DJE Texas (00:02.414)
Welcome to the DJ podcast where you will learn about real estate investing from real life examples. Here's your host, Devon Elder.

DJE Texas (00:16.654)
Hello and welcome to the show. Thanks for joining us. My guest is Richard Ross. He's a CEO of Quinn Residences and they're focusing on BTR, build to rent communities. So these are communities of a hundred to 200 plus houses specifically built for renters. You've heard a lot about this in the last couple of years since the pandemic. So we kind of dive in on Richard's background and his career, but

A lot about the BTR community space, how they're financing it, how they're putting it together, how they're building them, why they like this space, possible exits, how they're running it, property management, kind of the whole thing in the BTR space. So Richard's industry veteran got a lot of wisdom that he shares in the podcast. So I hope you enjoy it. We'll have a message from our sponsors and jump into the episode. This episode is brought to you by DJE Texas management group, a San Antonio, Texas based.

real estate investment firm with a track record of transacting on several hundred million dollars of multifamily, land and industrial deals throughout Texas. EJE has been in business for over a decade and is approaching 100 team members in San Antonio. To learn more about DJE, visit djetexas .com or the link in the show notes of this episode. This episode is also brought to you by apartmenteducators .com.

the ecosystem for professionals to learn how to find, finance, and operate large multifamily properties for profit. You can get started with a free mini course and learn more at apartmenteducators .com or visit the link in the notes. Hey Richard, welcome to the show. Thanks for joining us today. How are you, sir? I'm fine. Thank you, Devin. Glad to be here. I appreciate you asking me to join you. Yeah, looking forward to talking shop here on some real estate stuff.

talking about BTR and other things. But first, let's do kind of an introduction for folks listening that have not connected with you would love to learn a little bit about your background and how you got introduced to this to this real estate business here. Sure. Well, you know, we can start way back in the beginning. My father actually was a home builder. Yeah, back in the in the late 50s, early 60s. And so it's in my DNA.

DJE Texas (02:37.39)
he had a lot of success and then didn't as happens in the real estate business, right? It's an up and down business. So I hit my formative years when he didn't, wasn't having success and actually became an accountant, a CPA, because I didn't want to be subject to those ups and downs of the real estate business. Fast forward 10 years in the accounting world and the DNA kicked in, let's say. And so I got my first,

taste of the real estate business in the early 90s in multifamily when all of the big multifamily REITs, real estate investment trusts were growing public reform. The ones you know, MAA, Avalon Bay, Camden, all of those were formed equity residential in the early 90s. And that's sort of where I started to cut my teeth in the real estate business. And fast forward, here we are, what, some 30 years later, and still in the business, still in the game.

Yeah. What was the multifamily market like in that kind of 90s period? What were rates doing? What were operators after? What did the landscape look like? So not unlike today and maybe not so much in terms of rates, although when you look historically at interest rates over the last 50 years, a five or 6 % mortgage rate is pretty common. So we've been spoiled this last four or five years.

or 10 years since the GFC. But back then, multifamily was a mom and pop business. There wasn't a big institutionalization, if you will, of that business. And of course, all of these companies were formed in the early 90s. And that's when multifamily sort of became a thing, right? An asset class, if you will. And, and it's pretty fragmented before that not a lot of fragmented, you know, one guy would own three.

apartment complexes, another might own eight or 10. And so these big companies with the advent of the re industry and that the tax break that that gives you started to accumulate units and build and develop what we would now call Class A multifamily sort of the high rise, the garden style and the high rise apartments you see all over the country from San Antonio, where you are to Atlanta to basically all over the country. Right. And

DJE Texas (05:02.606)
it began to develop and get known as an asset class of its own. Class A and then Class B came along and Class C. So I liken those early 90 days to where we are in the built to rent sector, which is where I specialize today, was 30 years ago. Yeah, interesting. The family has been on a long run as we all know, right? Sure. We've had some challenges today with a lot of supply, but as we know, real estate goes up and down and...

