Revolutionizing Housing

Emmanuel is the Jacksonville Account Executive at PadSplit, the leading shared housing marketplace for affordable workforce housing. PadSplit connects property owners with screened residents, creating a win-win scenario for real estate investors and community members, exemplifying the idea that it's possible to succeed while making a positive impact

Transcript

Mike: 0:00

All right, everyone. Welcome to the Real Estate Game Changers show. I'm your host, Mike McKay, based in the Jacksonville, Florida market. And each and every week. We do this show with people who are changing the game of real estate all over the country. For anyone who is thinking about getting into real estate in the jacksonville area Or people who already are if you have any questions, feel free to reach out to us We're always happy to help or make introductions Also we have recently shifted our focus to purchasing a lot of mobile homes on land. So if anyone has those for sale, we are trying to pick up a couple of those every month. So today our guest is Emanuel from PadSplit. Welcome to the show.

Emanuel: 0:38

Thanks, Mike. No, it's really grateful to be on here and excited to talk more about PadSplit. It's been a really hot topic just with the way the market is today, high interest rates. And this is, one of those rental strategies that is working really well for investors. So thank you again for the opportunity to come on.

Mike: 0:53

Yeah, for sure, man. I'll start off a little bit different than I normally do. It is for people who don't even know what Padsflip is, can you give us like a very high level overview?

Emanuel: 1:03

Sure. So just a little bit about myself. My name is Emmanuel Premate, I go by E and I'm the Jacksonville account executive for PadSplit. In my role at PadSplit, I work with real estate investors who are either acquiring a property or already own a property and are looking to list on our platform. So PadSplit is the nation's leading platform for shared housing. So we offer furnished weekly room rentals for the workforce. We're specifically targeting the workforce. And those are, retail workers, service workers, Russia employees, like the majority of the workforce population and our specific income demographic are those making from around 20, 000 to 60, 000 a year. So that's who, we're geared towards and We are a platform. So another platform that you can compare us to is like Airbnb or VRBO, which I'm sure many real estate investors are familiar with. Our platform truly optimizes the host experience for shared housing. Shared housing has known to be a lucrative model for investors, but the challenge has always been, how do you do it efficiently? How do you do it at scale and how do you create a system out of it? And that's what PadSplit truly unlocks for real estate investors. I think when it comes down to there's four main pillars how we provide value to investors. So number one being marketing. In our active core markets, which we currently have 13 core markets across the U S and over 9, 000 units on our platform. The first thing is that market, we do paid advertising. Google, Facebook, Instagram, TikTok, all those major social media platforms driving demand for your room that you're listing. We also do cross channel listing. I didn't even know this until I joined the organization, but there's 60 plus listing services where you can list a room for rent. So we're going to automatically distribute across all those. Increasing your organic reach. So marketing's that first pillar. The second pillar where we optimize the host experience is the member screening. So when I say members, these are the people who are renting the rooms on our platform. That's just how we call them. They don't have tenancy rights with the pad split structure and legal model that we have that we create for investors. So our members go through a member screening where they have to pass a background check. They also have to pass our income verification showing that they make two times the weekly rent. So not the traditional three, but two and also they have to pass an eviction report as well. Now we do also do a credit check, but the credit check is not used as a determining factor like with traditional rentals. There's just used to gain more data on our members. So that's component number two, member screenings. The really big component number three is members support. So think of this is the people management component of pad split. We have a 24/7 staff that is there available to help with any sort of member disputes and triaging those, perhaps resolving them again. We've been doing this for the last five years. We started in 2018 so we've dealt with a lot of different situations, and that's what our team is trained on specifically on some of these things that come up in shared housing. And then the final pillar is payment collection. So our members, they pay through the platform. They have to stay at a minimum for 31 days. On average, we're seeing them stay for about six to eight months. But once they pass those 31 days, it's a week to week billing. And then our hosts get paid out on a monthly basis for all earnings from the Previous month minus our platform fee, which is 14. 75%. So that's just a really quick high level rundown of how we provide value and really give the everyday investor the opportunity to invest in shared housing and grow grow their portfolio quite rapidly.

Mike: 4:29

Yeah, cool. You mentioned obviously like short term rentals, Airbnb, like how are you guys different than a short term rental?

