Path to Thriving Workforce and Multi-Generational Housing with Scott Choppin REIA 459

Welcome to Real Estate Investing Abundance, the show for busy, fulfilled professionals like you to learn how to develop financial independence built on solid passive real estate investments. Now, here is your host, Dr. Allen Lomax.

Hello, enlightened investors. Welcome back to Real Estate Investing Abundance. I'm your host, Dr. Allen, and I'm so delighted that you have joined us again today. And I know that you're going to be pleased with our Scott Chopin is a returning guest. He has been on our show a couple of other times. He has one of the broadest perspectives and some of the most vital information concerning current markets. And also, he is more on top of where these current markets are going to take us in the future. So, I'm really looking forward to getting into the conversation with Scott. And so, Scott, if you can just tell us, first of all, just a tad bit about Urban Pacific Group and specifically what you're doing in workforce housing and multigenerational housing.

Yeah, no, I appreciate it, Alan. Great to be here. So, you know, just quick little description of who we are. So I founded the Urban Pacific Group of Companies in 2000. So we're on our 24th year officially last month or as of March of 2024. So that's like a cool little stat for us. We survived this long, Alan. So it's saying a little something. But we, for the last 7 or 8 years, I've completely focused on the workforce housing, like, marketplace and workforce housing demographics. So the way I describe who we are now is we're a workforce housing developer, investor, and capital manager. And what that means is, you know, we do development of the townhouse product that we'll talk about here in a minute. And then we also are beginning to ramp up an investment offer in the workforce housing space. That'll most likely be outside of California. So development in California, acquisition outside. And then, you know, capital management, we're in the process, have already formed one private equity fund to finance the equity portion of these workforce housing development projects and are working on the next one. And then the plan is to do several more. Really focused, you know, continuing to focus on development operations and California, and we'll focus on Southern California where we're based. And then we're in a new initiative right now to expand our development operations up into the Bay Area. So quick description, Workforce Housing. Basically, we build a new construction build-to-rent townhouse product we call Urban Townhouse, or UTH for short. And the unique part of that offer is that all of our units are built as a 5-bedroom, 4-bathroom, 3-story townhouse. With the intention of serving and the, you know, actual have delivered serving multigenerational working-class families in California as a basically sort of a workforce housing or naturally occurring affordable housing offer. So it's not government subsidized, but neither is it luxury housing. So we fit in between those 2 spaces. And, you know, the demand for, you know, that housing type in California is enormous. Our market study suggests that just in Southern California alone, we have, you know, nearly 50,000 units of demand of that specific 5-bedroom product that we build. If you look in a larger picture, Harvard's Housing Joint Center for Housing Studies thinks that there's a million-unit shortfall of all housing in Southern California, LA County and Orange County and Inland Empire. And then if you look statewide, you know, you can debate on the numbers, but The state of California thinks that we're close to a 4 million unit shortfall. So, you know, you don't need to say much more than that. But, you know, for all intents and purposes, you know, we'll spend the rest of, you know, my career and hoping that we can, you know, pass the, you know, the operations on to, you know, to my kids that will continue to focus on the workforce housing market. It's such a great, you know, benefit to house families, you know, working class families. And we're able to produce a, you know, good yield to our investors at the same time.

Well, Scott, there's so much I admire about you, but one of the things that I particularly admire about you is that almost 99% of the guests and people that I visit with in the real estate market totally and completely avoid, uh, the California market. And you have survived it for over, uh, 24, uh, years here and have discovered a particular niche that is in high demand But high demand is only part of the issue in the California scene. Uh, it's— there's rent controls, there's zoning regulations that are exorbitant, and the list goes on and on in terms of why people avoid the California market. So how, how is it that you navigate all that and come out profitable?

Yeah, that's a great question. I laughed when you brought that up. I'm pretty active on Twitter and the real estate Twitter space, and I put out something, just an innocuous tweet on, you know, Great weather in California. And like, talked to my— the person who cuts my hair, and she told me of people who left California to move to other states and then moved back within a couple years. And I put that out there with a beautiful picture of Santa Barbara's, you know, beautiful weather over the weekend we were up there. And craziness, Alan. Like, people were just nuts. Either totally for California, I love it, makes sense, or I totally hate it. It's like there was, you know, somebody who said, oh, you're writing this tweet for engagement.