multifamilies had a long run. Yeah, no doubt. So you had, if I heard right, I think like a decade in, in accounting before getting into the kind of the ownership. Um, I gotta imagine that's a huge leg up. And what I've seen talking to countless people over the years is that's probably the foundational skill to have in this business, right? Is that accounting background? Were there things happening as an accountant for you that, um,

you made real estate more appealing by the time you got into it or did you kind of know that stuff inside and out already? What was, no, I think, I think the accounting background obviously is a foundation in any kind of business, but real estate obviously is very financial oriented in terms of financing the asset, operating the asset, understanding, as you've mentioned, interest rates and leverage, you know, and things like that. So that, that's kind of the, and taxes actually, income taxes. And that's the, that's what I learned over those 10 years.

to say that, you know, that prepared me well, absolutely. But I always knew that the, I won't say the trouble, what are the issues of being a professional accountant, lawyer, doctor, is you're billing, typically billing your time, right? You're billing your hours. One to one ratio. Very lucrative, very lucrative business, you can make a great living, as I did, and millions do. But you're not going to create significant wealth.

billing hours. And so that's the attraction of real estate investing is if you're prudent, you're smart, you're in it for the long term, you can you can accumulate a nice little nest egg. Yeah, was there a breaking point for you with that? As a professional accountant? Or was this kid just kind of a natural? Actually, there there was I had children who were who were at that time. Seven nine years old.

DJE Texas (07:29.294)
And I was working a lot of hours, right? You, you tax season, right? From let's say now this time of year or really January through April. It was insane. And so I didn't see my children and that was kind of the breaking point. I got to, I got to find a new career because my kids are in their formative years that will allow me to spend more time at home, particularly, uh, you know, in this first quarter of the year. Yeah. No bigger motivation. Um,

So what did that transition look like for you? You mentioned multifamily. Did you just kind of dive right into the GP side? Well, no, interestingly enough, for me it happened. So I sold my practice to my partners and said, look, I can't do this. And I had some time on my hands. And obviously, I was in my mid -30s. I wasn't going to retire. Or could I retire again? Because I was an accountant making a manual wage, if you will.

And I called one of my friends who was a partner at one of the large accounting firms and that I had started with right 10 years is typically the track and a big firm to a partner and I said, Hey, I got some time, you know, you got anything for me to do? And he said, Yeah, I've got a client's about to go public. Maybe you could go over there and help them for a couple weeks. So I went to this client and that two weeks turned into two years and it was a company that was IPO in post properties out of here in Atlanta.

arguably the founder of Garden Style Multifamily. Interesting. They since sold that company several years ago to Mid -America Apartments, MAA, but a very big, very well -known owner, operator of Class A Garden Style Apartments throughout the Southeast. And so I spent two years there, kind of cut my teeth, if you will, on both the public company and on multifamily. And then from there went on to progress on my career.

So was this a consulting capacity for that? I was one of 30 accountants in a conference room crunching numbers and helping this company do what you have to do for the SEC right to get public. Oh my gosh. This was about 15 different apartment complexes owned by different individuals and you got to convince everybody to come together and create one company. And so that was that was the challenge. Yeah.

DJE Texas (09:52.014)
Did they go public on the strength of 15 assets? Yes. Interesting. July of 1993. Yeah. So that happened. You're out of the kind of direct wage scenario. You're consulting. You're moving into multifamily. And then what did, I guess, kind of going out, was it full time, full steam ahead into multifamily or was it partnerships or how did you approach getting into that?

So interestingly enough, I worked on this IPO and, you know, again, there's where the financial background really helped. Sure. And we did their IPO and then what they call a follow on offering. So with another stock issuance a couple of years later. And then I found myself with an opportunity with another company, similar circumstance. In other words, a company trying to get public in the real estate field. But it turned out to be grocery anchored shopping centers.

and another really good asset class. And the window, I won't belabor, spend a whole ton of time, but the window closed for IPOs as it typically does, you know, from time to time. So we're now in 95. And so we weren't able to take that company public, but I spent 20 years there as the CFO, helping them accumulate a portfolio of grocery anchor shopping centers.