Emanuel: 4:37

Yeah, so we're different in a couple of different ways. Let's talk about the screenings, right? So when somebody wants to book or a place on Airbnb, the only screenings they really do is identity verification. There's no additional screenings. You don't know if the person who's saying there is a criminal, you don't know their eviction history, any of that stuff. We have those additional screenings in place. Similar to Airbnb, we do give hosts the ability to do their own screens if they wanted to. So if somebody wanted to book a room on pad split, the host has an option to turn on this feature where then they can do an additional screen where it comes in as an inquiry. They can see, a high level overview of those checks. They can see their profile photo. They can see their age. They can see their occupation, the hours that they work. And we even have some of our members have take like a optional personality test. So that way you can see if they're an early riser or a night owl. You can see what times of the day that they work and if they're an introvert or an extrovert, just things that help the host start creating the culture. So when it comes to the screenings, we have that additional layer of screens. I think another thing as well, it comes to, comes to mind is like just the overall time that these members are spending in the rooms, right? So it's at least 31 days. Whereas with a short term rental. And you could have somebody just stay one night. So there's definitely a lot more work that goes into short term rentals. And there's also a greater risk because you don't really truly know who's coming in. There hasn't been a thorough check done on those individuals. When it comes to some of the taxes and the fees, that's also something that investors should certainly keep in mind. Because when you look at it as, a short term rental, There is a lot of taxes and fees. Like here in Florida. If you're going to start a short term rental, you have your Florida sales and use tax, your Duval County sales and use tax right there. That's seven and a half percent. And you have your transient occupancy tax, which is an additional 6%. So right there, you're at 13 and a half. percent. Then, depending on which O. T. A. Online travel agency used with the air b. V. R. B. O. They all have their own fee that you have to pay anywhere from about 14 to, 18%. And then, if you're going with a property manager a property manager for short term rental, they're charging you at least 18 percent here in Jackson. Sometimes even around 20, 22 percent just depends on who you go with. So when you add up all those taxes and fees, before you even see any of your revenue, 45 percent at a minimum is gone just on some of those taxes and fees. Whereas with pad split. It's very different because it doesn't fall into the short term rental category. And that's because of that legal structure strategy that I talked about briefly earlier. So basically the way it works is when you are ready to list on a pad split, we're going to create an LLC, and this is going to be the pad split LLC, which will be the tenant of the home. And then the host will be the landlord in a long term in that long term lease agreement. So technically there's a long term lease agreement between the investor or their LLC, which the home is in and then the pad split LLC. So pad split is the tenant. The members, the reason we call them members is because once they pass all of our financial and background checks, then they have to agree to a member's agreement and they become a member of the LLC. That member's agreement is about five pages long, outlines all the terms and conditions as part of being a member of PADSplit. So because of that, it's classified as a long term rental because PADSplit is the tenant. And so with that. You're really only subject to, know, the sales and use tax for Florida and Duval County, again, which is seven and a half percent. You have our pad split platform fee, which is 14. 75%. And then if you decide to go with the property manager, and the nice thing about pad split is that property managers are charging significantly less compared to short term rentals. We're seeing around 8 percent and some even are lower than that. If you go in at scale and you're bringing on, 3, 4, 5 plus properties, they'll likely work with you to cut you a deal. It's coming out to 30. 25%, just that in itself right there. It's 15 percent less in taxes and fees because of the structure and how we operate as a business.

Mike: 8:34

I imagine there's members who No, there's six of them maybe in a property and maybe they don't get along. What happens in that scenario?

Emanuel: 8:43

Yeah, that's a great question. And it's one that I get often because the question is do strangers really want to live with other strangers and, when Airbnb was coming out into the market back in the, early 2009, 2010, the big question was, do people really want to. Vacation to other strangers homes and now look, it's a 90 billion plus dollar company and what they've grown to. And so the numbers are already showing that co living and shared housing under PadSplit works. We did a survey of all of our members, which again, we have over 20, 000 members now. And we asked them, hey, would you recommend or family member. And 91 percent said yes, which is huge. We do have cases where the members perhaps don't get along and there are issues. The great thing about it is that we do have that 24 17 that is there to support. They do handle You know, some requests that they can again, if it's something that requires on site intervention, that's up to the property manager or the host. But if it's something that can be resolved remotely via our customer support team, work on that. And we actually have this member to member rating system. And this Member rating system allows other members to rate other members, and then the host can then also see the reviews and host can leave reviews of our members as well. So the host review carries the greatest amount of weight compared to, like the other member ratings. We do have certain things that are like immediate termination. If there's any sort of like violence or if there's any drug abuse or anything like that which we have outlined in our members agreement, like That's a no questions. Hey, you're terminated. Not only that you have to vacate the room, but then you can't rent on any other rooms on our platform as well. But also we have like thresholds. So once they fall below a certain threshold, then they're terminated and they're aware of that, they'll know ahead of time before they get terminated off the platform, if they're approaching it just to give them the warning. But that's more of the stick side of how we manage our members. But there's also a carrot right where we incentivize good behavior. And so our platform does provide a better co living experience. It is more than just a room rental. And the way we do that is by offering some additional fringe benefits to our members. So for example, all of our members have access to telemedicine services. They also have access to job matching services. So think of this as like additional gig work that they want to earn some more income and then also positive credit reporting as well. So as they're making payments on time. They're building their credit and then access to interest free microloans. So if they face some sort of hardship that they can provide documentation for then, they can gain access to these hardships so that can help them get back on track. So there's a couple different angles and avenues that we take to help, mitigate those sort of risks. key thing is, one having that structure and system in place, and that's truly what PadSplit creates.

Mike: 11:31

Sure. And how many PadSplits properties are active in Jacksonville?

Emanuel: 11:36

So we just crossed 9, 088 across the U. S. That's our nationwide overall inventory. And one thing I also want to mention is when we say units here in PadSplit world, that means bedrooms unlike other, traditional real estate where units means properties. So when I say 9, 088, that's but here in 894. And our occupancy rate currently is 76 percent median days to first bookings about 4. 8 days to get that first booking to get to 80 percent occupancy. We're looking at about 21 days here in Jacksonville and the average weekly rate is going for 170. Our average member tenure here in Jacksonville is 7. 3 months. And I will say with Jacksonville it is quite like zip code sensitive. One really cool thing about our pad split website is that we have something that's very similar to like air DNA. So if anyone's familiar with the short term rental space, air DNA is great to do your underwriting, to evaluate certain areas and see how they would perform as a short term rental. So we have something very similar like that on our pad split website. That's available to anyone. You don't even have to be hosting. You can just create an account. You go into resources and then there's under this explore tools tab. It's called the market data insights map. I highly encourage anyone who's interested to take a look at that or work with me and help. I can guide you through that, but that shows by zip code what the average weekly rate is. How many total pad split units are in that zip code and what the occupancy rate is for that zip code as well. We're working on adding some additional data, like the days to first booking days to 80 percent occupancy. And then we're also going to expand the pricing data. So that way perspective host can see what the average price is for a room with a shared bathroom versus a room that has a private bathroom. Cause obviously if it has an en suite bathroom, you can charge anywhere from 20 to 50 percent more for that room.

Mike: 13:28

Sure. So for people who might be considering this or maybe even like converting a current rental into this, what are the characteristics of the property that would make you say. Yeah, this is a good option for you versus maybe they should go the short term rental route, or maybe they should just keep it as just a standard long term.

