68 - Empowering Entry-Level Renters with an Innovative Approach to Housing with ARK Homes For Rent's Jordan Kavana

Welcome to Listening with Leaders. I'm Doug Noll, lawyer turned peacemaker. I teach executive leaders how to listen to emotions rather than words so that they can become the leaders everyone wants to follow. And I teach those same leaders how to be authentically present, available, and connected to their families despite being insanely busy. I have learned that we are 98% emotional, and only 2% rational. Learning how to listen to emotions is, in my experience, the foundational skill of life. Stick around to the end of the show and I'll reveal how you can be on our next guest in 15 to 20 minutes. So let's get started.

Jordan Cavani, you are the CEO and co-founder I think you're maybe the founder of Arkhomes For Rent, and that can be found at arkhomesforrent.com. Welcome to Listing with Leaders.

Thank you, Doug. I appreciate you making the time for me.

So, so you have had enormous success as an entrepreneur. Tell us a little bit about your backstory.

Sure. You know, I'm originally from Uruguay, South America. I grew up in South Florida. I've lived in 5 different countries. I, you know, I speak a few languages, but my story is, you know, the story of a Jewish family that survived the Holocaust and immigrated to South America after the Holocaust. And of course, I was born in Uruguay, where my maternal and paternal grandparents were. But, you know, my story as an entrepreneur really started, I think, at a very young age. You know, I, I always had a knack for creating cash flow. And at a young age, I was selling things that everyone could buy for a dollar. I was selling them at $5 because I figured out how to sell people on the access to those things. And, you know, flea markets, selling things at flea markets, setting up entrepreneurs to sell for me at flea markets. And, you know, one thing led to another. I'm going to kind of skip a couple of the early entrepreneurial things and just tell our audience here how I got into real estate. You know, my first business out of college, I decided to move to China because I had this childhood dream of creating high-tech toys that I never found in stores. I wanted to create them. And so I became friendly with a guy, you know, that I met in business school. Whose family was in the Chinese manufacturing business. And he said, well, why don't you come to China? So I hooked up with the MIT Media Lab in Massachusetts, and I started creating, you know, high-tech toys. And to make a long story short, I was able to build a successful business over 4.5 years in my early 20s living in China, took it to about $60 million in sales, sold it. And then I said, you know, I really want to do real estate. That was really what I went to school for. That was my passion. And actually, you know, my initial dream was, as a hospitality management student, was to create magical experiences for people, because I love giving much more than I love taking, number one. And number two, I like making people happy with creativity. And I'm a pretty creative person. And so my first foray into real estate was, was in multifamily. And, you know, it's a great asset class, but I didn't feel like I could be innovative or unique. And so I did it for a few years until I landed on single-family housing. And while it's not a hospitality experience, or at least I thought it wasn't, I saw— I just saw so much opportunity. I saw this asset class that was full of mom-and-pop investors. But I saw an asset class that at the same time didn't have processes, technology, innovation, And so I said, well, how cool would it be if I can figure out how to really systematize, you know, the buying and owning and managing of these assets? But more importantly, how about if I create a hospitality business around single-family rental homes? And if you think about that for a second, we're serving the entry-level renters. And we do, just to fast forward, we do two things very differently than I think most people that are in our space. Number one, We, we buy and own and manage only newly built single-family homes. And I'll come back to why that's so important in a second. And the second thing that we do very differently is we really try to put the customer first. And in fact, we do through our preventative health and wellness program, meaning you rent a home with us and we are really building an authentic relationship, not a transactional one with you, because when you move in, we say, hey, What are some of the health challenges that you have? Is it mental health? Is it sleep? Is it movement? Is it genetics? What are you struggling with? And by the way, if you can't figure out how to deal with these things through the traditional medical system or through insurance, we actually have some solutions for you. We figured out how to bring things that were marketed to the 1% top of the population. We're bringing it to the 99%. We're going to help you. And so this is all to say how I got here is because Yes, I've worked very hard. And as they say, the harder I work, the luckier I get. But I think a lot of it has to do with, I'm a really authentic person. And I say it as I see it, I say it as I feel it. And I don't care if that gets me in trouble from time to time. I'd rather lead an authentic life and not a transactional one.