What do they call it?

Engagement farming. And I said, dude, so not did that. Like, I was just sort of tweeting an observation. It was sort of funny side note.

Yeah.

Look, the reality is this. California is the most difficult state to deal with from the standpoint of zoning and land use regulations. At the same time, you know, it has, you know, code requirements. That are like the highest in the United States. You know, for all intents and purposes, if you build an energy-efficient building in California, you're almost net zero by default. And then, you know, at the, you know, the stabilized, you know, portion of projects, then you have the landlord-tenant laws. So on the land use and zoning standpoint, that's really our strength as a developer in California. You know, Having spent my entire career here, so it's 24 years for the company, but then I worked for companies before that. So it's, you know, probably close to like 30, 35 years if I do the math. What you do when you know how to operate in California is you get very, very picky on the projects that you do undertake and you avoid, you know, controversial projects. You avoid cities that have heavy political punishment of housing deals. And so we really spent a lot of time, you know, sort of, you know, searching for off-market sites, which is like our standard, but also off-market sites that have some zoning story, some narrative about why this thing could be supportive. And then, you know, marshal all of our resources to go into that. Even then, Alan, we still get every once in a while we get burned. Like, I won't, you know, try to, you know, you know, dispute anybody who would argue that it still happens. But Like, I think I, you know, in the last 24 years, really 24 years, I had one project at the beginning of that 20-year period where I got a turndown at the city council. And then I just had one about a year and a half ago. And that's the only turndowns I've ever had, because if we had a project that was controversial, you know, we wouldn't take it on, or we would do something strategically to make it not controversial. And, you know, I won't go into the weeds on that. But here's how I think about it. And I'm with you. A lot of, you know, a lot of developers, a lot of investors don't like California. But the way I say it, Alan, is like, if you know what you're doing, then you can get it done. And when you choose the correct sites, you're going to be as efficient as you can be in that domain. But here's the reality. When you get done with it and you deliver that property, you're delivering new housing into the most housing-constrained, highest demand, lowest supply marketplace in the United States. That's very, very good for the valuation and profitability and viability and feasibility of a project, right? So you're delivering, you know, basically a, you know, very valuable, you know, I think of it as like gold, right? You're delivering gold into the marketplace. And so you, you know, you just like when you're really good at something and you've done it for a long time, you choose well what you do. You'd be really strategic about it. You have great Team members, great vendors, great networks of help. Right? You know we have a land use attorney that's basically on retainer with us full time to make assessments of each project from a zoning and land use legal perspective. So you know people look people would argue like well why do all that work? Why not just go to Texas and you know it's much easier to get stuff done. I go it's true, but then in Texas you can build endlessly. You know we used to have an office in Austin. And sort of the running joke I had when you drive from Austin to San Antonio, you could watch the billboards of for-sale projects like single-family, and the price would drop $10,000 every, you know, freeway exit. You know, this one was $109,000, and then this was $99,000, and this was, you know, $89,000. And that just was like a good representative of like you just push out in the periphery unfettered, unlimited. And so therefore, Texas is a cash flow State for development and operations. It's not really an appreciation state, and I'm being general there. Where California is an appreciation state, and if you underwrite it correctly, can be you know cash flow. So so there's that. And then just real quick on the landlord. So look, the reality is it is getting tougher to deal with it. You know, California is like a dichotomy. Like we have like recently some