Speaker 1 (00:05):

Welcome to Real Estate Rewind. We’ve got one of the newest Auburn team members here, Kristen Brady, who I’m going to introduce in a second, but Real Estate Rewind is a podcast that we started. My name’s Tyson Chutze. I’m the founder of Auburn Realty and Auburn Capital Partners. And we really started this podcast to tell some of the interesting stories with the interesting people we meet in our markets. And some of the most [00:00:30] interesting people are those Auburn team members we have. I may be a little bit biased, but Kristen joins us from Houston where we have had the opportunity to partner up with a builder, developer, manager who’s doing some really interesting things in Build for Rent space right in Christian’s backyard. Kristen, you’ve been in real estate for a long time. Tell a little bit about what your background is and why you love Houston.

Speaker 2 (01:00):

[00:01:00] Yeah. I got into real estate at a very interesting time during the recession. So it was like 2008, 2009. So I basically realized I have to hit the ground running. And that’s pretty much what I did. And I soon found out that I kind of started working with the individual investor and I was like, “Oh, I kind of like this side of the business.” So that’s what kind of at first led me into the investment side is after working with a couple individual [00:01:30] investors, I then had the opportunity to start acquiring homes for one of the larger hedge fund institutions at the time, buying. And that was my calling. I was like, I enjoyed finding the deals. I enjoyed making all the different facets of that industry working and doing the volume. And so working with the hedge funds and investing on that side [00:02:00] in volume got me fully full-time into the investment side.

(02:05):

And then that led into the Build to Rent. So by working with the funds, I was able to help them create a couple different Build to Rent communities across Texas. And in this industry, you just have to pivot. So I was like wherever my clients told me, “Hey, this is what I’m interested in and this is what I want to invest in.” And that’s what I went out and searched for and [00:02:30] looked for some good sites to develop. And then working with the Build to Rent section got me into land and development. So over the span of my career, you’re always growing, you’re always learning. I’m always looking for different types of opportunities to invest. And I think being able to bring some of these unique investment opportunities to your investors is something that I enjoy doing. It’s not something that everybody has seen. [00:03:00] And then there’s also a huge off market.

(03:09):

A lot of assets don’t even hit the actual market. So even recently, I’ve even had some of the larger home builders reach out to me looking for land. So for Texas, we have quite a bit of land. There’s still a lot of growth there. And I was actually really pleasantly surprised how many different builders have reached out to me this year looking [00:03:30] for a land to develop. So the growth is on.

Speaker 1 (03:34):

Yeah. And I think one interesting thing, Kristen, is I got in the business around the time that you did, and what’s really happened over the past 20 years is this whole area of the market, this investment real estate, investment in residential real estate has really evolved. And I think your journey, which has a number of parallels to mine, is [00:04:00] the people in the industry have had to evolve with it. And so my start was very much, sounds similar to yours, investing in, managing, helping individuals acquire individual single family homes. And then some of these larger investors came in and did that in our market similar to yours. But then I think some of those larger investors also realized that there were some more efficient ways to invest in build for rent and [00:04:30] some newer construction assets. And so it’s been really interesting to, in some ways, getting in the industry when you and I both did, you had no choice as you said, but to sort of hit the ground running.

(04:43):

But then as there was so many interesting opportunities occurring that for those that really saw the value of responsible investment in their communities, there was always a way to figure [00:05:00] out how to work with people that were interested in investing. And that’s changed and that’s continues to change. The build for rent concept that I know you’re going to talk more about, that didn’t exist when you and I got in the industry. Build for rent was apartments and that was really it. And now that build for rent is one of the most interesting [00:05:30] asset types, both for the builders that you talked about, investors and residents. I think it’s a really interesting asset type that I think can provide a lot of solutions for people that live in our market. So how have you seen investors change and how have you seen Build for Rent specifically change in the market where you live in Houston where you’re born and raised?

Speaker 2 (06:00):

[00:06:00] Yeah. So I mean, you’re right. I mean, when I first got into real estate, there was, well, in my mind, I didn’t even know Build-Rent existed. I mean, I guess in some facets it may have, but it’s really something that has come about over the last seven years or so. And it’s really a great opportunity. It’s not a great opportunity for investors. It’s also a great option for tenants. [00:06:30] The Build-Rent communities, they’re very well managed and maintained and they give tenants and people that need to lease a home an option to lease a new home and also a newer home. So a lot of these Build-Rent communities, they are newer, they’re well maintained. And the renters, they basically are calling this home. And it’s a great option for somebody that wants to have more space outside of an apartment. [00:07:00] And so that’s what Builder Rent to me offers.