So, that's a lot to take in. So basically what What Arc Homes Rent does is buy new homes built by contractors or developers in subdivisions and then rents them out so that your renters are actually getting a brand new home to move into.

Our renters are always getting a brand new home. I just wanna edit slightly what you said. Yes, we buy and rent newly built homes and/or townhomes, But we do it in two formats. We either do purpose-built communities. You could think of it as horizontal multifamily, you know, with all the amenities that you would expect. Or we buy what's called scattered site single-family rental. So it may be 5 homes here and 10 homes there, but they are always within a kind of a 3 to 5-mile radius.

And when your customers come in to rent a home, what's the typical length of the lease?

So our standard lease is 12 months in most markets. Some markets is 24 months. The reality is, is that most of our renters, because of our preventative health and wellness program, are choosing to stay with us 24 months plus.

And so I'm just curious, when you— when a renter leaves and hopefully on good terms, do you re-rent the home or do you sell it and buy another new home? Oh, it's a great question.

So we re-rent the homes. We like to own our homes for about 5 years because it's at that kind of moment in time where some of the warranty issues start to burn off. And so we want to keep a refreshed portfolio. But yeah, we typically will get 2 or 3 rent cycles out of a home.

Oh, I see. Okay, so that makes sense. So obviously when, when the next renter is coming in, your crews go in and completely clean the place up and make it look like new and you start all over again.

Yes, yes. And every home has the, uh, what we call the Arc Living scent. Uh, we have a— we've even developed our own scent, which is 100% natural and non-toxic.

Wow. Now that— now the health— the, the other part of this that's really interesting is the, the health support you give. Tell us more about how you support your renters with health benefits.

Yeah, so, you know, this really started as a, uh, as just a personal interest of mine. I've always been frustrated with the medical system in the United States, while I think it has a lot of good, I think it marginalizes a lot of people, uh, unintentionally, of course. And so, you know, I said, why is it that preventative health is something that is marketed and reserved for the 1%? That shouldn't be that way. We should be able to give people the tools, the training, and the products and services so that they can lead a preventative health-oriented lifestyle. And so to answer your question, what we do is we focus on 6 disciplines, things such as nutrition, sleep, mental health, movement, diagnostics. And when you rent with us, you get access to our own app. It's proprietary, we've developed it. And in that app, for these 6 disciplines that I just talked about, you can have just education if you wanna learn about these different areas. You can have à la carte classes You can even have specialists that we pair you up with, be it a nutritionist or a sleep specialist or even a geneticist that comes to your home and talks to you about genetic counseling. So we figured out a way how to go to all the companies and specialists that do this, and we will bring it right into our renters' home. Um, that is an extremely important relationship and bridge that we build because effectively, if you think about it, what we're doing is we're saying like Hey, look, it's great that you love our new home and we only want to give you the best new rental homes. But what we really want to do is put the power of your health and longevity into your own hands. And if we can become that steward with you in the process, we think that we're going to have a long-term relationship with you. And we love that.

How is that service paid for?

So it depends on the location. In some cases, it's a good portion of those services are included in the rent. And others are à la carte. The customer will pay for them directly. In other cases, either because of municipal laws or whatever, you know, it is all à la carte. They pay for the service as they need it.

I got it. And I'm really curious about how your customers like this approach that you're taking.

Yeah, you know, I think it's, you know, our mentality is we first and foremost, we're in the real estate business. So we have to make sure we deliver a great real estate product and an excellent leasing experience. And we do. As for the health and wellness, it's been a long process. You know, we are still, I would say, very much in the beta stage of launching this widely because we've taken the last 2 years to educate our renter base insofar as what are we doing, why are we doing it, and why does it mean something to you? So far, I think that the, you know, based on, different surveys that we've done. They appreciate it, they get it. We're not yet at a point where I could say, hey, you know, 70% of my customer base is, you know, paying X amount because they really see the value. But, but we're getting there. It's, it's a slow build and we're fine with that.