Emanuel: 13:44

Yeah, that's a fantastic question. I'm glad you bring that up because we do have a pad split buy box. So something that, criteria that we look for to ensure that it meets our requirements. So the key thing of what pad split is that room conversion. Adding those additional rooms, because most of the rooms are going from about one 50 to, two 80 here in Jacksonville. Adding those rooms is key to getting the numbers to work and getting the pencil out and also making it more profitable. What we look for is like at a minimum 1, 200 square feet. The magic number is five rooms. That's what we want to get to. We want to get to five rooms and typically with 1, 200 square feet, we can do that. Now recommended that sweet spot for us is six to eight bedrooms. If we can get to six to eight bedrooms, that's when we see optimal balance between profitability and overall, just day to day operations of the pad split. Required 1200 square feet, recommended at least for 1400 square feet. And we want to have at least two bathrooms in the home. So our, required ratio is for every four bedrooms, there needs to be one shared bathroom. Recommended is if you can get a three to one, we've seen just a better all overall member experience if you have a three to one. But again, sometimes just with the layout of the home, the best you can do is a four to one and also no HOAs, don't go into HOA. You're basically under their jurisdiction and they can shut you down. I'm sure that's the golden rule with any real estate investor, not to operate with HOA when it comes to some of these more dynamic rental strategies or alternative rental strategies like pad split or short term rentals. Cause again you lose a lot of control with those HOAs. And one final thing I want to mention here is in my role as an account executive, I really act as a guide. Like I'm not here to upsell you on anything. I'm not here to, try to sell you on something. Really I'm here to educate, help and grow. Like whether you work with myself or any other member of our growth team, that platform fee is still going to be 14. 75%. The main difference is that you're going to be truly set up for success. So that way you can maximize your overall earning potential on pad split, because we're going to share those tools, resources vendor connections that we have. So on pad split, we have our vendor network. These are vendors who have applied and have gone through our training and had been approved by a general manager to be listed as a part of our vendor network. So these are like. Licensed general contractors, insurance providers, lenders, photographers, realtors, like anyone that you may need throughout that pad split hosting journey we have in our vendor network and I can help connect you with them. So just. I'm here to help and serve.

Mike: 16:06

Let's talk about that for a sec, because I actually had a bunch of investors over at my house last night, and we actually were discussing PadSplit, because one of the guys has a couple of them, and he wasn't sure about the answer to this so how do you handle insurance?

Emanuel: 16:19

Yeah, that's a great question. So we do have insurance vendors as a part of our vendor network. And ultimately it's up to the investor sort of risk tolerance. Now we have someone that. We work with Diana says, oh, here in Florida, fantastic resource. And if you have any questions around insurance, I'd highly recommend reaching out to her and her team. I've seen some investors go with an umbrella policy. So they do that to cover themselves or there's this commercial grade policy, insurance policy that is very similar to what's used for boarding houses and rooming homes. And it does go from about 3, per year per property. So it is, more expensive than traditional insurance, but ultimately when it comes down to it, it's really up to the investor's risk tolerance. And there are different ways that you can, make sure that you're covered, but I would always defer and recommend working with somebody who's specialized in that.

Mike: 17:13

But there are companies that do offer like policies that are like I don't want to say maybe specifically for PadSplit, but specific that do offer coverage for shared housing, right? That there's options out there for people.

Emanuel: 17:25

There are, yeah, there's another one OB as well as another provider. We used to have this provider called steadily may have heard of them. But they actually pulled out of Florida, I believe recently. Just with all the craziness in the insurance world going on. But again, we're our team. So one of the things we always emphasize is like this ecosystem that we're creating with pad split, just as Airbnb created an ecosystem and, There was many financial products and insurance products that, came out of that were, certainly striving to do the same here and have it be specifically focused for shared housing. So I think the best is yet to come in and we're just getting warmed up. And the thing about it is especially with the macroeconomic pressures that we're seeing between the rising cost of living and, wages not keeping up we're in a place where if there is a recession or if there is a pullback. That's tailwinds for us. That's actually going to help us push us forward because there's going to be a greater need for our product, the greater need for affordable housing. And it's even as of right now it's working fantastic for maximizing cashflow when you look at other options that are out there.

Mike: 18:27

Yeah. I used to own college rental properties in a different state in Connecticut, and in the city that I was in, there were some regulations about the number of unrelated people that could live together. I wasn't doing room share on one lease, but... There was still these regulations if do you have any insight into if that is a possible issue in Duval County. Do you have any insight in that?

Emanuel: 18:49

Yeah yeah. I wish I had an easy direct answer to that. But when you look at some of these zoning laws, they're very outdated and they really don't support solving this affordable housing crisis that. Now, one way we've been able to skirt the risk on that and being at least able to minimize the risk on that is going back to that legal structure and strategy we have in place because Technically pad split, the LLC is the legal entity that is residing in that home. And so it's that one individual entity because it's a legal corporation. Now I always caution. It's look, seek legal counsel speak with your attorney, somebody who understands real estate law. This is a new and disruptive form of real estate investing. And so you always want to make sure you know what you're getting yourself into. But what I will say is unlike. Say, for example, short term rentals, which are taking away from the housing supply and actually contributing to the problem. And we're seeing a lot more regulation coming into that space, like in New York City and in Dallas being shut down. The reason that is, is because these major Metro cities Are struggling with housing pad split is now this, solution that is helps with that, right? And so we are not meant to replace any government, housing initiatives that are already there, but rather we're meant to be in step with them and helping solve this problem that we're in with housing. And because Okay. We're filling for this need. Our hope is to be able to get to a point where we scale and grow and we start, being able to the value to municipalities and local legislators on like the impact, the positive impact we're having on communities. So that way. There can be changes in those regulations. That's how Airbnb operate, right? They were flying under the radar for a bit of time. And then they got to this point where it, it really grew and cities and municipalities had to adjust and change their code and zoning requirements. So that way they can, accommodate them. And then eventually Airbnb got so big that they actually then had influence on it, right? They were able to force some changes in. And that's a similar model that we're going with. But at the end of the day, it solves for a need. It's not just a nice to have.