(07:03):

It offers that extra option. I know back when I was buying for the hedge funds, I would have some opportunities to maybe buy a couple new homes here and a couple new homes there for the investors. But now we’re seeing where we’re able to actually create these purposely built sections for rental. And I just think it’s a great investment opportunity on both sides.

Speaker 1 (07:27):

Yeah. And I think what’s interesting about [00:07:30] the Build for Rent is it can provide a solution for residents, for investors, and the cities in which the investments exist. I know in Texas, you guys have a lot of master plan communities and you are now seeing more and more master plan communities that will have portions of the development that are for sale products and portions of the development that are for rent product. In some cases, I [00:08:00] think including the opportunity Auburn is working on, the for rent product can look as nice or nicer than the for sale product because there’s a regular routine maintenance schedule and upkeep that is being managed by the owners of that. Can you talk a little bit about what you’re seeing in those on the ground in the market where you live?

Speaker 2 (08:25):

Right. So I mean, specifically we do have a site that we’re working, Auburn’s [00:08:30] working on right now, a strategic partner down in Sierra Vista, which is a master plan community. They do have two different sections that are for rental. And what really stands out about that community is there’s also a huge amount of amenities that are offered to the tenants. So the master plan community is able to offer. This one in particular has a heated [00:09:00] lazy river, an Olympic size pool, rec centers, sports courts, hiking, biking, dog park. I mean, you name it, it has it. And so with these particular rental sections, they’re being maintained by the management company. And this one in particular is Willow at Sierra Vista. And I was really blown away by what I saw. The section was very well maintained. [00:09:30] Everybody there seemed to really appreciate what is being offered.

(09:36):

When I was out there, I candidly overheard somebody looking to rent one of these homes and she just loved everything that they had to offer. So being able to hear just even from the tenant themselves, how much they love that everything is included with the property management. Their yards are maintained and manicured. Everything about the house [00:10:00] is kind of being taken care of. So it just takes all that guesswork out and it becomes a very great passive investment for an investor as well. So talk about diversification of your portfolio with Auburn being in 10 different markets. It’s easy to kind of come into a build rent community and invest in a product like that. It’s a very passive way to invest and you know that your asset is being well taken care of as well.

Speaker 1 (10:30):

[00:10:30] Yeah. And I think, Kristen, the point that I think build for rent really solves for is it can be better for the residents and the investor. And it’s interesting in that regards that for a resident, which we’ve seen through some assets that we’ve managed in a number of different markets, particularly a Jacksonville community that we just fully leased up that was built for rent, is the residents [00:11:00] really believe that it’s home. When they are coming into that neighborhood, they’re not coming in like some multifamily properties where it’s just a stop along the way to the next location. Some of those folks are coming in and saying, “Well, wait a second. I can have the benefit of a yard, a driveway, a garage, a home that feels and looks and lives like a home that [00:11:30] I would purchase for sale, but I don’t have to deal with any of the headaches or hassles of maintaining the asset.” Or in some cases like this, Willow and Sierra Vista, even maintain lawn and other parts of it.

(11:43):

There’s entire maintenance packages that give the residents their time back to go interact with their neighbors, with their community, with the people that they live around. And so I think it’s a really interesting dynamic of this. Aaron, you’re going to make some comment on that, I believe.

Speaker 3 (12:00):

[00:12:00] Yeah. I think what’s interesting too is that the mix of residents that that attracts, because it appeals to many different demographics. I mean, you can have a young professional who wants a single family home type. They’re not sharing walls with anybody. They’ve got sidewalks to walk on at night in the evenings or the mornings or whatever. And then you have retirees who might be looking to downsize or [00:12:30] have less maintenance. So that also contributes to the richness of the community that it has different demographics that it attracts.

Speaker 1 (12:43):

Yeah, I think that’s a great point. I mean, these communities can have barbell populations that I’ve heard too, is some of the people that are most interested in these communities in which we’ve managed can be some of the younger folks that are coming up still trying to decide where [00:13:00] they want to settle down or exactly where they want to live. But then also some folks who maybe are looking for a less involved living experience and are selling a home. And so it’s different than the multifamily community that you go to the pool and it’s MTV spring break. These are neighborhoods that have a lot of different people from different backgrounds. And it’s cool, Kristen, that I think [00:13:30] as an agent that’s involved in seeing this, you can see it firsthand, but then also be able to take that experience and communicate to investors why that may be a good investment for them.