Got it. Now the other thing that strikes me about your company is the scope and the scaling you're planning on. If I read correctly, $3 billion invested in new homes for rent?

Yeah, yeah, we're about at a billion and a half, uh, now, um, already invested, uh, and we have another billion in the pipeline. Um, I actually think that, um, just to, for, to contextualize it properly, um, that is the equity, um, that we are planning on investing into the space. Um, and I think that we'll likely get there in the next 2 years.

So are you, are you financing a lot of the homes that you're purchasing? So you got some leverage involved?

Yes, yes, we do take leverage, albeit relatively conservative, you know, when you compare what we do versus some of the public or private platforms. But yeah, yeah, you know, I think that our total portfolio value, when all is said and done over the next 5 years, will be somewhere in that $5 to $6 billion range.

Wow. And where are you raising the capital to do this?

So we have a lot. We have a proprietary balance sheet, you know, through our kind of, you know, kind of the company setup has its own proprietary balance sheet. But in addition to that, we're raising from institutional, both offshore and onshore, you know, be it pension plans, endowments and so forth. And then we have a lot of traditional US institutional investors as well. And Of course, high net worth investors, which is what I've done historically. We have a lot of those investing with us as well.

Interesting. So Jordan, what is it that gets you really excited to get up in the morning?

Yeah, so it's 3 things and I'm very clear on that because it's almost like a mantra for me at this point. So first and foremost, it's the creativity. If I can have a day where I'm creating something, I'm tinkering, I'm breaking or fixing, That is absolutely a huge driver for me. So that's one. Two, I love my team and it motivates me to speak to them, to help them, to partner with them on a daily basis. And of course to make them happy and make them successful. And then the third is health and love. I never thought, you know, 15 years ago that I would be saying these words, but It's become so pivotal to my own growth and my own happiness to focus on a daily basis on health, meaning my own health, my family's health, the health of my team, and now my residents. Um, but also love. I believe that so many of the issues that we see in the world today is there's so much hate and there's so much polarization all around us. And if people would just kind of give others the benefit of the doubt and say, hey, maybe you're coming at this from a place of love, it works. And so I focus on that daily.

I love that. My only spin on that is listening, which we'll get to in just a moment. So what is it, you've got all this vast experience over in many, many different arenas and dimensions. What is it that you think makes, what is it that's unique about you that you bring to the table in this enterprise with ARC?

You know, I, I think, I think I've been blessed with the ability to, you know, be a little bit ahead of the curve at all different stages in my life. And I think that the unique driver that we have as a company, what I like to tell investors is, look, there's a lot of people buying homes, there's a lot of people that can scale, and there's those that are much larger than us. We are entrepreneurial at heart, number one. We care greatly about details and about what we do. And, and also, when you're investing with us or you're a partner with us, you better believe it that we are voraciously reading and researching and digesting what's happening in the world around us to make sure that we're staying one step ahead. I can just— one simple example. Now it's very common to hear about build-to-rent deals, which are these purpose-built single-family communities. Well, when I did the first deal with the country's largest public company at the time, the largest home builder at the time, nobody had done one of these deals. I went to this public home builder and I said, hey, your divisions are building all these homes and selling it to retail customers. Fantastic. You do a great job of that. Why wouldn't it be an idea for you to get the same margin that you're getting with all these retail sales, but not have to go through the sales process and sell to these hundreds of retail customers. I'll buy them all and we'll build a purpose-built community. They said, great idea. So, you know, that, that was something very unique at the time. And from that one deal, that whole industry blossomed. And I'm very proud of that. I could care less that there's a million people doing it. God bless. You know, it's a big space.

Right. That's really interesting. And I can see why a developer or contractor would find that very appealing. They got one who's gonna buy 5,000 homes and it's, it, and all the hassle and stress is taken away.

That's right. Present value the cash flows and move on.

Wow.