This is nationwide. No, in the southeast, south. That's kind of been my focus. And then, you know, we had the GFC, the great financial crisis, I helped them get through that. And by 2010, I was I was just needing a break. What do you call it? A midlife crisis called sabbatical. I took a year off. Well, I did the whole dream and then came back and.

Got into consulting business again, found another little multifamily company that was trying to get public, so I helped them as I did, what now, 15, 20 years ago. And that's where I met my current equity investor here at Quinn. We ran a multifamily read out of Florida, sold that to a bigger read in 2015, and...

DJE Texas (12:10.702)
went on. I went on the board of that company for five years until this opportunity at Quinn came up and I was called by my board chair who was the chairman of the of the public company and he asked me to get into this business. This built to rent business. I wanna dive into that but I don't wanna gloss over the sailing around for a year. What where'd you go? How was that? I it's I went it's a it's a it's a saga, right? Yeah.

I left, I spent a summer in the Chesapeake Bay, beautiful, probably one of the, certainly in the U S wonderful place to sail, came down out of Norfolk, Virginia and across the Gulf stream went south to Tortola, the British Virgin islands and went on from there. I love it. I love it. Well, let's talk BTR. We hear a lot about that last couple of years. Been seeing a lot of deals being put together in the space, seeing it pop up in my town here in San Antonio.

a lot more talk about it. And I'm interested in all of it, but you know, you kind of mentioned fragmented asset classes or newer emerging asset classes. You hear maybe that self storage was that, you know, in recent, in recent past, you hear maybe flex industrial contractor garage is kind of that a new emerging thing, BTR is new emerging thing. So what's driving all this and what, what, what are you guys excited about in this space? So what's driving it?

is basically demographics. Let's start before the pandemic, right? So this business started out of the great financial crisis by big, some big institutions buying up what we call scattered site homes. So foreclosures, you probably read in all the media, you know, courthouse steps kind of things or MLS listings. And there, you know, now too, there were three public companies, Blackstone just

one private, probably read about that icon, you know, a month ago, so there's two, two very big public companies that got their start amassing these huge portfolios of rental homes, single family rental homes. Those are what we call scattered site. In other words, in San Antonio or Atlanta, there might be, I mean, today they have thousands, but they're not, they're not all centrally located together in one community. And that business thrived from let's say 2010 till today. It's,

DJE Texas (14:37.646)
right being public companies today. What happened in let's say 1718 is the concept and it really started not far from you in typically in Arizona, where the thought was, let's build entire communities purposely build an entire community for rent. So your typical subdivision in suburban America right is 200 250 homes, a builder will build that sell each home to Bill and Sue Bobby and

Joe or whatever. But the idea came about, well, let's build an entire subdivision, but rent each home. And that that's the was the genesis. What was driving it and it still is driving it is the aging of millennials first, right? So they're all in there now 30s, mid 30s. And 2030 years ago, right, they all

moved into a one or two bedroom apartment, which is typically what multifamily is, maybe a few three bedrooms, but mostly ones and twos. And so as they age and are either they're having children or they want a little bit more space, they wanted to get out and have a home. And so that's the demographic driver of the business. Then what happened, of course, is we had a pandemic, right? So lockdown and early 20,

I don't want to be in a shared wall or shared hallway with someone. So I want to get out of the apartment and get into a single family home. So that was another driver. This is all before the increase in interest rates. Then of course you have mortgage rates go up, home prices go up and people either can't afford a home before even before the interest rate increase. It was after the great financial crisis, right? You needed a 20 % down. So.

starter home, let's say as $300 ,000. Well, that's 60 ,000 bucks you got to come up with. That's real money. You needed a good credit score to write, you needed to have a credit score. So, so that was a challenge. Then of course, you put now interest rates are zero or you can't get a two or 3 % mortgage and now mortgages are seven or 8%. It just continued to put gasoline on the fire of unaffordability of a starter home. So what we offer and what the bill to rent,

DJE Texas (17:01.806)
folks offer is essentially a starter home, right? A three $350 ,000 home identical to what most people would start at. But our our rent is about 40 today, 46 % less than owning that same home. And that's got today's today's numbers today's rates. Yeah, today's numbers today's rates and that that's included inclusive of insurance taxes. That's huge. Huge.