of the best housing laws that have ever been passed in California to be housing friendly. to facilitate cities to approve more housing projects. At the same time, we're putting in, like, you know, crazy, you know, sort of not like— I'll talk about rent control briefly, but, you know, basically just, you know, more and more regulatory stacking on that. Here's where I go with it. It just— we have to be extra, like, vigilant, just like we are vigilant in the land use and zoning domain. We have to be vigilant in that. You still can't avoid, you know, getting weird stuff that goes on. If you get somebody who, you know, just refuses to pay rent, then, you know, you're going to have to go through an eviction. And we have like the most difficult eviction process, maybe second to New York. Maybe I might describe it that way. But the reality is one of the things that we found in our 5-bedroom housing units, because we house these multi-generational, multi-owner families, what we found is this: these families don't want to mess up their housing situation when they have this brand new 5-bedroom unit with a 2-car garage and a laundry room and quartz countertops. Like, it's nothing like they've ever been able to get, Alan. So what we found during COVID is the example I use. We didn't have a single collection issue. We didn't have a single family that refused to pay rent. That these people really, if anything, they gathered, they circled the wagons around in their family, right? Everybody's like, okay, let's like, we're going to make this work, man. We're not going to mess this up. And they did whatever they needed to do to keep the rent paid. And so when you did the re— when you look at the research, the people who didn't pay rent in COVID and the COVID moratoriums that were— California was the worst example of— really were generally middle, upper Middle and higher income people who could do that weird stuff and risk getting an eviction on their record or toy with that risk. On the landlord front, we have to be vigilant. And so that's property management, the housing type. As I was saying a minute ago, these families, we had no collection issues. So it's sort of like the product type that you develop and the way that you manage it, of course. And then the last part, the really the biggest concern I have is in the rent control space. And so we do have a law in California called Costa-Hawkins, and that's a state-level law that basically sort of dictates how cities can implement rent control at the city level. But it's up to each city whether they implement or invoke rent control or not. And that law basically presently says that anything that's 1979 or later housing age is exempt from rent control, which obviously includes any new housing that we would build. And then there's some moves afoot to change Costa-Hawkins or even eliminate it. And then basically, I think cooler heads prevail at some level in California, at least the apartment and development lobbies does a good job. And so they basically were talking about if that got changed, which it hasn't yet, in fact, it's been defeated twice, the change to Costa-Hawkins, that there'd be a 15-year rolling window from the date of certificate of occupancy to 15 years later, then you would have rent control. And so we're not doing anything specific yet to address that future possibility. We're just tracking it. Frankly, a lot of people think that rent control change at Costa Hawkins at the state level is probably not going to happen. And so if that sort of stays in stasis where it is, meaning 1979 or later, then we're going to be fine. There's still some laws at the state level for rent caps, 10% per year, as I recall, some of that stuff. So we still have to deal with that. But you just need to be on your game. And then we just need to be prepared as we're moving forward on each new project. We make an assessment at that moment. What does the future look like in 3 and 5, 7, 10 years out? Make appropriate decisions and then always be prepared. And so for us, rent control starts to impact new construction, then we'll be a net seller of assets in California. And one of the reasons why we're starting to ramp up this acquisition workforce housing model in outside of California, in places like Texas and Florida where the housing's needed, but also we would have the capability to have active, you know, stable assets in markets that don't have these rent control issues, or at least less likelihood of it.

