation in our mind of the equal protections clause to the U.S. constitution. And we've had constitutional law attorneys who have fought that and been successful in multiple jurisdictions. And so that's a key, that's a key distinction, I think, from affordable housing or battling against those types of laws relative to a ban on Airbnb in New York or something to that effect. They don't have the same types of protections for vacation rentals that they do for just how individuals are treated, whether they're related or unrelated. Oh, by the way, like, a lot of those laws still say that you can, you can have no more than two unrelated people, but an unlimited number of domestic servants. Just to give you an idea of how far back statutes are going. Yeah, I want to, I want to clear that up specifically. But the other misconception everyone assumes, oh man, you're going to have low income people living together in a home. That's just going to be, that's going to be a nightmare. It's going to be a disaster for management. And the way I respond to that is, look like I have, I've been a professional property manager for almost 20 years now, right? I've managed Section 8 rentals, I've managed low income apartments. This is far more effective from a. Just a mitigation of those types of instances than any of the traditional affordable housing paradigms. But to bring in a simple analogy, I like to ask people, oh, you think it's going to be really troubling when strangers are living together? Have you ever been to a crowded airport and have you seen it, like, breakout? Like, maybe you have, but it's incredibly rare. And as humans, literally, like we have evolved to, to be social creatures and like, the fight or flight response is real. And if you give people the option to move into a different location, which we do through just a transfer to another unit, uh, or you Just give them an outlet where they have a place that they can retreat to. Like they do. Like humans are really good at working things out. Do they bicker about somebody leaving dirty dishes in the sink, et cetera? Yeah, absolutely. Uh, but like those things are super minor and it's a big part of why we exist as a platform and one of our three pillars of the values that, that we offer. We fill those rooms really quickly, we collect all the payments and then we handle a lot of those social issues inside, inside units or at least we're the first step for triage. And the idea is how do we make this model as similar to a traditional rental that we can. And I think we've been pretty effective at doing that, which again is shown in the results. Cliff, I don't know if you have anything to add there, but yeah, I

Speaker C: was just going to say Matteo. Our uh, slogan for Vacasa when we started was vacation rentals made easy and we stuck with that for a while. I really think a lot of what we've done at PadSplit is make co living easy. Yeah, it's on both sides because uh, I think the reason people struggle a lot of times with managing affordable housing is because they try to force people into their system. Whereas what we've done is uh, what Flood has done since the onset is meet them where they are like, okay, what can you afford? We're not going to do a traditional like three to one income test. We're going to look at what you're, whether you uh, have steady income, what you can qualify for. We're going to include all the utilities and all the other expenses and make it a simple weekly payment so that you know exactly what you know, it's aligned to your pay schedule, those types of things and give lease term flexibility. So I think as we evolve like really continuing to listen to our members and our hosts and understand like what is making this hard for them and how do we make it easier through our platform is how we continue to activate more affordable housing. And that's everything's back to the mission. It's one room at a time. And I would say there's probably like a little bit of a qualifier there, like one quality room at a time. Quality is different for everybody.

Speaker A: Right.

Speaker C: It's better than what they're current situation is. So uh, how do we continue to elevate uh, people's housing situations?

Speaker B: Yeah, and one of the things that I, looking into the model that I've seen and I've been on some of your Investment calls shout out to E. He does a great job. I love that guy. He's super cool. He did a really good job. For what I saw the buy in from the investors is incredible, but also the support from the platform is incredible. The peer to peer support, the how to be successful. Because it is a different type of management with these investors and I think when like Airbnb they don't manage right. Like in a platform that supports the, the management and whether it's from a sole proprietor or a professional property manager, um, and your platform being the same, but it seems like the roadmap to success for this model is supported through community and building of that community which seems to be done really well. Was that organic or was that by design? And what is your goal? To grow that. Right, because that seems like that's crucial to the success of the model is continued peer support and showed success in best practices, references and resources. And it seems like you're doing a good job of doing that well.

Speaker A: Appreciate that. And I'd love to take credit here Matteo, but the truth of the matter is look like as the short term rental community know, uh, you just get a couple people in a room together that are excited about a place, particular platform or project and see an opportunity to fundamentally change their lives. Like that community happens organically. It really does. I, if there's one thing I can take credit for, it's that rather than going the route of uh, an invitation homes, we went the route of an Airbnb to create that community or at least be the foundation that community. But, but uh, I've never been personally great at setting up the infrastructure to, to build those communities or doing that day to day. And it's a testament, I say, I think first and foremost to, to our team, but also to the other hosts who have been incredibly generous with their time and their learnings. A lot of different hosts have different strategies on co living through padsplit. Uh, and just those forums have been created in many ways organically to be able to share some of those learnings and have, have some constructive disagreement with what people think is the best way. And I'm also an operator, but I know I don't operate the same way that a lot of our other hosts do. And we have disagreements about what we think should be in a room or in a home, or how something should necessarily be designed, or the types of residents that we're even trying to attract. I think so much of that just happens organically and the benefit of a marketplace platform means that you can have literally millions of different decisions and choices, and people learn based on what the outcomes are. Cliff, I don't know if you have anything to add there, but I know it's something that we're leaning into, and we're currently hiring a, uh, Director of Community Success.