I mean, historically, Devin, rental is all, let me back up. In this country for the last 50 years, it's been pretty consistent that about 65 % of people own their homes and 35 % rent. I mean, this goes back to World War II. That rule of thumb holds for decades. How it holds today, actually, it might be a little bit higher today, homeownership might be 66%, but it's stayed steady. So,

rentals have been around for a long time, right. And it was always about a 15 % discount. Typically in the last 30 years, running was a little bit cheaper because as the owner, the landlord, if you will, is making the down payment on the home. Obviously, with the increase in interest rates, the huge increase in home prices, HPA, we call it right home price appreciation, that cost of ownership has gone way up.

And so that 15 % has now grown to over 40 in terms of this and that includes maintenance insurance and taxes as I said because we maintain the homes Completely we move on we unclog your toilet if it gets stopped up all of that I was gonna ask about lawns because one of the complaints about rental houses and I've had a bunch over the years is you know They're not tenants aren't taking care of it like an owner Maybe you can tell the rental houses in a neighborhood versus the owners So you nip that in a bud and just go ahead and mow the lawn for him?

Yeah, and that's that's kind of the ding right on on rentals. The perception is renters are second class citizen. And I beg to differ. If you give a renter a brand new like our homes are brand new and when the resident first moves in, they tend they will maintain the home. But to your point, we make sure the lawns are made, we make sure the property taxes are paid.

DJE Texas (19:26.51)
it's an asset for us, right? It's just like and so we maintain it. We keep the roofs clean. We clean the gutters. The appliances are, you know, serviced every year and and because it's in our interest to do that and that obviously is to the benefit of the resident and the municipality where that particular home or community is located. Yeah, that's right. So the play for you guys obviously build it, lease it up.

Is it package it and sell it off to private equity? Is this a long -term hold? How are you guys viewing that? So different for us. We're a long -term holder. This is not unlike any years plus longer. Correct. I mean, look at these multifamily companies that were created in the early nineties. There's no strong, huge market caps. Yep. And this is a very, very early stage industry, right? Meaning this bill to rent community. So.

I see this going for, you know, the next 10 to 30 years. Now, different people have different things when when when it got hot, right? When built to rent got hot, which I would say was coming out of the pandemic or maybe 20 late 20 early 21. There everybody was doing it right. So a lot of guys thought, OK, you know, if I build a little 100 home community and and I can build it, lease it up, put the residents in and sell it.

to private equity or whatever and make a ton of money. Those opportunities were there and a lot of people took advantage of them. Obviously with the increase in rates and the challenges of the availability of capital, that's kind of waned quite a bit in the last, let's say, year, year and a half. Right. Yeah, the steam has been let out of all manner of projects for sure. How are you guys handling management? Is this something that you built the management arm as well?

Is this third party? How does that layer into things? Yeah. So when we started, we third party manage, right? Like most small operators do. Yeah. Easy to get started. Yeah. I've learned in my now 30 years in the business that no one manages an asset better than an owner. Yeah. But you need to be at a scale. You need to be at a certain size where it makes financial sense.

DJE Texas (21:41.518)
That's right. And so our first three years, we were externally managed. We used two rather large third party managers. And over the last six months, we begun the process of internalizing managing our own our own assets. And that process will be completed here in the next month, where we'll manage everything we own, which which gives you a couple things. Again, I said no one manages an asset better than an owner.

but you get the relationship with the resident. Your information is much more timely and fast than the third party. And you just take better care of the asset when you own it. Yeah. And the transparency for the owner too. We went through the same thing, started out third party. You kind of have to, but a certain scale started on management company a number of years back. And I like the transparency of it. You know, there's always going to be issues, property management is hard work, not great margins, but...