Mike: 20:50

Sure. And then, you mentioned lender relationships as well. Like, how do people get long term debt on these properties?

Emanuel: 20:57

Yeah. That's been a big question I've often received. And right now there's basically two different routes that you can go in. Or through, if you're counting yourself as like a cash buyer, you can do that, but going on the lending side. You either get into the property with, through either private money or hard money lending, do your rehab, and then before you actually put up the walls that's when you get the appraiser to come out to get into your, DSER or conventional loan or whatever you use to get into your long-term debt. But the key component of that is making sure that you haven't yet put the walls up. If you do have the walls up, then just. Have it at least be like, don't have a door there, or if you have a living room, just, have it be the frame don't have the actual door on theirs, but starting to see more and more adoption, especially like with the appraisers on them, understanding the past, but model that's a key component when you're going that traditional route. And once you're in your longterm debt, then go ahead. Yeah. Add those walls in and you're good. You're in a good place, but a second option, the second route is going with, a Pat's foot loan. So Jeff Waller. Local community member here, local real estate investor owner of Coast to Coast Mortgage. He has a loan product that is specifically designed for PadSplits, the nation's first PadSplit loan. And this allows the financing and refinancing of a home that already has rooms converted for PadSplit. And it's 75 percent LTV. It's a 30 year product. No income documents required. The interest rate is a bit higher than, your DSCR loan. But at least it's an option that's available there. But again, I want to drive back to the point of the ecosystem as we continue to grow. We're going to start seeing more products, and more options available for investors. But as of right now, those are the two and I get it, right? And it's once you put your capital in, I was like, Oh, that's great. I have this awesome cash flowing asset, but how do I pull my capital out? So I can then go get more. And that's a piece that, we're working on. We have some options available, but I feel next year, this time we're going to have even more options available.

Mike: 22:48

Gotcha. And then, for the people like myself, maybe, who have no interest in managing the rentals once they own them, they have long term rentals, but they outsource that to a property management company. I know you guys are a platform, so you don't handle the on site stuff. So If someone wanted to not deal with that on site stuff is that possible? Can they find someone to do that? No. There

Emanuel: 23:11

Absolutely. Yeah. 100%. We have property managers are part of our vendor network who can truly make this a hands off approach. So that way the investor doesn't have to worry about anything related to the property. So the property manager will take care of the lawn care. They'll take care of the pest control, any maintenance items that come up. What's really cool with the Pat split platform is that we have this maintenance task system in place. Members can report any maintenance issues. And then that notification will go to the host or the property managers. That way they can mark that as complete and resolved. But it just helps with maintenance tracking. Yes, property managers can make it a truly hands off approach, even go as far as paying for utilities and things like that. We have a number of providers here within the Jacksonville area, but every single one of our core markets which again, there's 13 of them. We have. Vendors who can help with the property management. I'm going to try to name out all of our core markets. We have Jacksonville, Orlando, Tampa, Miami New Orleans, Dallas, Houston, Atlanta Las Vegas, Phoenix Baltimore, Kansas City, Manhattan. And Richmond, Virginia. Dude, this took me three times. I've been on three different podcasts. It's the first one where I was able to do all of them. Let's freaking go.

Mike: 24:23

you go. Outside of like the square footage, ability to add rooms what else should people, and I know they can go to the site, obviously, and go through the market research, but what else should they be looking for in a property that would make it ideal for a pad split? Yeah.

Emanuel: 24:39

So we touched on the actual property itself. What are some of the careerist characteristics that we're looking for? But another key component is like everything that's around the property. So the location and when it comes to the location, we want to be in those class B, class C zones and close proximity to major employers of our target demographic. So when I'm working with an investor, if they have a property, they're interested in bringing on a pad split, One of the first things I'm doing is I'm going to go to Google Maps for you and see what's in that surrounding area. Is there like a shopping Plaza or a Walmart super center or a target? Or is there some sort of like restaurants and bars nearby? Or another one I've seen is like Amazon warehouses or distribute fulfillment centers. And, making sure that's at least somewhere within proximity. Another really big thing is parking. Thank you. Of the actual parking availability of the actual property itself. So our recommendation is for every two pad split groups for there to be one parking spot. Now that's just a recommendation. It's not something that's required. It's just something that's going to provide a better member experience. So that's another thing. And then also proximity to public transportation. We did a survey again, when we did that survey of all of our members, one of the things we also asked was. Do you have a vehicle? Yes or no. And here in Jacksonville, 45 percent responded that they do have a vehicle. The remaining 55 percent responded that they rely on public transportation. So I always say you want to be at least within about miles walking distance of one, public transportation spot. But, one thing that's really unique about Jacksonville is that you have these sort of different pockets where you'll be able to serve You know, members, if you're, say, for example, somewhere like in three, two, two, four, six, or one, six, you're probably going to be servicing a lot of retail employees, people working at town center or working at these small little stores or Walmarts or things like that. Whereas if you're perhaps like on the West side, like in two Oh. You're going to have more of those like blue collar workers. There's a lot more of those industrial plants. You have those fulfillment centers out there. And that's going to be the target demographic there. And you go into Oh five, for example, or one Oh, you're probably going to have more service based workers just because you have a lot of restaurants and bars in that area. I think the location is a really big thing. Parking public transportation, proximity to public transportation. Another part point is know your neighbors. Not know your neighbors like personally, like making them cookies and that, but I'm just saying know the overall neighborhood. If it's a predominantly rental neighborhood, that's a good thing. It's going to be a lot tougher. You're going to maybe deal with more complaints if you go into an owner occupied neighborhood. So just be mindful of that, just, be mindful of the neighbors as well cause you could get complaints.