(13:44):

Talk a little bit about that. And the

Speaker 2 (13:46):

Other –

Speaker 1 (13:47):

Yeah.

Speaker 2 (13:47):

Oh

Speaker 1 (13:47):

Yeah. Well,

Speaker 2 (13:49):

I was just going to expand on that. The other, I think from the investment aspect is if you are able to have a product where your [00:14:00] tenant is happy and they’re happy to be there and call it home for more than a year or two, it’s like you’re keeping your client retention. So it’s just less turnover is what I’ve kind of seen long term. If somebody leasing a property is now like, oh, this is home. They’re more apt to stay there longer, which is better on the investment standpoint because less turnover is better for the investor.

Speaker 1 (14:27):

Yeah, that’s a great point, Chris. And that’s the golden [00:14:30] rule, right? The turnover can be one of the most detrimental things to an investment. I was recently at a land and home building conference in Charleston, and there were some investors there communicating that most multifamily operators will underwrite a turnover in as short of a time period as 10 months. That’s how fast some multifamily properties can turn over. But in build for rent communities, there’s some operators using data [00:15:00] to say that the length of tenancy can be closer to four years. So those seemed a little bit extreme on each end. But I think the point is that at the end of the day, because these folks are viewing these communities and these residents as home, the likelihood of them staying much longer is greater. And then you get the bonds that are formed in a community where you’re hanging out with your neighbor.

(15:25):

If your neighbor’s deciding to renew, it’s going to influence your impact to renew. And so [00:15:30] there’s a lot that can be done in these neighborhoods to create an experience that causes people to want to be in them long term. Right.

Speaker 3 (15:42):

It also seems like kind of the perfect product for an out-of-state investor who, I don’t know, maybe has never been to Houston. I mean, we talk about how great Houston is from when you’re living there as either an owner occupant or a resident. [00:16:00] I just lost my thought guys.

Speaker 1 (16:03):

No, I think it can be a great option for an out-of-state investor because definitely –

Speaker 3 (16:07):

Okay, right. Because it’s passive and it’s like a turnkey almost asset. They don’t have to look for a property manager. They don’t have to look for a great operator, especially at Sierra Vista because Willow is kind of an all been approved operator for the asset, but then you’re not [00:16:30] worried about the maintenance of the asset and you don’t have to be there. You don’t have to make a call at midnight to call a plumber.

Speaker 1 (16:42):

Yeah. I think it’s as close as you can get to a sort of turnkey experience. The assets that Kristin are working with have existing residents in them. They’re new construction assets. And then there’s both packages for the investor and the resident of [00:17:00] services that really can minimize really the questions or guesswork of what’s needed either to live there from a resident perspective or to invest there as an owner. So Kristen, I know you’ve seen a bunch of different products in Houston, both older inventory and new. What were your takeaways having recently spent time in this community and interacting with the assets, the management and the owners there?

Speaker 2 (17:30):

[00:17:30] Right. Yeah. I mean, when I first got into the Builder Rent section, it just seemed like at first everybody just wanted to see how many homes we could squeeze in. And it was just like squeezing in all these homes where you’re really still on top of each other. And so the one thing that stood out to me about Willow at Sierra Vista is that [00:18:00] these homes are spread out like a normal section of homes that you would see throughout the community. So they’re on larger lots. There’s little bit larger backyards. And then also their finishes were done really nicely. And so those are things that I saw that actually that the people looking to rent and lease, they were willing to pay a premium to live in something that felt more like a home that was not [00:18:30] on top of each other, that was finished out nicely.

(18:35):

And then just everything being maintained through the home management plan. They’re almost a hundred percent occupied and for a reason. So those are the tenants kind of telling us the market. So a lot of times I think as investors, it’s really important to know, okay, what are my tenants looking for? What are these renters in this area looking for? And then being able to offer that to them.

Speaker 1 (19:00):

[00:19:00] Yeah, that’s a really great point, Kristin. I think just to clarify your statement, when the early investors I think were getting into bill for rent, there was this concept of the more dense the sort of neighborhood can be, the more product we can get in there, the better. But that density doesn’t always create livability. It doesn’t create that community or sort of home-like experience that I think we’re seeing or have [00:19:30] seen the industry evolve into. And I think the owner and developer at The Willow at Sierra Vista in particular did a really good job of understanding that if you put out a premium product, there can be the expectation of a premium rent, but then that product can be better for the resident and the owner because then that individual wants to stay there because the product is superior to other options in the market.

