Daniel Mishin

EPISODES


Episode 24.

Daniel Mishin, Founder & CEO of June Homes

00:00:00 – 00:04:00

Daniel Mission of June homes estimates that twenty percent of rentals are ripe for renovation and rental rate increases. A little investment can go a long ways. Just ask Noga, a hell’s kitchen multi family owner we chatted about in this episode. And rates are rising, inflation is high, home price appreciation is cruising. Where should you be bullish about the rental environment? Virtually everywhere, says Daniel. I truly enjoyed both episodes with Daniel and I really hope you do too. Thanks for listening. You’re listening to the real estate of things podcast. Welcome to the real estate of things podcast. I’m your host, Dalton Elliott, coming back with a apart too, here with Daniel Mission, CEO and founder of June Holmes. Daniel, thanks for spending more time with me, my friend. Great to be here back often. I really enjoyed the previous episode of looking forward to this one. Let’s do it beautiful. So let’s hit the ground running. Rental prices. Home price appreciation has been up into the right the last few years. It has been on fire, but something that’s been even a wilder market has been the rental price area. You’re seeing wild wild increases across the board and most every market, right and but part of that is a function of home price appreciation. Tie It over, but in a lot of areas rental growth has outpaced and in a lot of ways significantly outpaced home price appreciation. So you know, whenever I see such rapid and deep growth, it’s great if you’re a landlord, but I always feel like there’s a double edged sword. It’s never as clean as everybody’s happy with this piece. So walking through what you’re seeing in the rent growth and at a deeper level, do you see usame double edged sword scenario there? So you’re not started with these questions. Look, I mean let me give you like thirty seconds on how we think about overall pricing and then maybe I would talk a little more about sort of what’s going on like the specific moments in time. So one of the things that we actually realized is okay, because we are we’re we’re outside, we’re from outside of the industry and we came, like my team and I came from completely different places. Like our CTO, for example, was a PhD in us for physics who spent lost ten years researching different universes and using macro data to basically analyze universes and different stars, and I came hospitality. What we’re realized is that the weight pricing is done in the multi family is completely broken and is completely outdated and it’s absolutely not data driven and it’s absolutely got driven and it’s very up the subjective to to opinion of certain individuals. So one of the things that the bigger piece just be some thinking here is that we essentially think that pricing and multifamily should become more data drout and pricing in June homes is very different from pricing in traditional multi family. When we price our units, we in real time adjust our price to the actual demand of what’s actually going on. If we list a unit at a thousand dollars per months, as a hypothetical example, and then we in real time track how many website visitors do we get? How many visit, how many use our listings? Again, are on different line works? How many people are submitted their applications? What’s going on at the top of the funnel? And then in real time we’re just in our prices crea getting a lot of demand to the unit we are our endic pricing is increasing. If we’re not getting enough to our dynamic pricing. Is this decreasing depending on the least start date, please and date. Prices are dynamic, depending on the duration. Prices are dynamic depending on what package does the person choose? Furnished and furnished partial the furniture prices are dynamic. So to me, pricing in multi family needs a major revamp across the industry. It…