Correct. Transparency to just go, Hey, I need to drill down on this specific thing at this property and this leasing agent is on my payroll. So we're going to get right to, right to this thing versus layers of bureaucracy or third party or a regional manager, you know, with a, yeah. And I'll, and I'll give you, you know, really simple, concrete example. So, um, we have a resident, you know, our, our residents typically stay in our homes for,

three plus years. That's fantastic. Multifamily, right multifamily sign a year lease and they typically move on. It's a slow hotel. Yeah. Right. But let's say we have a resident who's been in two years and he or she is is ready to renew and you're you're a third party property manager and you have a certain rent increase you want. I'm just going to make it up 5 % so it's 100 bucks a month. Yep. And the resident says, you know,

can do 75. A third party manager doesn't really have that flexibility. It's a big machine. It's all in the system, right? The bureaucracy. When you're internally managed, they go into the leasing office and they talk to the property manager or the leasing manager who's there. And, you know, they call me or they call my, you know, my head of operations and nine times out of 10 will come to a reasonable accommodation because we don't want to turn that unit, right? Right. expensive.

DJE Texas (24:04.654)
move somebody else, move somebody in. They can see even if it's even if it's a hot property and you don't you still need a month to clean the place up. And it's never going to be zero turnover cost. Correct. And you got to paint, you know, clean the place up and that costs money. So to keep people in the home heads in the beds, as we call it is in bed is is is good. And it's much harder when you're when you're in a huge machine, third party manager.

That's right. How, how big when you guys are going to identify a site and build a community, let's talk about kind of the specs of the whole thing. You know, how many acres, how many houses, what does a house look like? Is it, is it three different plans? Is it, is it more than that? What's the whole layout look like? Cause you guys are approaching, let's say the anchorage will depend. We do two types of projects. We only do three and four bedrooms. Nice homes. Yep.

average, you know, let's say 1400 to 2300 square feet, sweet spots about 1850 to 1900 square feet. In terms of size, we've learned, we've done some smaller communities meaning under 100 homes, the sweet spot is 150 to 250 homes, because that gives you enough scale to have an amenity, a nice amenity, amenity. Yeah.

depending on the size of the community, if it's under 100 units, which we have some of those and I'll get to that in a minute. We don't put a wet amenity, a pool. It doesn't support that, but we always have three things. Dog park and in this order actually, dog park, playground and some sort of green space. It can almost even be like a walking trail around a detention pond or a couple of fire pits, someplace where the people in the community can.

get outside and get. Yeah. Yeah. We fence every backyard. And and then once you get over 100 to 125 units, you you add a wedding, all those three things. Plus a wedding. What's interesting enough, Jim, Jim's are not. Jim's are not a thing anymore. Not not. I think the pandemic proved either got your peloton or

DJE Texas (26:22.67)
Yeah. You know, in your house or whatever the mirror Nordic track thing is or you're going to LA Fitness or some big anytime fitness and working out at the, you know, down the street at the Mega Gym. Right. So we've kind of learned to that that gyms aren't aren't necessarily important. So that's kind of the sweet spot. Every yard is fenced. Garages are really important. And interestingly enough,

I'd say 90 % of our residents do not park in the garage. Isn't that funny? So their cars are in the driveway. The cars are in the driveway. You ride down the street on a Saturday morning or whatever and all most of the garages are open and they're they're a man cave or like a workshop. They're storage units. They're even like little playgrounds or play areas for the kids.

but very rarely are they used to park a car. It's extra space. Yeah, that's right. And by the way, I will tell you once they fill the garage, they don't move. That's interesting. That's it. Makes them sticky. Yeah. Fill that garage up. Yeah. I love it. What's it cost to put in a pool? Depends. Um, anywhere from a million and a half to 3 million bucks. Yeah. Yeah. I always wondered about that. So given that you guys are building these, you're kind of,

you're there for the entire life cycle from looking at the dirt to holding the sink for 10 plus years. Has, is that influence your, your construction choices, materials, et cetera, versus, you know, maybe a builder that's going in and building a similar price point product, or you just kind of a hundred percent. We've learned a lot, right? Your typical, what you call, you know, especially a starter home sort of builder grade pain. Sure.

So what we've learned is we don't do carpet anymore, anywhere. Not a stitch of carpet. All solid surface, even the stair threads with the most important, right? Cause that's obviously the most where. Yep. So solid surfaces. We make the stairwells a little wider than a, than a typical sort of interesting furniture gets moved in and out. It doesn't ding the walls. We provide washer and dryers. It is a convenience for the resident.