(19:56):

And folks are willing to have [00:20:00] a slightly higher rent to have a backyard, garage, neighborhood that feels exactly like a home that they would own. Which that didn’t exist. Even as build to rent sort of came online five, six, seven years ago and started to become more popular. The homes looked very generic. They didn’t feel like these new homes. So how are you seeing that change in terms of [00:20:30] what that means for investors and just living in Texas in general? How is that dynamic changing the market?

Speaker 2 (20:40):

I mean, I’ve still seen. There is still a variety of different builder rent type products, but I have seen it evolve to where they’re becoming a little bit more mindful of now tenants these days. They do have a little bit of options to choose from. So you have to think about what will [00:21:00] attract those tenants. So I’ve seen the finishes kind of go from basic to maybe middle range. Just trying to meet some of those client expectations. So I’ve seen the products diversify a little bit that way. So I was really glad to see, especially when I went out to Willett Sierra Vista, that they really did think about the full picture of everything from the investment standpoint and from, [00:21:30] because it’s held as a rental thinking about, okay, the tenants, what are they looking for? So they did a great job in being able to really look at the big picture and be able to offer that.

(21:43):

So yeah, I mean, we just have to continue to listen on these investment properties, continue to listen to what the market is telling us.

Speaker 1 (21:52):

That’s a really good point, Kristen. I think also one of the ironies to me is that rental homes [00:22:00] can get a bad rap from some of the politicians and other things, but there’s a greater responsibility that comes along with being a rental home developer because you’re going to be involved in that asset long past the point of sale. If you’re a traditional home builder, you build out the homes, you sell them, you create an HOA and you’re done versus this builder developer in Houston is develop these homes, [00:22:30] is leasing the homes to residents, and then is providing a service both to residents and investors that’s long term. It’s intended to run with the assets sort of indefinitely. And so listening to the market, but then also acting in service of the residents’ investments long term, it’s just a very different dynamic than I think some of the traditional housing mindset.

(22:56):

How are you seeing that shift compared to more [00:23:00] of the sort of build it and move on capacity that may existed in Houston and Texas previously?

Speaker 2 (23:11):

I mean, as far as the development, I mean, just depending on. Were you talking about for the builder rent sections?

Speaker 1 (23:18):

Yeah, just like how this product and this investment is different in terms of the commitment of the builder, developer, manager to sort of stay involved [00:23:30] in ensuring that the community not only looks great at the point of completion, but stays. You were visiting some of these homes when they’ve been occupied for a year or two. And I think we’re still very impressed with not only the product in the area, but also how that product and area compared to the other portions of the neighborhood that were maybe a for sale product. Talk a little bit about seeing that firsthand and what that [00:24:00] means in terms of the owner developer still being committed to the appearance and the performance of the assets.

Speaker 2 (24:11):

Yeah. I mean, it’s actually a great strategy. They came into this project very intentional on exactly what type of product and what type of renter or client that they were looking for. I’ve seen [00:24:30] even more now a lot of different developers and builders wanting to be in the build to rent space. They want to section out a part of the neighborhood for build to rent, which is something that I really talk to a lot of different builders about making a hybrid neighborhood where you can satisfy both the for sale and the lease section. So more and more, I’ve seen a lot of even these builders or developers, they are starting to hold on to certain sections and create them [00:25:00] for intention of rental purposes. So for them, that is a long-term hold, but it just shows kind of the diversification of them wanting to be more involved in the asset and what type of product that they’re putting out there.

Speaker 1 (25:17):

Yeah. And I think it’s going to be really cool to see that continue to grow because I think it keeps developers and owners committed to a longer term involvement in locations [00:25:30] that’s really more beneficial for everybody. Having recently attended a conference that I referenced before, there was also a lot of people talking about neighborhoods and communities that have diversity of for rent and for sale product both in the same community, but then also diversity of those different rental products that you could have some that are maybe a smaller footprint for somebody that doesn’t need a [00:26:00] full three bedroom, two bath home. While you also have product that is very similar in size and scope to the community that we’re involved in with Texas that feel exactly like a traditional home that could accommodate a large family or even two families consolidating. And then you bring those different populations together, you can have much more interesting [00:26:30] communities I think in where people live.

Speaker 2 (26:35):

Something for everyone.

Speaker 1 (26:36):

Something for everyone, for sure. Well, Kristen, I know you are actively working with investors from a number of different backgrounds, experiences, locations around the country. What makes a build for rent investment in Houston [00:27:00] something that an investor should consider? Why would you suggest that somebody should be curious enough to explore whether that’s the right investment for them?