Well, just fascinating how you've been able to navigate all that. And like you mentioned, it has to do with the fact that you are a leader in the industry. You've been at it for 24 years and you've just perfected your trade. I'm assuming that just given California and you're in the— you're doing this in the LA and the Orange County and I guess the Valley and all of those areas that have a high center of concentration. And I would think that the infill opportunities are going to be difficult and challenging to find. So really, what kind of infill opportunities are there?

Yeah, we have always been an infill developer. That's always been from the day I started the company. That's always been our, like, our, call it our specialty. So one of the moves we're making more recently is that we're starting to stretch out into the Inland Empire. So that's Riverside and San Bernardino counties, which is sort of east and south of where we are here in Long Beach and Los Angeles County. And that basically gives us the opportunity to find bigger parcels of land. You know, one of the things since you and I spoke last a couple of years ago is we've ramped up our volume of projects, both in size of projects and the number of projects. So we have a portfolio that's close to 500 units right now of just UTH projects. All that is in the San Bernardino and Riverside Inland Empire area. We continue to look for infill sites in LA and Orange County. As you alluded to, it's difficult. So what you find is more expensive land, although you will get better rents and then, you know, just more challenging zoning.

Right.

Not to say the Inland Empire has its own zoning challenges, but they're different. And then, you know, land is like generally the bigger parcels of land in LA and Orange County are less available. One of the interesting things we found is that the industrial market like took off and exploded. And so all a lot of sites that might have been decent housing sites were getting, you know, zapped up to do to change zoning to industrial properties. I know several people had big housing deals that they converted into logistical, large-scale, you know, industrial stuff. And so that's, you know, that sucked a lot of the fun out of the, you know, LA OC market, although that really is more active in the Inland Empire. But, you know, it became like a competitive factor for us in land. So look, we continue to look for sites in those locations. We're, we're pushing out a little bit more. So like we're going into like Ventura and Santa Barbara counties, just looking for stuff, although land availability there will be, you know, not as great as, as Southern California proper. And then, you know, I alluded earlier that we've made— we're making this movement up into the Bay Area. And I actually think the Bay Area may be like, like maybe the ripest hunting grounds I've seen recently.

Mm-hmm.

And so we're going to be focused in, if anybody knows the Bay Area, in Contra Costa and Alameda counties, which is the east side of the, of the San Francisco Bay Area, I think like where Oakland is. And then, but even going further inland in those 2 counties, it sort of becomes what I consider to be the Inland Empire of the Bay Area, meaning further afield from the city center, right? Cheaper land. You know, you know, obviously people would have a propensity to commute a little bit more. But for us in those inland areas, it really becomes like where the working-class folks who work in the city or, you know, work in service jobs in local or in the city, where these people tend to live because the affordability is better. So they'll commute whatever, 20, 30, 40 minutes inland. And so we want to be right where they're at already, which is our, you know, that's our philosophy in Southern California and LAOC and the Inland Empire already. But I just see a distinct opportunity. So we have actually we're tracking a pipeline of off-market land deals, you know, just in Contra Costa alone. That totals almost 3,000 units of our UTH product. I think, you know, we'll find more. And so my expectation is in Southern California, we'll continuously do between 500 and 1,000 units a year in Southern California. And then we'll do the same, you know, possibly more up in the Bay Area, just depending Functionally, our land availability really is our biggest constraint. Capital is disrupted right now with the interest rate change, and there's lots of newly appearing distress in the office market, and then some multifamily starting to show a little bit of leading edge on distress, but predominantly in that value-add 2021, '22 purchased value-add stuff with bridge loan, variable rate debt. You know, we're starting to see those, you know, come back onto the market, you know, at below the debt value for, you know, purchase price or sale offers. You know, we're seeing a little bit of adjustment in the multifamily new construction market on valuations. Interest rates are naturally going to change that cap rate, but it's, you know, it's, you know, 50 basis points. So we went from, you know, 4.5 to 5 or 4 to 4.5. You know, when we do cap rate research, you know, we did a cap rate survey in the Inland Empire probably a month and a half ago. And out of maybe 15 projects that were sort of like had, you know, were recent enough for it to be comparable for us, out of those 15, only 2 had a 5 cap on the valuation, either in a refi or in a sale. Everything else was still at 4. Now, you know, those went back, you know, I think we did it a month and a half ago. I think they went back a year. So that probably catches sort of a little bit of pre-interest rate rise. But some of the stuff that had a 4 in front of it was from like, you know, June, July, August of last year.

Really?

I, you know, I still think we're going to anticipate some change. But, you know, the beauty of, you know, underwriting new construction deals and particularly our UTH model, because it's already so strong, like we have the capability to sustain a model because our yields on cost and trended yield on cost is, you know, well enough above the exit cap rate in a market to justify investment. And we continue to see that. And then last thing is we're hopeful, we don't see it yet, but that decline in multifamily volumes in Southern California may be sufficient to bring the subcontractor cost structures down a little bit. I don't think we'll see any savings on material prices. In fact, I continue, those will continue to go up. you know, money printer go, you know, more, uh, means more inflation, more material cost inflation. I think labor, you know, is probably going to be slightly inflationary. And then I think where we expect some savings is subcontractor margins as volumes fall. You know, would expect, you know, those margins to tighten up a little bit.