00:04:00 – 00:08:00

…needs to become more big data driver. Multi family is really behind other consumer facing industries in terms of how we do our pricing. If you look at hotels, pricing is so much more sophisticate, even though it’s the same piece of real estate. Pricing is much more efficient. You take data from market, to take events data, you take data from your competitors. There’s so many different data inputs that contributed to pricing and it’s adjusted programmatically in real time. So that’s just sort of like our overall take on pricing. So pricing needs to become more we should as a whole, holistic. What’s going on today? There is a whole consumer movement today. There is, if you look on social media, there is a major trend on tick tock and and instagram where people are really complaining about losing their covid threats. tennons are at odds thos landlords because your traditional landlord had to drop their prices to get their units rented in during, during the covid pig and today and when they’re increasing their prices, tenons are complaining and there is a time movement, but they’re losing their units. It’s a real thing. If you look at like tick tock, it’s like it’s a major movement and it’s getting picked up by major national media. So to me, the way to really avoid this and the way to really holistically solve this is to work on providing products that tenants want, not just like real estate owners have more than one lever. At that lever is not to increase the decreased prices. That’s not the only tool that we could uce. We could be creating products that are more feeling for consumers, packages that are more dealing with consumers, upselling services that are more baling to consumers to make unit economic sport for our landlord partners. So when Covid Hint, the way most levelers reacted is by dropping prices and giving consussions. That was a default reaction to the bigger problem, but our reaction was creating more flexibility. For example, instead of dropping crisis in the middle of the Covid we introduced a plan that allow people to automatically extend their least for it is. It was essentially a month to months lease priced and an attractive price, and it gave us flexibility to essentially have units roll over every months and if tennis foks a bit of a product that they were looking for, product that’s much more flexible at the time when people couldn’t commit and we got our occupancy up that weight without actually losing our rates. So I know this is not directly answering your question, but I guess the two points that I want to make. Point number one is the industry needs to become truly data driven in price. This whole idea where broke. We can walk into the United’s say this is two thousand, six hundred and twenty two dollars because this is like, this is what I think it is. That’s just that’s outdated. That’s just wrong. Human brain is not good and making pricing decisions by default. So machine learning and algorithms are much better in it and it’s proven by every single developed industry under the Sun, from airlines to hotels to ECOMMERCE. That’s part one and part two. We need to get built in products that consumers want and not just play increase a decrease prices as a reaction two major things like covid. Yeah, no, the the finger in the wind approach. That’s that’s the way it is, a way it’s like, why do you raise rents? Well, because I can, because I feel like that’s what I can get it and and certainly they’re you know, there’s a part of the Pyramid of investors who take a data drive an approach. But just as an industry, there’s a certainly room for more, like said, dynamic pricing, like like whenever you’re describing the pricing model on your in the first thing, I thought it was uber. Right, try like as opposed to the old taxi way. Would I didn’t have a ton of experience with the taxi worlds, but a little bit when I was a kid traveling around with my dad, and that lack of transparency. There’s great inefficiency around it and you know, I look as at your approach as kind of a corollary to the the uber approach to the taxi world. You just had clunky, like there’s no rhyme reason behind pricing, but then you have dynamic pricing. All of these factors that stack up to make it just a more more fair,…

00:08:00 – 00:12:03

…transparent environment, and that’s it’s incredible that in one of the most expensive parts of your life, like you mentioned in the last episode, like you’re going to spend more money on housing, whether you’re renting or bright, then probably anything else in your life, that there has been such opaqueness, lack of technological development, lack of data driving decisionmaking, there and and just kind of emotion. And how do we feel about it? And this, you know, this is something that I like and I’m going to pay for it. I don’t know how it stacks up and if this these dollars and sense makes sense. It’s kind of insane, whenever you break it down that way, to think about certain facets of the industry and how how much opportunity is there. But that’s the silver lining, right. There’s massive opportunity and the direction that you and June homes are heading, that’s the next wave for this space. So let me strow and does the ten seconds about how we did prices in photos because I think that could be. Yes. So when we, when we rental hot run our hospitality business every day, that was a report called str shirt to rental report, and essentially this is a system where individual hotels anonymously contribute their average rental price, their occupancy and their require revenue for available rout and they submitted every day to a certain system. System anonymizes and sence back the report of all your surrounding hotels with their anonymous rates and they’re animous occupancy. So you, as a hotel owner or a price in manager in a hotel, you have immediate visibility as to what is the demanded overall market, what is the supply and overall market, and you adjustive price in real time based on that. Imagine if a multi family we had an anonymous way to exchange data with each other. That would essentially create a much more sophisticated price in algorithm that would react flexibly to increases in demand and supply and to the balance of demand and supply. We’re not. We don’t have that data today. We need more quality data and we need to become more data driven in our approaches to pricing, leasing, management and everything else. And that’s and that’s and that’s a good thing in the long run for everyone. It’s going to give tenants ability to rent at times when they can get a better, better deal, when the the the demand is lower and therefore they can they could get more market power and that will give flatwords ability to build their listing strategies that are much more flexible to demand and supply. So that’s really the kind of things we think about and that’s really the kind of instruments that we think this industry will transitions. Yeah, everybody loves efficiency, transparency, fairness. It’s hard to argue against any of the core principles that flow into what you’re doing. A stay in on the data topic, right. So you and the team you built an algorithm that detects shabby apartments, apartments with good upside potential, untapped potential, and you have a process to really inspect, upgrade and listen rent those units out in a super short time frame, and I want to, you know, tell me about that. But really what I want to get to is the story of Noga. There’s a great hell’s kitchen, multi feeling example with some mind blowing numbers that, you know, just someone sitting on pile of gold that you just didn’t see the potential there, and a little mining and you had the motherload. So walk me through that. Yeah, it is actually really interesting time. So junerfuls was originally called residents and it was completely different company, completely different name, and the original business deer was turtle. It didn’t end up working. We basically like it was just nut going anywhere and we were trying to. It was a multifamily space and it was in the space of intersectional technology and real estate and we made a bunch of mistakes and we realized that it’s not the think that’s going to that’s going to fly here and one time. But but we knew that like whole idea that technology will change the space, the whole idea that the space real position from fragmented too consolidated, from UN granted to Brandon. All the trends were clear. It was going in that direction. But we didn’t have the right business foul. We didn’t know how to solve that problem. We were just we didn’t want to build another, you know, luturally corporate housing. Friend. We wanted to find a real unlock to…