Speaker 2 (27:12):

Yeah. I mean, as far as the build-to-rent sector, I mean, I’ve even helped establish those sites from raw land through development process and entitlement. And one thing that we definitely look at when we are analyzing a build-to-rent location [00:27:30] is usually you have close proximity to the freeways. There’s schools that are close and nearby. You want to make sure that there’s access to shopping. And I’m always kind of looking like, okay, where’s the grocery store? So when you’re analyzing these different build-to-rent locations, you want to also see the big picture of, okay, that’s why when I look at different pieces of land, I’m analyzing it. [00:28:00] Sometimes maybe it doesn’t hit all those different marks. It might be too far out. The schools aren’t close. Just different things like that. So I think once we look at the Build-to-Rent sites and then you can look at the different locations, that really helps determine what are some great sites to invest in versus others.

(28:22):

Because a lot of times people will send me sites and I’m like, everything just doesn’t work for Build to Rent. Just because it’s a piece of land doesn’t mean that [00:28:30] all of a sudden this will be the best site. So really, I mean, it’s from the ground up. It is a process through developing the sites. But in some of these communities that are larger, they’re able to section off those sections for Build to Rent, which I think is such a great idea.

Speaker 1 (28:48):

Yeah. And I think you bring up a number of points there that people should consider. One, that in a Build for Rent community, people are still going to want [00:29:00] access to the typical things of schools and grocery stores. Some of these communities have those within the neighborhoods. But then from an investor perspective, there’s also the opportunity in this particular development that we’re working with the Willow at Sierra Vista for an investor to come in in a community that’s already established. The home’s already built in development. So the guesswork that usually occurs in new construction [00:29:30] has already been done. It’s been taken off the table. And yet they still have the benefit of coming in and participating in a way that just wasn’t possible 20 years ago. It wasn’t possible. If I had a client in 2007, eight, nine that wanted to say, “I want to own a new construction home within a community of intentionally maintain and develop [00:30:00] rental homes, I would’ve said, “Okay, let’s-” What are you talking about?

(30:07):

Let’s figure out where that exists because I’m unsure of it. And so I think it’s a really interesting time for residents and investors to begin to pursue a product that I think is going to define how we live and invest for years to come. I think we’re really [00:30:30] in the early days of this type of living, but I think the benefits to residents and investors are going to be here for a long time to come. So what else, Kristen, would you like to tell people about that before we. I know we’ve got to wrap up our time with you here today. I know we could talk about this all day long, but what else would you tell somebody that they should know or consider about Build for Renter Houston where you live and love?

Speaker 2 (31:00):

[00:31:00] I mean, I know we’ve talked about the community Sierra Vista a couple different times, but for sure one thing that really stood out to me as far as something they’re able to offer to investors is the home management plan. One thing for anybody investing is you’re not just investing in a home, you still have that asset to maintain. And so with this home management plan, it allows an investor to be very passive [00:31:30] in the investment. And also to me, I feel like it gives them a peace of mind that their asset is being well taken care of.

(31:43):

Let’s face it, sometimes tenants don’t necessarily maybe maintain the home the way maybe a homeowner will. But on the back end, this home management plan ensures that the filters are being changed regularly. The HVAC is being looked at yearly. The yards are being maintained. Just all of those [00:32:00] little intricacies of owning a home, like you said, all that guesswork is taken out of that. And so in this particular build to rent site, all of that is offered and available. So I think that actually is something very important for an investor to also consider is the maintenance of their investment. So yeah, definitely lots to like.

Speaker 1 (32:28):

Yeah. Well, thank you very much for sharing that info. [00:32:30] I mean, I think the interaction with the residents, with each other, the interaction with the management with the residents, the interaction with the management with the assets themselves, there’s just a lot more touches that prevent involvement or activity for the investors. And that’s a lot of the things that I think they don’t tell you about investing in real estate is sometimes owning an investment property can be a very active [00:33:00] pursuit. No matter how many managers, agents are involved. There’s asset management decisions that often have to be made that with new construction homes and an intentionally purpose-built community, that doesn’t exist or that goes away to almost a very tiny degree that is a really cool option for folks wanting to get into investing. So thank you, Kristen, for being a part of this, and thank you for joining the podcast [00:33:30] today.

Speaker 2 (33:31):

It was great. I’m glad. Thank you for having me.

Speaker 1 (33:34): Thank you.