Enlightened investors, if you haven't done so already, be sure and click that Like button and also click that share so others can take advantage of the content. And finally, be sure to subscribe so you don't miss a single one of our upcoming episodes. So what do you see really currently nationwide in terms of, of cap rates and interest rates? And how is all of that really affecting The, I guess, the global market in housing and real estate investment.

So I'm going to, I'm going to speak predominantly from a development of new housing angle. So, look, the reality is in the new construction multifamily market, volumes are off dramatically, meaning some places 80 or 90% declines in new construction volume permit, you know, permissions are falling off, starts are falling off. And that, you know, is expected, right? As interest rates went up, right? You know, it changed the cash flow basis to some degree. But really what we're seeing where deals become infeasible is in the debt coverage ratio of, you know, perm loan underwriting, that those are restricting the perm loan amounts. And so the equity gets really big, the loan gets small, and then the returns are dragged down. You're seeing, you know, falling untrended yield on cost. Right. A lot of podium deals predominantly is what I see that, you know, it'd be 3 or 4 or 5 stories over a parking structure in urban environment, at least in California that I track most closely. All that product, none of it is moving forward. It doesn't make any sense. So people are finishing deals, but even they're finishing deals into a declining value market. So what it was worth when they started is going to be less worth when they finish it. And so then functionally it becomes, you know, for those people who are either starting new deals or finishing new deals is what's the, what's the back-end story, the perm loan underwriting, what does that look like? And then what's the valuation look like and what can they do with that? Right. So one of the moves that we're making is that we're starting to raise more of our capital to be on a long-term hold basis. Right. So, you know, 10-year money if we can find it, although that's more difficult to raise. But at least, you know, we're orienting around, you know, 5 to 7 year money to basically give us a longer runway to build these projects, stabilize and season them. The reality is I have no doubt in California that we will continue to have demand exceed supply. We're in a sort of disrupted moment in time because interest rates popped way up rapidly. You know, we had, you know, California never had that high a volume of new construction in multifamily anyways. We were still restricted from regulation. That you know, if you look at national statistics like Jay Parsons on Twitter is formerly with RealPage. He always had great stats, and you know, here's the starts. You know, multifamily went way up on the graph, and then it fell way down. And so on a national picture, it looks awful, and it is awful. It's it's it's not wrong. But then you start you got to think about regionally, even locally micro market. And so you look at you know what is Southern California doing? Even inside of that Inland Empire versus OC versus you know. versus LA, you know, the California story is, you know, a flattening more than a falling. Right. And that could be flattening rents. It could be falling volumes. That for sure is happening. But then when you look sort of look out a year or 2 in the future, you go, oh, volumes have fallen way off. And then in '26, '27, '28, assuming we get through whatever recession, if we can even call it a recession at this moment, is, you know, we'll be coming out the other side of that and then we're going to go back directly into a supply-constrained market with, you know, like, you know, sort of sustained demand. I don't— I can't argue if, you know, demand will rise rapidly in California. I don't— I don't expect that. But it's just going to continue to be, you know, steady upward trend because of supply constraint. Right. And, you know, California is losing population. You know, I can't remember the stats from last year, But as many people as we lose, which is mostly lower income and middle income, are moving to places like Texas and Florida. We're getting an importing of you know almost an equal amount of people that are upper middle, middle upper middle, and upper income, right? And so you know on the on the the tweet I was telling you about today, we had a lot of people battling California sucks and California is great. You know very very polarized. And somebody said, oh well this you know the. What did they call the demographic or the, you know, the population shift trends, you know, sort of demonstrated clearly that California's bad. And I said, well, not really because we're sort of even and losing a little bit. But we have, you know, a population of almost 40 million people. So at least for us where we're in this workforce housing domain, that's one of the reasons we're so excited about is one is the family need for this housing type is enormous. And that is a, you know, middle class, you call it working class demographic that will continue to be around. I mean, these are people that work in service industries. You know, they work the barista at Starbucks. They're the construction worker, the, you know, the guy that works at the car wash, the guy that works at the gas station, you know, that kind of, you know, salt of the earth working class folks. And those people aren't going to go away. Now, people argue they're under pressure and that's why they're moving to Texas from Florida. And you're right. That's true. Okay. But I also think that, you know, given sort of some of the advantages that we have in California, you know, weather being one, that, you know, we'll continue to have a good bit of people who are going to continue to sustain and love California and will never leave. And so, you know, how many of those people in the middle class do we need to stick around for, at least for our housing type to be successful? It's not a huge number. There's plenty for us in that marketplace. So Let me stop there and check with you. Does that answer the question as you were thinking about it, Al?