Speaker C: Yeah, that's what I was going to add as well, is I think there's always opportunity to go further in this area. There's so much shared knowledge happening already. Like on. We do have an official host platform, which it's great to see. Hosts are typically answering each other's questions before we get involved, and usually with some really nice disparate opinions. Not everybody. Some people run their pad splits almost like a hotel, I would say. Like, I, I went to one recently that thought I was like, in a spa. Others are very basic and it's. Everybody keeps themselves and that's that. So I think the more we can surface, like, what the different flavors are and let people decide on the host side, what kind of one, what kind of pads would do they want to run, and on the number side, what kind of pets, what do they want to be part of? Yeah, that's the part the member side, I think, is even harder because unfortunately, especially people that are struggling to make ends meet often maybe don't talk about their housing situation enough before they get into it. And so the more we can get in front of people and, uh, get them out of situations that might be bad, where they're spending all of their money and unable to save anything and just perpetually stuck in an apartment they don't want to be in, in their own part of town or something thus far from their job, like, how do we. So I'm really interested with this Director of Community Management, like, how do we find people before they've heard of us and use our existing PadSplit members that have had good experiences to just help them, um, bridge that gap, get comfortable with the situation and find the right one for them. So I think the host is easier because people like to talk about their real estate investments. Right. Member side's a little harder, so looking for different ways to activate that.

Speaker A: The other thing, too, I'd add here, and this maybe gets into some of the common misconceptions. Mateo. I built the platform just assuming that. All right, I know that one third of the entire rental population United States are one or two person households that earn less than $35,000 a year.

Speaker C: Okay.

Speaker A: That's an enormous population.

Speaker B: Yes.

Speaker A: And, and that 35 grand cutoff means that the max that person is going to qualify for an apartment is $873. Okay. So I knew that was the bulk of the market, but all of my units I've catered towards that. That segment that's sub, um, $873 as max, they can afford sub 35 grand. And I think that's generally true of the broader pads with population, but it's not always true. And we've seen hosts to Cliffs Point that are doing almost luxury units that are catering to a much higher income demographic that are, that crave the flexibility. And that's actually one of the other things that, that has always struck me as unique time and time again. Every time we survey our users, they rate flexibility as the number one thing they value about using Pad split, not affordability. And I think that would surprise a lot of people. I've seen it on all sorts of different income demographics as well. And yeah, the bulk of our resident base is really in that affordable essential worker type category. But uh, but it's hardly exclusive. And we have. Whether it's people in film who are using this or. I even heard uh, an anecdote once about a guy who owned a very successful business, but he was based in New York and would come down to Atlanta every month. And so rather than book a short term rental like he would keep a place here that he would pay for. So you hear some really interesting use cases that you never would have imagined.

Speaker B: Yeah.

Speaker A: And I rely on those local hosts to know, all right, hey, I think I see an opportunity here, whether it's for traveling nurses or pilots or business people or what have you.

Speaker B: And I, that's actually interesting because I hadn't thought about that, the diversity of what the model could offer, keeping the focus on affordability. But uh, will there be, you know, different levels to that? Will there be a midterm and maybe a more lux type stay? I think there's too much focus on the lux. Right. Cause I think that where everyone thinks the money is. But I think this model shines a different light on what a variable mindset could be in terms of also property types and property locations. Which brings me to the question, you have 19,000 doors now. You know, what does scaling look like to you both? Like in five to 10 years, where do you want padsflip to be? Where do you see the future of this platform expanding?

Speaker A: Sure. The reason I wanted to mirror Airbnb is because at the time it had 6 million listings. And I know that the shortage of affordable housing in the US is around 7 million units. So scale has always been in the millions. Uh, and the question is just how quickly can we get there. But there's no doubt that the demand is present in, in cities across America and likely around the world.

Speaker B: Atticus, I know you have some um, and Cliff, you, you as well have some creative ideas in terms of types of housing and even somewhat purpose built housing for this model. Where do you see that going and how do you see investors taking that into consideration with also inventory that we have, but also where the model can grow with purpose built inventory?

Speaker A: Yeah, so I've, I've built some new construction pad split units that uh, we actually have some more that are under construction right now. They're builders in I think almost every single one of our markets at this point that have done new construction pad split. The entire project was designed specifically with pad split in mind. Uh and that number has absolutely been increasing. And the other thing that's interesting is you can find some of these unique lot opportunities that may be undervalued relative to what they should be. Certainly if pads but were kept in mind like think about a major road with WL line with maybe a bus route on it. It's not necessarily the prime single family building site. But for a pad split opportunity for rental, the numbers work much better and it's a great location for folks that are looking for proximity to transportation, public transportation or services. So we see some of that. We've also seen accessory dwelling units has been another use case. And then the last but not least would be the conversion of motels where we've seen folks that have converted motels even though it's not a traditional shared living situation. We've added value is our average time to refill a room is seven days. So if someone's looking at a long term rental opportunity that's much, much faster. And we'll pay for our fees just in the difference in time that it takes them to fill that room through traditional channels versus listing it through pads. But so those are three different scenarios. some point I suspect we'll see some of these like office to residential conversions. Come on. We haven't seen at least uh, an office building yet. We've seen a dentist office that's converted. That was very successful in Las Vegas. But, but otherwise, yeah, I think we'll continue to see an expansion of just new construction models that were designed around uh, around, around this modality.