Mike: 27:16

Gotcha. And you guys said collect rent weekly. What's the rationale behind doing that versus collecting monthly?

Emanuel: 27:23

So collecting weekly just makes it more flexible for our members. So basically they're always, paying in advance. So say for example, somebody had now paid for the following week and if they moved out this weekend, we're not going to like retroactively refund them. They've already paid through for that week. But I think when it comes down to it, it's like offering those flexible lease terms, they're not tied or committed into, this long year long lease agreement that, then they lose that flexibility. So I think that's a really attractive point about pad split for the members. And then I think it just comes back to us like being able to differentiate ourselves. There's no other platform that I know of, at least that's, doing at our scale and offering that option. And it's, beyond just like those four pillars that we talked about, it's also. The structure and strategy we have in place that has now allowed us to scale it to 9, 000 plus units with zero of those being delisted from our platform.

Mike: 28:13

Did you say, say zero people have relisted their homes or properties Wow. Okay. That's cool.

Emanuel: 28:20

There's zero that have been delisted for any sort of like violations or anything like that is because again, it goes back to that legal structure strategy we have in place. We have had people who have listed and they decided to want to go a different direction with the property, which actually it's a really good point to talk about. I'm glad you brought that up is because if you wanted to say, for some reason, sell the property we do have, what's called the passive marketplace. And so this passive marketplace allows you to be able to sell a turnkey. You're ready to go pad split. And it also shows the historical, cashflow of the property in our pad split marketplace. You can see which rooms are occupied. You can see which rooms are vacant. So it's an exit strategy out of a pad split without having to take down all the walls.

Mike: 28:57

Interesting. How many properties are trading on that marketplace in like a given month?

Emanuel: 29:02

I Know like right now in Jacksonville, we have two that are listed but nationwide, I would probably say somewhere between 20 to. It's a 30 would be like a good estimate.

Mike: 29:14

Yeah. Are they like actually selling, like they're actually trading hands on there or

Emanuel: 29:18

Oh yeah. Yeah. So when you sign up for a Pat split account, you'll actually be automatically signed up for the pathway marketplace, like monthly newsletter. So you'll get to see, which properties are listed at what price, what our projected returns are. You can then see which ones have sold. But Yeah, a lot of them are cash buyers are just buying them straight cash. Now with the pats, but loan that unlocks the ability to, be able to get financing on these.

Mike: 29:42

yeah. And then in terms of like maybe additional setup costs versus whether it's a long term rental versus a short term rental. I know there's some additional construction costs in terms of building, like maybe some walls and things like that. But yeah, other stuff like furnishing, like how much are you expected to furnish versus a short term rental, for example?

Emanuel: 30:01

WE require standard living furnishings and for the bedroom a bed frame with a mattress and a nightstand. And we do require like having two points of egress in the room. So one has to be a door to the inside. That has to be like a shared space. You can't have a door goes into another bedroom has to either be a hallway or shared space. And then that second egress has to be a window or door to the outside. And again, the square footage has to be at least 80 square feet. And that shortest wall can't be less than seven square feet. But going back to your question about the furnishings. Yeah. So the bed frame, mattress, nightstand a place to store clothes as well. So sometimes when you like add those rooms, there's no closet. So we do then at that case for car, they're having like a dresser or wardrobe or more, just somewheres our members can store their clothes. Having a source of light in the room. There also needs to be an AC vent in the room. So sometimes when, again, when you add those walls, you have to take a look at the ventilation and see where, maybe potentially we have to add a vent in the room. The rooms also have a smoke detector, but then as a host, really, truly, this is your business. So if you want to go that extra mile to provide a better member experience you're then going to see greater returns and also more consistent returns as well. So some things that I personally Seeing some host doing is, adding like work desk and so having little work desk in there where they can work or perhaps they can eat. So that we didn't have to, go to the dining room. I've started to see, many fridges being a thing as well. When you think about having that many people in a room and sharing one fridge. Yeah. Sometimes it may happen where other people will eat other people's food, it happens when you share one fridge with that many people. So one way to mitigate that is by having many fridges in the rooms. I'm a huge fan of them. Yes. The utility expenses might be a little bit higher, but in the long run I think your earnings are going to be a lot greater having those in there. And also another thing is like a bathroom. So You know, preferred having a standing shower versus having a bathtub, because if you have a standing shower, one, they're going to be spending less time in the bathroom. They're just going to get in, shower off and then, get out. Whereas if you have a bathtub, then maybe you have somebody who's hogging it and taking a bath every night. And then it's also driving up your utility expenses. And another little pro tip I've picked up on is like having those tall standing mirrors in the rooms themselves, like maybe bolted into the walls or screwed into the walls. So that way when they need to use a mirror. They're not going to the bathroom for that. Rather, they just have it there in the room. So there's like little best practices, little things that I've picked up and working with hosts here in the Jacksonville area and other core markets that truly just optimize the experience for our members and therefore, have them spend more time there. So The total cost for the furnishings, I'd say if you're doing it yourself, you're probably going to be looking at around like anywhere from about 500 to 750. If you're going to have a furnishing provider, which again, we have some locally here in Jacksonville who understand the model, know what's needed. It's going to be closer about 750 to a thousand is what I'd say per room. Now, one of the requirements we also do have for each of the bedroom doors is having one of those wifi enabled, smart locks on every single one of the doors. This is for two reasons. One, it's going to make it more secure for you as the host, because, The person who's staying, only have that code for the duration of their stay, but then it's also security for the member who's staying there because, then they are the only ones who has that code to be able to access their room. That is, again, one thing that would. Unique compared to other, short term rentals and the cost for that. But we're not an amenity based business. Like our members are not looking for pools. They're not looking for game rooms. They're not looking for these, little things that you have on short term rentals that, can get quite costly and add up when you're thinking about the furnishing. I'd love to kick the question back to you, Mike. You've been a short term rental operator yourself. And I know in some of our private discussions that you had, it sounded like you had a fun time doing it. But talk to me about how was that experience? What were some of the challenges? And I don't know, I'm just be curious to hear how that's been for you.