Yeah, very informative. In your multigenerational homes, typically how many income earners are there per household?

Yeah, it's a great question. In fact, we describe our housing as multigenerational workforce housing, but it's also multi-earner household. And this is one of the sort of secret sauce of this multigenerational housing, why it's successful is because it has multiple earners. So in a family of 6 or 8 people, and we never go beyond 8, like we haven't had a unit that's had any more than I think like 6 or 7 people if I'm going off like recent numbers, you will generally have 3 or 4 wage earners. And so if you start to do the math, you go, oh, if that wage earner makes between $30,000 and $50,000 a year, they're that in that service industry job. You know, that by itself would not be enough to sustain a new unit, like even their own unit, even if it's not new, it's certainly nothing new. And you see the stats and, you know, the media, they're like, oh, you need to make, you know, $47 an hour to afford the, you know, the, the median price of a 2-bedroom apartment unit. But no one really lives that way, right? No one lives and I make $47 an hour and I rent a 2-bedroom. So, so like the average, it doesn't really exist. What people do is they come together when they're under pressure economically. They come together to what I do, what I call economic sharing. And it's just what we all know when we all lived in roommates. If anybody ever had a roommate situation in college, you were economic sharing. You didn't call it that. Co-living is another example. And our UTH, you know, family shared housing is that also. But what it does basically gives us multiple earners to spread the incomes and expenses across the family group. So that each person, you know, they earn what they earn. But by the combination of coming together often and most often in a family group, now all of a sudden they can afford a unit that allows them to give a better life. And what we're doing with our UTH models, we're giving them a unit to serve that family lifestyle and enable them to live a good life and do it in a way that's uncontested. Meaning, you know, we have a 2-car garage, which doesn't sound like anything great, But for a family has always lived in apartments and never had a garage, like literally never a garage. This is like a unique, almost an amenity, we call it that, you know, we got laundry room in the unit, you know, we got quartz countertops. So we're certainly comparable to market as far as finishes and the look and the appeal of the unit. But then we're located in these infill neighborhoods where these families already live. So we're making it coherent with their social networks, which are very strong. That's part of the reason they stick around and don't screw around on paying rent. It's because, you know, their extended family's close by, their kids go to school, you know, their extended family's close by, you know, their job is, you know, between 10 and 20 minutes away. These are not super commuters. They, they drive to their job at Starbucks, right? Or they don't drive, they ride transit often, lower propensity to own, own cars. So we're sort of like just bringing a coherent offer to a location where they, they already exist, but by By this multi-earner structure, they can now afford, you know, a better opportunity. Now, people will argue, they go, oh, well, I don't want to live with my family. I don't, you know, whatever, whatever people would say is logic. But the reality is virtually all these families naturally lived multi-generational already. We didn't create that. They were living in 2 apartments next to each other or apartment here and apartment block away, or they were living overcrowded. But they were already economic sharing. They were already living multigenerationally. Just the format of their housing and lifestyle wasn't coherent with like a good family life. And so we are giving them a unit to occupy that way. But, you know, we tell people all the time, we were like, they're like, how do you, you know, one guy's a family office investor guy, nice guy. He said, I don't understand, how do you put 2 families who don't know each other? How do you put them in the same unit? Don't they like get in fights and argue and— don't get along. I go, oh, no, no, you don't understand. These are not separate families. This is one family. You know, it's mom and dad, it's adult kids, it's a grandparent, it's an in-law, maybe small children of the parents or small children of the adult children. These people are related families. You know, there might be, you know, somebody married into the family or a cousin or whatever. And we don't require that. That's not our mandate.