00:12:03 – 00:16:03

…a real market and a really clever way to solve a up and I remember like nine months into that’s like terrible moment of trying to find product market fed tons of uncertainty. We’re running out of cash. You know your typical startup story, how you’re running out of cash, how it’s almost it’s almost like like like you, it’s almost like doomed at that point and we were sitting and it was like maybe a year in here in the company. We’re like how do we solve it? How do we solve and we’re like sninking and talking about it all the time. And then barrel, I was looking for my own apartment to rent myself and I remember I went on street easy and I wanted to get a one bedroom and hells kitchen. I sort of like scrolls through the listings and then I went to the last page, where I typically don’t wear. Typically get sumberstone go like you get first two, three pages and then whatever is at the tail end. You never even go there. And I just clicked on the last page and I was like okay, let me actually see what’s going on here, and I don’t line and the average price for a one bedroom, call it is threezero dollars. And I see this listing that’s listed a fifteen hundred dollars. What is this like? What? Why is it? Why is it stung much cheaper? Is it just another clever broker to an avative switch tactic? Is it? Or is it? Or is it? Like what is going on here? The just genuinely go to interested. Picked up my phone, called the gold gold the listing and it was listed my own. So speaking to the owner and I’m like hi, you know, I am interested in renting your unit. Why is your price so much cheaper? She’s like quite, like, I mean, that’s always what I’ve been charging. I’ve been I’ve had ten tenants in the past thirty years. That’s what I’ve been doing. Okay, fine, let me go and check it up. So I go to the building be to this woman. Her name is noogare. She’s a seventy five year old, you know, Israelian Woman that owns a building, a building and house, kitchen and and she and she says, and I’m like hey, like you have a six huge building. It’s a ten million door asset. Why are you a pricing so low? Like what’s like? Why is it so low? What’s what’s wrong with it? And I realize that the only thing that’s really wrong with it is it’s slightly outdated and we have an owner that just doesn’t know how to operate their listings, that doesn’t know how to manage their their portfolio. They that doesn’t trust brokers, that have doesn’t work with brokers because essentially brokers don’t add value and that person is just, you know, they just don’t know how to how to operate their portfolio. So essentially what I did is I said, well, how about we do this? I’m going to take your unit for fifteen hundred dollars. I’ll invest my own money in renovating your unit and if I can bring you attendant, is going to pay you more. I will only take a portion of that increase. Worst case scenario, you get free renovations and some stupid guy who basically invest catching your apartment. Best case, sorry, you’re going to make a little bit more rent. So went in, signed the lease for fifteen hundreds, went and signed, I went to Brighton Beach, hired a bunch of Russian guys for for cash, went to Home Depo, bought a bunch of things. Three days later renovated this apartment. Invested five thousand dollars, you know, and basically created, created a listing that got rented for double the double depress. I was like wow, oh my God, like you literally have a millionaire sitting on an asset worth ten million dollars that they have off for the last forty years, that doesn’t know how to operate, that doesn’t like, doesn’t provide a product that is appealing to the market. That listing, by the way, was sitting on the market for a hundred and twenty days. There was no town that wanted to rend it. It was outside of the HOUSAND system. That is one of the ways to solve housand housing shortage because you’re essentially taking units that no one would ever rent and you’re bringing them to the condition where it’s built to consumers. At the same time you’re increasing yield for a multifamily owner so they can pay their mortgage, have a sustainable business and you essentially it’s a win win for everyone. Do you have any idea, and this is a big broad question, but do you have any idea what the ball part percentage of units are that with, you know, some light but material upgrades would have a meaningful upside on rental income? Is it you know, is it? Is it a small portion? Is that the majority? Is that the story that you’re sharing about Noga? Is that something that’s kind of the exception to the rule, or is that you know,…