DJE Texas (28:49.166)
but you also don't want people moving a washer and dryer in and out of the worst. Yeah. Just, you know, in terms of Nikki, um, technology is very important. So we put a tech package in all our homes. Like I'll come back to that. As I said, fence backyard and garage, um, and then someplace these days to work. And it doesn't have to be like an office or a bedroom, but they need, they need someplace to work from home. Cause inevitably, uh, one of the residents, uh,

is probably going to spend some time. Right, right, right. Yeah, it makes perfect sense. And then the tech package. So our standard tech package is a ring doorbell, right? So they can see who's Amazon or whoever's coming to the house. Obviously a programmable thermostat. We put leak detectors in under the water heater, under the kitchen sink and under the washing machine so that if there's a leak, we get notified.

we can notify the resident. Let's say you leave at eight the morning, you go to work and for whatever reason the water heater fails or you forgot to close the lid on the washer out. I don't know for some reason and it starts leaking. Well, we'll get an email and we'll know within 10 minutes as opposed to you being gone all day and you come home and your house is flooded. We wire all our garages for EV chargers. We don't put a charger in necessarily, but we wire it.

You got a 220. Has an electric vehicle or a hybrid. They can pay a nominal fee and will come out and install the charger. Yeah, with a long cord so they can plug it in in the driveway. Yeah, that's right. That's right. Interesting. I like definitely like the hard surfaces. That's a game we play in multifamily for sure. Yeah. Yeah. Also, by the way, putting solar on we piloted one community was a huge success. So we're now rolling it out to five of our other communities.

Wasn't there some legislation recently passed? It's going to be a big, a big help. Yeah. Well, you get a 30 % tax credit for the cost of putting the solar in. So that helps obviously take down the out of pocket capital outlay. Sure. What we found is our one, it saves our residents. We can pass through about a 20 % savings on their normal electric going. So it's great for them. It makes them feel good, you know, to live in a sort of a

DJE Texas (31:15.118)
more greener home, a solar home. And so it's a win -win for both us as the owner and the resident. You guys selling back to the grid then? Is that how that works? Yes. We actually don't get paid. We sell it back to the grid and get a credit, right? On a sunny day, you're sending power back. On a cloudy day, you're using that credit up. Yep. Yep. Yeah, I like it. That's interesting.

Talking about the financing of these, is this a construction loan, construction to perm? Are you guys bringing in equity here or multiple? Is there a Mez piece? I always like to kind of get into the capital stack on these types of projects. For we're very fortunate. We have one, a very small group of investors that have put up just short of a billion dollars of equity. And we also have a very large credit facility.

about nine banks in this facility. It's currently at half a billion dollars and we're in the process of increasing that by 50%. And that facility allows us to do it all. I would almost say it's a little bit unique and we're very fortunate to have been able to obtain this. We can do land as one bucket, construction as a bucket, a completed home as a bucket, and then a stabilized community, right, where you're at 95 % occupancy.

So we have four different buckets, different leverage points. But for a small operator, yeah, historically, right? They go get a construction loan, 36 months, you three year construction loan, typically from a regional bank. You've been reading about that a lot in the last, you know, well, we had two little hiccups a year ago and one just last month or a couple of weeks ago. But those are typically the lenders that finance that construction. And, um,

the equity can come from institutions, from hedge funds, from private equity, sometimes country club, you know, if you have a small little 40 unit deal and it's a $20 million project, right? You only need six, seven million of equity, you know, maybe cobble together a dozen folks that put up that equity. So it runs the gamut, but typically it's either one -off construction loan financing or some sort of credit facility.