Mike: 33:36

Yeah, we were going into some regulatory issues with changing regulations in cities. So that was a big challenge. We got actually regulated out of business in one of our markets. So that was unfortunate after we put a lot of time and effort into a market that had actually made torture rentals legal and then reversed their decision. So that was a regulatory issues were always a problem. Saturation became a problem in some markets. Where we had cookie car units that were nice, but not unique. And then we were really scaling the business very quickly, having to onboard, 15, 20 units a month and actually the furnishing process, getting them ready. When I say furnishing, like the furniture is actually the easiest part of furnishing. I, I call it like the knickknacks, like the knives, forks and towels and all the little things. It's probably 80 items that you need, maybe more. I don't remember, those things become difficult, right? Just managing the process. That was our big bottleneck for us. We were running about to do a two bedroom, decent size, probably 1200 square feet apartment, we were running about 15 grand to get it done all the way. That includes art, forks, knives, furnishing. So it's definitely an upfront cost. It would take about, I think our average payback time on furniture was seven months. It's not terrible, you're not making money for seven months on that

Emanuel: 34:49

Yeah. And that doesn't even take into account like things that may potentially happen, things, being broken, lost. And for example, we don't require you having all those additional little things that you mentioned. It's obviously nice to have, but for example, like linens and Terry's, that's not something we require. It's typically something our members will bring on their own. We just recommend having a mattress protector on the mattress. Less expenses there from that front. One of the things I've started seeing hosts doing is like just offering one set of dishes and silverware and they're actually like color coded and it's based on the room. And so then they'll also like place like little numbers on each of the kitchen cabinets. So we're going to has cabinet one room two as cabinet two. And then like room one has red dishes, room two as blue dishes. And it's only one. set, the reason they do one set as well, you use it, you clean it. If you don't clean it, then, Hey, person in room two is going to see that to red plates, red dishes, be knocked out there. Dude, go clean your dishes, man.

Mike: 35:47

Yeah, that's an interesting idea. I never thought about that. Yeah, huh.

Emanuel: 35:50

Yeah.

Mike: 35:51

So you said before the egress thing, right? It's just a question popped into my head. You said it could be a window or a door to the outside. So I was thinking like, does a door, does that command a premium in your experience? Because they almost have a private entrance.

Emanuel: 36:05

It does definitely. And that's one of the features you can add in our platform is that the fact that it does have a private entrance and, I always recommend charging more for that. Now you can't charge, as much as like a private ensuite bathroom, but let's say an additional, 10 to 20 percent perhaps for that private entrance definitely.

Mike: 36:21

Have you seen like any host make modifications to their places to like, maybe like frame out more doors? Or is it just not really caught just they've existing.

Emanuel: 36:30

The one challenge with that is, anytime you do any additions, whether it be a window or door, you're going to have to go through the permitting process for that just recommended right? You don't have to, then you're running the risk of getting tagged fine or tagged by code enforcement. But that's the one thing with additions. We're not going to check for permits. We're never going to ask you for them, but yeah. You want to cover your base, especially if you're doing those kind of any kind of additions or garage conversions or things like that, just so you don't run that risk.

Mike: 36:55

Gotcha. And then like For people who've maybe only done long term rentals before you know What are some common pitfalls or mistakes that you see people make on their first pad split?

Emanuel: 37:07

I think what I've seen lately has been like trying to do too many at once. Like maybe they have, a couple of portfolio of rentals and they're trying to do. Three, four at a time at first, right? I think it's really important on that first one. Like just focus in all energy and effort on that first one. Get familiar with the platform. Once you understand what that process looks like, once we've worked together through that process, you've worked out the Kings then that's when you can really start, pumping them out and, you're more familiarized with it. But when it comes to the actual, just like maybe technicals of it I think it's like very little minor things that I've been seeing. One, one example that comes to mind right away is like on the front door. You don't want to have, the wifi digital keypad lock deadbolt lock. And then also that bottom door handle that can be locked from the inside, because what's going to happen is, one of the other members instinctively may just lock it. And then even though they have the code to get in, it's. They can't get in. So you just want to make sure you have I handle that turn. So that's like a little really thing. That's very specific thing that comes to mind that I've seen happen before. And then, if they're self managing. And they've only ever done long term rentals. I always make sure that I set that expectation that, Hey it is going to be a bit more work, but not as much work as like a short term rental. When you compare it, also the turn costs as well, your turn costs are significantly higher with the long term rental compared to a pad split, on average, we're seeing the turn costs go anywhere from about 70, 72 perhaps like 90 per room per turn. Because really all that's needed is a deep clean of the room and then maybe replacing of the mattress cover is really what all we recommend is needed. So let's turn costs as well with with that split.

Mike: 38:49

gotcha. And there is obviously more frequent turns, right? And I think you said seven months on average and in Jacksonville, like how long does it typically take? I know you said like initially first tenant comes within a few days, but is that kind of the same if they open the room up, turning it like, I just don't know how the platform really works.

Emanuel: 39:08

like the time to rebook, like to get it filled again.