00:16:03 – 00:19:59

…a large number of units and just maybe with some thoughtfulness from a landlord’s perspective and a little bit of investment, you can really throttle up the income there? So yeah, I mean seventy percent of all multifamily is owned by mom and pops across the country. Out of that percentage, fifteen to twenty percent of units we consider underman due to the student homes in markets where we did that research. But the thing is that it’s for us, it’s not about being the best construction company. We’re not a construction company by default. Where a brand that’s building better consumer experience, and we are. So we are a layer of service and a layer of technology. We’re not the best dial people planning people in the world. We are good in basing the building processes and built to coge that. That’s three lines. So we don’t like limit ourselves to distressed and other venue real estate, even though that’s where we started. We focus on essentially creating that consumer experience and creating that consumer loyalty that improves performance of underlying assets and taking only a portion of the venue that we have added. We’re not a typical broker that’s going to charge the broker fee. We’re not a typical management company is going to charge our management we are essentially able to create additional venue by providing better experience to consumers and only take a portion of that, of that additional venue that we’ve created. So we’re no brainer for tenants, so we’re a no brainer for landlords, because both get a fair and a good deal. And the only way, with the laven like, the only way we think this can be successful in the long run, is if we create a win wind kind of situation versus try to arbit rush some inefficiency that exists in the market. Yeah, for sure. And when from your seed? Are there any markets that you are most excited about from the rank growth perspective? You know, call it the balance of this year. Is there any place that really just focusing efforts on, or is it just a broad bullish on the whole country, let’s go after it all approach? It’s really interesting. I mean there are markets that office to got a major influx of new renders that everyone knows about, the Miami of the world, the Sunday over the world. But the thing is that we think that young consumers and young frinders will continue living in major cities. The whole idea of people suddenly moving from New York to a rural area is just never really bought it to that we think that young people are so driven by their social circles, but their friends, by their dating lives, by their restaurants, by their communities, that’s it. They’re just something. At least cities people want to be. In cities people want to be that as other people. The whole idea, even though you may see like an increase in travel for people, people traveling more frequently over longer, we still think that people are going to continue living in the city. So my answer to a question is I think all major US markets are going to be fine in the long run. There are markets that got a spike, there are markets that got a decrease, but in the long run we believe in old major US markets. We’re very strong in New York. That’s our home base, that’s where we started. Basically we have, you know, one of our largest markets. We’re also doing really well in emerging markets. We’ve done extremely while in Austin this year. We’ve done extremely well in California this year. So we think that if it’s the right price, the right product, every market is the right way. Yeah, I the suburb comment right. Whatever could of it hit and we got many months into it there was this talk and scare about everybody’s going to move out of San Francisco, New York, La, those places are going to be ghost towns, and from the outset I was scratching my head. As a community to tell me that people who live in these world class cities with economies that trump many countries economies, it would because right. Yeah, major and that all of a sudden, and…