Amazing. So let's talk about listening a little bit. You know, that's, that's part of my big thing as a lawyer turned peacemaker. Tell me how important listening is in both in your daily and your business life and your personal life.

So I regret not saying that when you asked me the question earlier, because it is such an important element of my mantra. You know, I have 4 kids. I'm blessed with 4 wonderful children and a wonderful wife. And I always say, why did God give us one mouth and two ears? So it's all about listening for me. I am absolutely, I think, a 10 out of 10 on the listening scale. I learn the most when I listen, not when I speak.

What do you think gets in the way of good listening?

Sorry, say it again. What gets in the way of it?

What do you think gets in the way? Not many people are good listeners. What do you think gets in the way of that?

I think two things. I think ego and impatience. I think when, when you're in a conversation and you're more interested in what you're going to say versus what the other person is saying, that's ego to me. And impatience. I think that people are so focused in this day and age on instant gratification that it's like, I just want to do what I want to do. I don't want to just take the world in. And that's a really important skill.

How do you overcome those? I agree with you on both counts, ego and impatience. How do you overcome that?

I learn every day. I make mistakes and I just learn every day. As simple as that. I can tell you that I'm an information seeker and I am constantly questioning my own decisions and my own judgment. And what I like to do when I finish an important conversation, whether it's personal or business, At the end of it, I usually end the conversation by saying, do you feel like I listened to you, or was I not, or was I talking too much? And the more people that tell me I'm listening, then I know I'm doing a good job.

That's right. One of the things in my work that I learned is never more than 2 periods before a question mark. There you go.

I like that.

Follow, you know, follow always 2 periods, then a question mark. And that's right. And if you do that properly, and reflect properly, because reflection is a really important part of that, then usually you'll turn into a good listener over time.

I like that.

So where do you see yourself going in the next 10 years?

Great question. You know, look, I'm, as much as I'm excited about building or continuing to build a multi-billion dollar business, you can only have one breakfast a day. And so I'm not doing it, you know, to add more, more cash or more zeros. It's really not what drives me. I will tell you some of my goals in the next 10 years. Absolutely. My first and foremost on the business side, I'd love to see this business flourish. I would very much like to attack the affordable housing dilemma that we have in this country. I think that even if it's through a nonprofit lens, I would love to leave this earth saying, you know, it's great that we put new homes over people's heads— excuse me, new roofs over people's heads. Even more importantly is how do you break down those barriers of affordability? It's a huge issue. So that's one important goal of mine. Another important goal is because I'm a lifelong learner, I want to go back to school and I want to learn all kinds of things and I want to find the time to do that. You know, I love architecture. I love health and wellness. I love— I think one of the bigger issues that we have on planet Earth is our food system, and I'd love to figure out how to tackle elements of that as well and teach people how to have access to real food, not processed food, right? You know, another big issue. And then a third is a big goal of mine is I want to spend a lot of time with my kids, and I want to enjoy you know, the time that I have with them before they grow up.

Good for you. I love the lifelong learning part. I'm actually thinking— I'm 72 years old, and I'm actually thinking about going back to school and getting my EdD, Doctorate in Education.

That's amazing. Beautiful goal.

In a new program that I think is going to be offered at one of the California State Universities. I'm thinking about it. I'm like you. I, if I, if I'm not learning, I'm dying.

So, well, listen, don't, don't think about it too long because education may change. So you gotta do it.

Yeah. Well, they, they don't have the program accredited yet. So I think, I think it, I don't think it'll be starting until maybe 2024, maybe 2025. So they're just now in the process of putting the program together. And I've been mentoring, I've been mentoring a young man who's actually in their master's degree program and he told me about it and I said, well, Jason, maybe we should do this together. And he got—

oh, that's wonderful—

he got quite excited about. He's a— just by way of example, he's a guy who spent 19 years in prison, and I met him in prison and trained him to be a peacemaker in our— in the Prison Peace Project that I co-founded. And now he's out and working on his second master's degree and is just flourishing in terms of what he's doing with his life.