DJE Texas (33:44.832)
combined with an equity investment. Yeah. Yeah. Interesting. So I'm going to zoom out a little bit, just kind of look at the macro. We're talking in Q1 2024 right now, I got an election year. We've got pretty interesting hiking cycle that we're hopefully kind of at the end of, but what are you seeing kind of macro from your vantage point for, I guess, the rest of the year ahead and maybe the next couple of years? So I'll step back first before we go forward.

tell you just to give you an idea of our activity because I think it's probably true throughout the industry. In 2022, I think we did somewhere around 2300 homes in 14 communities. Last year, we did less than 500 homes in three communities. And that was all in the first months. So over well over over a year ago, we hadn't done anything for a year. What I'm seeing now is

things because of the rise in rates and also a flight of capital, people just got spooked because of. Yep. So hasn't been a lot of activity in the last year to 18 months. We're starting to see that change and actually have entered into a couple contracts for deals that make sense. Whereas they didn't six months, nine months a year ago. I think where, you know, if I knew Devon where interest rates were going, you and I would not be talking. I'd.

I'd be on another boat and probably in Tahiti or something. Having said that, my guess is we'll see some easing here. Don't know if you know when that starts probably later than everybody thinks because the rates go up faster than people think and they ease later than people think. Yeah, it seems to be playing out that way. Yeah. And for me, it's always been and this is going to sound I don't know, a little silly maybe or crazy.

I don't really care where interest rates are. My first home mortgage was at 13 and a half percent. Yeah. Back in the 80s. So what is important is that I know what the rate is and I have some some expectation and some stability in the rate. Then I can make my financing decisions. So for instance, if we get a 10 year treasury that settles in around four, somewhere between four and four and a half today, if that holds steady,

DJE Texas (36:08.558)
then I can make my decision, right? I need to start investing in properties that generate a yield that's somewhere between 150 to 200 basis points over what I can finance at long term. So that's a six and a half yield on cost. Just to do basic math. And so I think the treasury is starting to stabilize. I think short term rates will start to come down because all the construction loans and

all of that financing is on right floating rate stuff. Then I think you'll start to see a lot of activity. The demographics and the the opportunities in my particular industry in the built to rent industry are huge tailing, meaning the aging of the population, the inability to buy a home. And I don't know that that

solves anytime soon. I mean, the real thing driving is the shortage of supply. You've got demographic trends, but you also have a shortage, depending on who you believe, somewhere between three and six million of households. Meaning we have three to six million more households than we have homes. We haven't built any homes since the great financial crisis. And that's getting worse. So last year, I think a 1 .7, you can verify the data, but...

the U .S. formed about a million seven households and we built about a million four homes. So three hundred thousand dollars worse. Right. So a huge supply problem. Demand continues to grow because of the aging of the population and the fact that people want more space. So those things are are pretty much in play I would say for the next five to ten years. Right. So it really becomes a question of financing. And if that stabilizes I think you see

see a nice runway here in the next 12 to 36 months. Right. Is there a scenario where BTR kind of becomes an accepted asset class cap rates compress and you guys just do a giant portfolio sale to PE or is this kind of well, I mean, I think it is becoming a defined and very important asset class.

DJE Texas (38:28.302)
I think whether it's me or somebody else who's developed a significant accumulation of homes, there's probably a couple exits. One is these big multifamily companies, right? So if I'm a big public multifamily REIT and all my residents are leaving my one and two bedrooms and going to move into a home that Quinn built, maybe I should get in that business. And some of them are. I mean, they're dipping their toes in.

there's a lot of development, right? So there's, it's a long time to get the cash flow, typically 30 months. So they want to, they want that is not sort of well looked at in the public markets. So they're going to want to acquire somebody who has a significant. They just walk right into that cash flow. The cash flows. The other option is to do what, you know, I mean, Blackstone is famous for it, right? They just.

They did it in the early part of this industry after the GFC and they just bought Tri -Con, huge company and there have a big bill to rent business. So there's private equity that could be an exit. And then there's an IPO is also another possibility for a large operator to have a very homogeneous brand new portfolio of assets.

That's could be pretty attractive. Yeah. You play that game before. So yeah, once or twice. That's right. Well, Richard, this has been really instructive, really interesting to dive into this asset class. And I appreciate it. If somebody listening wants to learn more about the company, where do we send them? Www. All right. We'll link to that in the show notes. Richard Ross. Thank you so much, sir. Appreciate your time. It was great to connect. Thanks, Devon. Take care. We'll see you.

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