Mike: 39:11

Yeah, I guess that's what you

Emanuel: 39:12

Yeah. Here's a really great thing, man. It's once you get to a stabilized period, stabilized status with your home so you have the rooms filled. Even if you have one person that moves out you still have all those other rooms that are bringing in that cashflow. So that's another way you're mitigating your risk. It's not like these traditional rentals where it's an all or nothing approach. If a tenant moves out of a long term rental and it's taking a couple of months to get it filled, you're out, like you're not making anything on that. Whereas with Pat split, you're actually, still continuing to cashflow. And our time to rebook is, it's very similar to our meeting days to first booking, right? It's going to be anywhere from about four to seven days to get somebody back in there. Obviously it's also dependent upon the quality of your property manager or your self management to make sure you get that room turned and rent ready condition. But. If once it's there and it's back in an active status and no longer in that it needs turn status man, I'd say, four days to a week and you'll get that thing back filled.

Mike: 40:06

Is there like Any way for a host like let's say someone gives some notice Hey, i'm going to be leaving next week. Is there any way that they can start looking for a new person knowing that like they're going to turn that in two days Like is that an option on the platform?

Emanuel: 40:21

So it's going to show like the availability date so that way, like it's can still be marketed, but a really nice thing about our platform is we have this coming soon feature status. So if somebody wanted to maybe let's say gauge the interest of, Hey, if I were to do a pad split here, would there be people who would be interested? And you can do this when you just go on to the pad split platform and go on, create a new listing. You'll eventually get to a point where it's just not going to let you go any further. And tell you like you enter in the room details, but once you get to that point, it's going to create a coming soon listing card. So when members are searching for rooms they'll be able to see that listing card. And I always recommend like just putting a photo of the front of the home. So that way they can at least see the front of the home. And our map is going to show the general location. Then it's also going to show like the approximate price range of the room on a weekly basis. And then you as the host or owner, you're going to be able to see like your wait list. So you can see, how many people have signed up. And once you go live, they're going to be notified either by text text message or email. That, that room that they signed up for is now live. So you can already start generating demand even before you're fully live and ready to go. I've, I had a host to do that, who, had a long term rental and they wanted to first gauge the interest, see what it'd be that, they were out of Orlando and they had like 40 people signed up on their wait list, they went live. And like within the first couple of days, they were fully occupied.

Mike: 41:43

Gotcha and like i'm assuming that there's no like showings or anything like people just book and then They get the room, I think it's only a week long, so it wouldn't be the end of the world if it didn't, they didn't like it. Is that

Emanuel: 41:56

Exactly. But they do get to see the other members who are there so they can see who else is living in the home. They can message with the host or property manager prior to actually moving in. But it's very similar to Airbnb. It's like you can't actually go see the place until you've booked it. And at that point, that's when you can go inside.

Mike: 42:13

Gotcha. And like photos, things like that, like I'm assuming to market the listing is that something that they, the host or their property manager would be responsible for taking? Or is it something you guys do?

Emanuel: 42:25

Yeah, it is the responsibility of the host. I always recommend getting professional photography done because that's what truly attracts attention. So like the photos attract the attention, the listing description and the listing details at which is what gets people to pull the trigger. If you can market yourself in a way that differentiated With having, the high quality professional photography then that's only going to work in your favor and whatever that cost is. And again, we do have vendors who are part of our vendor network. If you can help with that it's going to be well worth it in the long run. And then we do also have I believe we have the 3d map functionality as well. Don't quote me on that. I think I remember seeing that. There's certainly ways that you can make sure that. You're marketing your property and it's getting eyes and people are viewing. I think like when I last checked here in Jacksonville last month in the 30 days, we've had over 25, 000 searches for room rentals on pad split. In the last month. Yeah.

Mike: 43:15

You said something earlier about like sales and use tax. So are you guys charging your members for that? Is that like a pass along pass through costs or is that responsibility of the host?

Emanuel: 43:27

It is the responsibility of the host at this time. Right now. We don't have that functionality to add built in like taxes on that. When you go as a host and you go into your dashboard and you go into your earning statement, like you're going to see your total earnings minus our platform fee and then paid out earnings. And so it's ultimately going to be up to the host to, pay any taxes that may be due. Hopefully, maybe one of these days we'll have that as an additional feature. I think, as we see other O. T. A. S. Have that. One thing you'll see about pats with platforms that we're constantly working on improving it, adding additional functionality and truly listening to our hosts like we, asked for that feedback from our host to see how we can make the platform a better place and a better experience for them as well.

Mike: 44:10

Yeah. And then I guess like between I know in the short term rental, rental business, you would look at something called like a metric called rev par, which is like revenue per available room. Which was always a metric that I like looking at because it took into account your occupancy rate, the fluctuation in your daily rates. So, it just popped into my head that obviously there's some turnover and all that stuff, but do you guys have any kind of a similar metric, like a rev par type statistic. So if I'm like, Hey, I've got six bedrooms, my rev par is going to be per week one 50, which takes into account vacancy. So I can really expect the true amount I'm going to get at the end of a month would be this based on that. Do you guys have a metric like that?

Emanuel: 44:51

I think this is one of the few moments where I've been stumped on a question. I don't believe we have that man. It's just I'm usually pretty good with the answer, all the questions that come my way, but it's a good thought and something I will take back to our team to see if we can create like our own version of the rep part, because it does make sense. You will have some partial vacancies. And so to get a true, accurate representation of potential earnings or when you're, maybe evaluating in your underwriting. I think it's really important to have some kind of figure of like that. Cause as of right now, really what we're basing it off of is the average weekly rate and whether it has a shared bathroom versus a private bathroom. And then just the overall occupancy rate, like one of the things you'll see in Jacksonville if you decide you want to go and look at that zip code map particularly if you start looking at any zip codes east of the river, you might look at a zip code and see a really low occupancy rate. And don't be shocked or alarmed by that. Cause right now our map takes into account even new properties that get listed. And so if you have a zip code that say, for example, only has 16 active units and then two more go live each having eight bedrooms. It's going to show a 50 percent occupancy rate, even though maybe the day before it was like at 90. A hundred percent or whatever may have been a hundred percent. It may have been fully filled. So that's just something to keep in mind as of right now. That's just like one, maybe like limitation with it is like in those zip codes where there's not a lot of data to work with the moment new units go live, it's going to skew it, but also that data is refreshed on a daily basis. So you can keep track of it day to see how it progresses.