Hmm.

But we're certainly looking for, like, you know, a family connection. And look, we rent to roommates too. You know, we're, we're not like, you know, We don't discriminate against anybody. We're, we're still a developer. We still need to rent units. But gosh, man, when the roommates find us, Alan, we had a project in Long Beach that was very far away from Cal State Long Beach, the local, you know, university here. And they showed up on this project really far away from campus. Like, I was surprised that they would come and look at our site and they were like, we are begging you to rent this 5-bedroom unit to us because we cannot find anything. We got 4 roommates. We'll go find the 5th. We'll figure it out. But, you know, they recognize the capability to have that unit that fit their lifestyle and was brand new. And they would even choose to go into neighborhoods that were like not convenient for them. I think it just— it's like keeps demonstrating to me over and over again that when people see this unit, when they find it, they're like, gosh, man, I didn't know this existed. Wow, this is like special, unique, which is what we go for, right? tenant reaction and investor reaction that we're differentiated and we're uncommon in a way that like is, I don't know, surprising and valuable to people who are like, wow, you know, I didn't know you could rent a 5-bedroom apartment unit. Like, I'm, I'm, I'm in, you know, where do I sign up? We get that all the time.

Well, you say there's about averaging 3 to 4 earners. How many of those 3 to 4 earners are on retirement income?

I know.

It's a great question. Very, very few. I can't think of a single instance where we had a sign— like the way we do our property management, we'll always have the wage earners be the signers on the lease, right? We tie those 2 together. Often what we find is that they'll have a grandparent or an older in-law who has retirement income, but they're generally not one of the main earners. So their retirement income is sort of additive to the pool of money that they have in the economic sharing model, but it's usually not a primary source of it. And I, I'm going off memory, and we've rented a bunch of these units over, over years now, so I could be missing, but there's certainly no great trend to have the grandparent who's on Social Security have them be one of the main, you know, signers on the lease and one of the main income earners. And the reason is because usually it's the— that's like the parents that are, you know, in their, you know, older 30s or 40s or 50s. I mean, those people are usually in their prime for earning, and then they'll have the adult kids. One of the interesting things that we see often, which doesn't show up like any stats, is out of those 3 or 4 income earners, a lot of times we have an entrepreneur as one of the 3 or 4. And so, like, we had a group that was a mom and 2 daughters. Just the 3 of them rented a 5-bedroom unit, and they were going to use one of The ground floor bedroom bathroom is a work-from-home space. And the mom had a business. I can't remember what it was, but she brought in, you know, $20K a month from the business. And then the daughters each worked a W-2 and were going to college part-time. And they were like, totally loved the unit, had plenty of income to qualify for the rent. And so particularly in this, in the Hispanic demographic, often we'll have somebody who's a, who's a Entrepreneur, has an entrepreneurial tendency or has their own business that they will literally run, you know, often, you know, from this unit. I mean, we don't, we don't encourage or discourage people, you know, having work-from-home situations. We know this ground floor bedroom bathroom that's in every 3-story unit, we do that as a standard, is a natural place to work because it's right by the front door at the bottom floor. It's a room by itself. So, you know, certainly it's set up for— and during COVID that was like a common move that people made.

Hmm.

But we really like the bottom line is we want to be coherent with the demographic. And this showed up for me. We sell some of our buildings and we sold a building in the San Gabriel Valley to a doctor and a partner of his. And I keep in touch with the doctor and he, you know, we talk every few months and he's like, dude, we're having a hard time renting a couple units that became, you know, that freed up and ready to re-rent and they were on the market for like 6 months. And he kept like, what's wrong? Like, we can't rent these things. And I go, well, what are you doing? You know, you know, rent too high, right? I just like superficial things. Well, he called me the other day last week and he said, you know what we figured out? We did this. We did a poll of all the tenants that you had rented to when you owned it and sold it to us. And he said, they're all the salt of the earth, Hispanic, you know, multi-gen families. And they're great tenants. He says they are like some of the best we've ever had. But we pulled them to see like, who are they? Like, they didn't like have a good feel. We had rented to them. They didn't. And so like, just like we'd expect, you know, you know, multiple earners, some entrepreneurial stuff. But one of the interesting things is, you know, they had a couple of families out of like, you know, 15 or 20 that they pulled that had some bankruptcies. And, you know, what our rule is, no evictions. We don't— we just—