00:20:00 – 00:24:02

…granted, you know, there was a lot going on for a while, but the idea that folks were going to just leave in mass and these cities were going to become ghost town there was a period of time whenever that was that was big talk. It didn’t buy and I’m super happy that it did not pan out. I mean you had really just a shuffling of you know, some people moved from California to Taxas and then the opposite Strey of people moved New York to California. You had more of maybe a reshuffling of the deck than any cards getting thrown out, and I from the beginning was skeptical and head scratching on that one and am happy, but not surprised, that it’s panned out to be the way it is where these these these cities have been through a lot just by nature of being major metropolis has for many decades, north of a century beyond that many of them. So the idea that we were going to have a fall off the edge of the cliff and everybody was going to know could be yeah, I’m going to trade in my fair Gonemo loafers at Goldman Sachs and go be a rancher out in Montana. It’s just not just the the furthest thing for reality of my line. So I couldn’t agree more. Yeah, I’m with you on the the bullish across the board piece. One thing I definitely want to touch on to. If you have a lot of exciting things going on at June homes the talk to me about the Fund right something on your radar this quarter where in q one, two thousand and twenty two? Can Walk me through what’s going on there. Yeah, so’s it’s actually it’s actually a really interesting so June Holmes essentially right now is like aness of life service layer and we work with landlords and we essentially support levelers attendance, but we don’t own any real estate. And we set to see one really interesting track. It was started seeing how different jude homes level it’s in different cities are growing their portfolios student homes. So we started seeing how someone named DC went and bought seven single family homes and basically exclusively to work with jue homes. They like they were. It worked extremly well for them and they’re just like in the broke that they the only thing that they started doing. It’s just fine real estate ended option homes by real estate jus because they trust us. They know we are honest, they know we provide good quality customer service, they know that they get better performance with us than with traditional market. They know that we had thinking long term versus short term and they started to do this. Same thing happened in Boston, same thing happened in San Francisco, same thing happened. Multiple groups did the same thing in New York. So we’re like, that’s so interesting. We essentially enable real estate investors to go and focus on what they actually want to do, close more deals. So at one point, like those real estate developers came to us and they said, look, I want to be a group that works with you guys are like in this city or in this neighborhood or in this like Bot of Brooklyn. So and apparently we were like okay, sure, like why not? We would love to would love to be involved. So what’s coming on right now is we’re essentially working with multiple groups and multiple cities to set up separate jude homespunts that are going to start buying underline real estate. June holes is going to going to have skin in the game as a cogp of those funds, and we essentially work with different groups on that and we are looking for more partners to do that with. And Yeah, I mean obviously work with amazing partners like you guys to to count that of the debts side and the levers. I love it. I love the Hustle, always hungry, always looking for every angle of attack. That’s how you keep growing, thriving, more resources to put behind the engine. As Beautiful Daniel, I can’t thank you enough for taking time not only for one episode but for two episodes, and I absolutely got to get you back on down the road for check in. I’m excited about what you and June homes are doing. Congratulations on all of the growth and where you are. Super Bullish on you and the crew forward blow so absolutely love it and thanks…

00:24:02 – 00:25:37

…again for joining. Great being here. Thanks so much. Great and and one thing before I forget. If somebody wants to learn more about June Holmes, where do they go? Jotscom. They can holders page. We have a semain local list all our information. We have achild to beautiful June holmescom. Reach out see what it’s about. Thanks again, Daniel. Thanks everybody for listening. Take care. Are you a real estate investor looking for the right lender that can finance all your deals and help you scale Lima? One capital has the best suite of loan products in the industry, Barnet, whether that’s fix and flips, fix and holds, building new construction or buying rental properties, they have incredible financing solutions for it all. A reliable common since Linder is one of the most important parts of your investment team, and that’s exactly what you get with Lima one. Let Lima one capital show you how they’ve helped thousands of real estate investor scale and increase their wealth. Check out Lima onecom or call eight hundred two five, nine, zero five n ninety five to speak with the consultant and preparation for your next project. Thank you for joining us today on the real estate of things podcast. Subscribe and tune in weekly for new content from the industry’s best while we continue to unpack the nuances of this dynamic market. Follow us are cross social media for additional insights and analysis on the topics covered in each episode, and remember to rate, review and share the show.

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