Mike: 46:24

Gotcha. And for us, Jacksonville people, what are you seeing as the hot zip codes that are really having a lot of success?

Emanuel: 46:31

Yeah, so when we're looking west of the river, I'd say 32218 is one that I'm really like, and I think it has about 162 average weekly rate with about an 85 82 percent occupancy rate. 332205 is good. But if you're going to go into 0 5, just make sure you stay like West of us 17, because again, the acquisition is what makes or breaks a pad split. You want to make sure you're acquiring preferably below 250, 000, but maybe potentially below 300, 000. Again, it just depends on what the numbers work out to and how many rooms we can get to. But oh, five, we've seen some good results. And also, Like I'm starting to like really Westside, 32220 I think it's one nine as well on there. You have a lot of those, distribution centers and fulfillment centers that we've talked about where you can get more of those blue collar workers. So that's another area that I'm really liking. But east of the river. I'd say three, two, two, one, one in that Arlington area, that's where you can, get a pretty good acquisition. And we've been seeing really good performance overall, just in terms of average weekly rate occupancy, because it's very convenient location. It's centrally located. So if somebody's working in downtown or even maybe working like in South side, it's easy for them to get to where they need to go. And then another zip code in that area is three, two, two, one, six. So In 32216 we have a partnership with Tulsa welding school and they're based there in 3, 6. And so a portion of their students would stay, in a pad split, at a predefined rate, which we negotiated with them. So I think it's like 175 that we've. Set that rate for them. So I always have the option if they wanted to, dedicate their home to Tulsa welding school, they can do that. Or if they just wanted to, list it there, they can do that as well. It's I think we're going to start seeing more and more properties on the east of the river. And I think there's definitely a need for it there. And they also garner a higher average weekly rate compared to anything west of the river.

Mike: 48:21

Sure, cool. We're getting to the end here. There's always two questions that I like to ask at the end And the first is what is the craziest or most uncomfortable situation that you have ever experienced in a real estate deal?

Emanuel: 48:35

Yeah. So it was my first short term rental. We had just gone live with it. And it was like maybe a week before the player championship, the TPC, the big golfing tournament that happens here in Northeast Florida. And, my business partner and I, we were super stuck yes, we got the short term rental. We're excited. This is great. We got the TPC weekend. Lo and behold, it was actually a group of college kids who just threw a massive party at the place. Absolutely trashed it. They snuck into the attic and then they fell through the ceiling. I have a photo where like half the ceiling of the bedroom is just missing. It's laying on the bed. It was, yeah, it was definitely an experience. Like the trash bins were overflowing with beer cans and alcoholic drinks. And I was just like, oh wow. So this is what an Airbnb and short term rentals are about. Sweet. But since then it's only been uphill, man. Yeah. We've, had good success. We've really grown in the Mayport area. We found a kind of good little niche there and that was, the one hiccup, but yeah, that was definitely a slap in reality of oh my gosh, wow, this is how it goes.

Mike: 49:33

Yeah Cool man

Emanuel: 49:35

Yeah.

Mike: 49:35

Second question for the newer people listening to the show which is if you go back in time Give yourself one piece of advice when you were looking for that first real estate deal knowing what you know now What would you tell yourself?

Emanuel: 49:48

Don't be afraid to ask for help. Just set the ego aside. People are here willing to help. When I first joined the Jacksonville Real Estate Investors Association, Jack's Ria I felt a little intimidated. And, these people are like, Oh, I got all these properties. And I'm like, Oh man, like I got nothing. I felt a shame to ask for help. But it's truly like the community is what drives growth and connection. And if you have a problem don't be afraid to put it out there and ask for help because people are willing to help and in turn, then you also may be able to help them grow their business as well. That's, I think one of the beautiful things about real estate is that, we're all in this to be able to grow obviously, financially, but also grow our communities as well and grow with each other.

Mike: 50:29

Cool. Good piece of advice. so people want to reach out to you after the show, like whether they have questions about PatSplit or if they're thinking about starting one, or maybe they just want to reach out to you personally. How can they go about doing that?

Emanuel: 50:41

Yeah. So if you want to get in contact with me directly I'm available via email Emanuel, my first name at pad split. com. I'm also on Instagram and YouTube as big REI growth. So I do post like pad split tips and like pad splits need to knows and things like that. So all pads, but related stuff on those two channels. And then we also have our pad split Jacksonville Facebook group. So this Facebook group is great to just, Get more education on pad split connect with the community. We have people posting sub two deals and other deals in there. And also that's where we post like our events that we're going to have going on. We're going to be at the Jack's Ria citywide networking event coming up on this Thursday. I think it's November 9th. So we'll be there. We're actually working on planning out another event in January. So this one is going to be called diversifying your investment portfolio with pad split and short term rentals. So we're going to have an expert panel including myself, we're going to have Jeff Waller, we're going to have a couple other individuals who are in the short term rental space. And these two, I feel like have been a hot topic lately, so let's put them head to head and just, get to hear from those who have had experience with both. And so be on the lookout for that one. We're just in the planning phases now, but soon will be announced, but yeah. Best way to get in contact with me is by email, but if not, you can join our Facebook group just to get more info. And then also would highly encourage making a PadSplit host account. Even if you're just curious, you just, go ahead and create that account because you're going to stay up to date with everything that's going on in PadSplit world. You're going to gain access to all those tools and resources that we have available. And then when you are ready to host it's then one less thing you have to do. So it's well worth it,

Mike: 52:15

Cool. Awesome, man. This was great. Thanks for being on the show.

Emanuel: 52:18

dude. Thank you so much. I really appreciate this opportunity.

Mike: 52:21

Yeah, for sure, man.