we won't—

we can't accept anybody who has any evictions. And then you sort of like have to make an assessment of the credit, right, the credit rating. But often what we do with our property manager is he will go meet the family. Like, in fact, we work with this one property manager on all of our deals because he has this technique of going to, you know, he meets them at the open house, he does the tours himself, like he's assessing this family group. And he says, you know, please invite everybody, invite grandparents, invite, you know, not, you know, family plus, you know, who will live there plus their sort of extended family. And he's sort of looking for signs that these people are going to be good salt-of-the-earth people. And he's picked amazingly well. What was interesting and why this group couldn't rent the units, they had handed over the leasing to their, their property manager. And that property manager had applied standard property management criteria to the renters, but the demographic never fit that. So, they could never rent a unit because they kept turning all the people down. But when they looked at it, these are our best renters and We keep declining them. And so they're now changing their, their practice about how they do that. But it was noteworthy. The guy was like, I didn't understand. He goes, but now that I look at it, I get it. They're great tenants. We know them. They've rented to us or from us for 2 or 3 years now.

They've owned the deal.

And so— but that was intuitive to me. Like, we were— this is like who we look for. But not everybody thinks that way intuitively. So.

Well, Scott, we could go on for hours, I'm sure, but we need to close this out. So tell us once again about your company and give us some contact information.

Sure. Yeah. So where I would encourage people is go find me on Twitter. My handle there is @ScottChopin, S-C-O-T-T-C-H-O-P-P-I-N. You can also go to our website, which is urbanpacific.com, and you can certainly get in touch with us there. And then either through the website or if you go into Substack, look for our newsletter called The Real Signal. And that basically is sort of a workforce housing investment newsletter plus my sort of natural research of sort of real estate plus macros, what I call, Alan, which is sort of like tracking real estate economic trends and macroeconomic trends, sort of mashing those 2 together. And that's actually most of what we write the newsletter for is just sort of like our own research. You know, we sort of assemble it weekly and it's really our read of whatever's going on in the marketplace. And it could be real estate, but it could be population trends and demographics and technology. I'm trying to collect from everywhere. So we have the newsletter is on the menu of our website, or you can just go to Substack and look for Scott Chopin and The Real Signal.

Well, enlightened investors, I know you found today Enlightening. And so if you are in an area where you think that workforce housing in terms of multi-generational housing is a workable solution, I encourage you to get in touch with Scott. He has a wealth of information and experience, and he has always been willing and ready to share with me. I know he is with you as well. So reach out to Scott. He's a wealth of information. Enlightened Investors, I look forward to being with you in the next episode. Enlightened Investors, wait, wait, don't go just yet. I just want to remind you about our recently launched webinar that you will not want to miss. If you're at all curious and would like to learn more about how real estate investing can diversify your investment portfolio, alleviate the anxiety associated with Wall Street swings, leverage your 401s and IRAs to substantially increase the return on your investment, and do all of this with turnkey, hands-off, passive real estate investments, then you'll want to immediately go to stevetucker.com/webinar. In the webinar, we'll also address the common dubious investment schemes that you want to avoid. To access the webinar, Go to stevetalker.com/webinar. I look forward to seeing you in the webinar.

Thank you for tuning in to Real Estate Investing Abundance, brought to you by Steed Talker Capital, a company working for passionate professionals like you to develop financial independence built on solid passive real estate investments. As part of our efforts to make the world a better place, Steed Talker Capital contributes activities and organizations committed to better understand the equine. These endeavors attempt to enhance the human treatment of horses worldwide. Steve Talker Capital, working for a world where all creatures great and small flourish abundantly. For resources to develop your financial independence, connect with us at stevetalker.com.