Speaker B: And I saw one of the tools that you have that can show people they submit their property type and there's a uh, configuration model that can show them how to maximize the asset. It shows them how they can reconfigure or configure to best utilize whatever that asset is. I thought that was actually pretty cool. The interesting part you brought up is commercial. It seems like in, I don't know where the economy is going and all this craziness that's going on. Do you see that as being a place where piazzfit will have a focus is commercial transition and commercial conversions. Typically commercial entities are proximity waste. Right. And could be if we're talking about keeping people in areas and where they work and being able to provide spaces in which they live. There's gonna, there's a lot of commercial real estate, uh, when you see it here in Atlanta, underutilized, I know that

Speaker A: the infrastructure for those, the, A lot of those buildings with just common core where all the mechanicals are in the core of the building really make it cost prohibitive to do traditional residential conversions. And so I absolutely think there's a role for co living to play if those types of buildings are ever going to be converted. We haven't seen it. It's still expensive, right? It's much, much cheaper to convert. Let's say a formal dining room, right? Uh, a formal dining room to a bedroom is like $1,000. And that's something that literally anyone in your listening audience can do. And to convert that formal dining room that generates $0 in rental revenue today to one that generates seven, eight hundred, a thousand dollars a month, like that's a, that's an outstanding return on investment and it's really easy math. Mhm. There aren't a lot of people who have the, the capability to go convert a large office building, even if it does make more sense as co living than it does as either office or traditional residential. So I think you'll see them. But, but it's fewer and farther between. And back to something we talked about earlier, just there are literally millions of consumers and just retail real estate investors who can add inventory of housing supply in their markets with very little effort or even experience. Um, and it's a different world that requires a lot more institutional support for the commercial side. I hope we'll get there, but yeah, it's certainly a bigger hill to climb.

Speaker B: I think it's going to be interesting especially in the current environment and probably and my personal opinion is demand is going to jump significantly. Solutions like this are going to be more and more important on both sides. Both from the investment side, but also from the demand and the needs side and playing more of a crucial role as housing is one of the largest issues that we have to deal with in this country, not just in Atlanta, everywhere. And that I think is something we have to have very serious conversations around. And I think through, um, creativity and being open minded as to how we can approach these solutions. Password is a prime example of what can happen when we take the blinders off, see what's possible and what we can do with what we have. Right.

Speaker A: I think you nailed it, Matteo. And whatever problems that we're facing, I think about just the idea of empowerment and it's part of our mission, but recognizing that we are the change, we are the cavalry, not pad split, but like we, the broader community here in the US and that, uh, any individual has the capacity and power to, to make significant change right now. And when you look at what's happening nationally now, where a lot of the funding streams for any programs are being cut off, what still gives some hope is I get to see every day our hosts that are making transformative changes in the lives of people in their communities. And it's real, right where you get to see that every single day. And I can't tell you the number of times that I see reviews come in that say thank you for this has been life changing and thank you to my host for giving me this opportunity. And people come for the income and they stay for the impact. And that continues to be true.

Speaker C: I love that.

Speaker B: I love that. All right, as we're, we're going to wrap this up. Any last words that you both would like to leave our audience? And of course, we will list all the pad split information where they can find you both, where they can find more information about the model. But to those who are potentially interested in the investment side, and maybe there's some people in our audience that could, maybe even need the pad slip model for their own living.

Speaker C: Yes. Yeah, I can, I can jump in first and let you close out Atticus, but I was, I was gonna, I

Speaker A: was gonna let you close, but go for it.

Speaker C: Okay. I was gonna say you can be part of the solution to your point. And whether you have a room in your house that you could activate probably higher barrier to get you to do that or become a pad split owner or become a fractional owner. So there's a lot of platforms now, mobile club, fractional, or a couple that we've been working with that allow you to dip your toe in by investing in a pad split alongside others. If you're interested, feel free to reach out to me happ get you started to be part of the solution.

Speaker A: One room at a time. Love it. Love it.

Speaker B: Gentlemen, thank you for joining today. We will definitely have you back. This is, uh, something that we hold near dear to our hearts and we're going to follow your success and hopefully have you back on and talking about the new and amazing things that are going on with Passplit in the future. Thanks everyone for tuning in for this week. John and I will be back with a new guest. Do not forget to listen and subscribe and share and as always, have a great week.