So I have a question, if I may, on your Prison Peace Project. Is faith or religion an element of the program?

No. However, my colleague, my co-founder and colleague and dear friend is Jewish. And I am, I am, I'm, I like to say that I'm a follower of Jesus. I'm not a Christian. And the reason that I say that is because I see too many Christian sects unable to follow the actual teachings of Jesus. So I follow his teachings as closely as I can. Our program is purely secular. People come in, into the— they self-select into the project, in people who are serving long-term sentences in maximum security prisons, and we take them over a year and train them in over 200 skills so that by the time we certify them, they are powerful mediators and peacemakers and stop prison violence. And the stories are unbelievable about what they've been able to do. So in brief, that's what we do. And occasionally we get people that come in and they hear of Prisoners of Peace and they think it's some evangelical thing, and we say, no, no, no, no, no, this is all about real peacemaking.

And, and, and so my, my hat off to you for such a wonderful initiative. It's, uh, uh, so important.

Well, thank you. One more question. What's the one thing about you, Jordan, that we wouldn't know about unless you revealed it to us?

Um, well, up until 6 months ago, uh, I was on a 4 to 5 hour a night sleep routine, which is not ideal at all. But the reason that was the case, uh, it was because I'm a voracious reader and I typically will run through 3 or 4 books a week. Wow. And, uh, you know, it's one of these things where the mind just never quiets down. And so, um, you know, for health reasons, I've had to really kind of stop that and, um, and really learn how to, uh, how to meditate and breathe and sleep well, which, which I now am, thankfully. But yeah, um, most people don't, you know. I'm, I'm— I, I love engaging with people and meeting people and learning about them and asking them about themselves. And so Most people just don't take me for the kind of quiet reading type.

What kind of books grab your attention? Everything.

That's the problem. Everything. I, you know, typically I have like 6 or 7 books, you know, that they're all like a quarter of the way through.

Right.

And it could be books on cars or planes. It could be on cooking and it could be on history. It's just everything.

Yeah, unfortunately, I'm the same way. I became a voracious reader in the 4th grade. After I got fitted for glasses and all of a sudden could see stuff. And I mean, it was after that, it was, you know, my parents, I'll never forget the, I think it was the summer of 4th grade after I got glasses and I could really see that our local librarian, head librarian in the city library called my mom and said, he's in the adult section again. What do I do?

That's funny. That's funny.

He was good enough to say, let him read whatever he wants. It's all good.

I like that. So I have one last question for you, Doug.

Absolutely, Jordan.

Do you feel I've listened to you?

Oh, yes. I think you are a good listener.

Okay.

You are a good listener. And you were able— from what I could gather, you understood my questions and responded in a really eloquent, thoughtful way that I think my audience would say was very beneficial to them. And I think my, my, the people listening to this will, will learn a lot from our short time together. So thank you.

I appreciate it. Thank you for making the time. And I always like to end these things saying, if anybody wants to reach out to me directly, I'm a very open person and I, I love connecting with other entrepreneurs. You can look me up on LinkedIn or, or Doug Noll Connect Us.

Perfect. Thanks again. Thanks again, Jordan.

Thank you, sir. I appreciate it. Have a great weekend.

Doug Noll here. Thank you so much for listening to Listening with Leaders. If you are a successful executive leader who would like to be on this program, please visit podcast.dougnull.com/podcast. If you got something out of this interview, Would you please share this episode on social media? Just do a quick screenshot with your phone and text it to a friend or post it on the socials. If you know someone that would be a great guest, tag them on the social media to let them know about the show and include the hashtag #ListeningWithLeaders. I love seeing your posts and guest suggestions. We are regularly putting out new episodes and content. To make sure you don't miss any episodes, go ahead and subscribe. Your thumbs up ratings and reviews go a long way to help promote the show and mean a lot to me and my team. Want to know more? Go to my website, DougNoll.com, or follow me on LinkedIn, Facebook, and Instagram. That's @DouglasEnoll. Thanks for listening, and we'll see you on the next show.