YouSaid · the spoken record

Don Mullen

lines on the record: 87
first: 2023-06-29
most recent: 2023-06-29
sittings or episodes: 1
sources: podcast

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“And so as a result, I wish I was a more magnanimous younger person, who nonetheless being as driving people hard and working hard, and I've found that to be an interesting and amusing thing as I'm in this seat today and traveling the world. I find people who used to work for me from Abu Dhabi to Korea. And I guess I wasn't as bad as I perceived myself to be, because so many of them have been nice and helpful and collaborative, but more than a few have said to me. Stood outside your office and was absolutely scared shitless to go in. And that person is the global head of real estate allocation at a very large sovereign wealth fund.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think I'm very blessed. So everything that's happened, I wouldn't redo. No matter how bad it was or how good it was, I wouldn't go back and change anything. Everyone around me Has just been a great experience, great friends, great family, very happy with everyone. If I had the opportunity to learn something sooner When I was in my 30s and running a lot of stuff, I had a A great sense of anxiety, because my responsibility vastly exceeded my experience. And during that period of time I would say that I could have been more magnanimous to the people around me. And as I grew older, I became keenly aware of the fact they don't meet anyone once. You will meet him almost as many times as the earth goes around the sun.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“So there is a fellow who worked at Bearstern's named Richie Metric, a brilliant man. And they had given me a new business unit to manage I went through it and started analyzing the people and laying people off and hiring people. And Richie said to me, why are you firing all these people? He goes, well, I kind of figured out if I could do their job better than they could, I probably should replace them. And he goes, No stupid, that's why you're in charge. So it gave me a whole different perspective on human resources. So while it might sound like a story about me, it's about me being stupid. And so I had to change my views. That was one of the best pieces of advice I ever had from someone.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mentioned Gary Cohn, Tom Maharis, Mike Milkin, John Good Friend, Hase Greenberg, Jimmy Kane, even though a lot of people like to take Jimmy's name in vain. I thought I learned a lot from him. So I had the benefit of almost being Zeleg for those old movies of Wall Street because I worked at all these fantastic places with all these brilliant people. And they all taught me something.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd bring him up is not because he was a mentor on Wall Street, but that what I said my advantage was a willingness to work hard and as colleagues have said, boil the ocean to find an idea so I'm famous for getting on a plane with three or four canvas bags of research and finishing the trip to California or the Middle East with down to one canvas bag and then rereading it all on the way back and making notes and figuring out what to do. And that I think is the product of my father who worked extraordinarily hard. His challenges in life put the chip on my shoulder. We had to borrow money from uncles and cousins and stuff like that to buy a house. And so feeling like the poor relatives was one of the important motivators. After that, I've learned from just a ton of great people like Loyal.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“That fellow whose followers in elevator repairman has to go at the top of the list because I probably wouldn't have got a job and been invited back because when I left at the end of the summer there was no plan to hire me back besides being a summer intern. My real first full time job wasn't a junior credit analyst. My real first full time job, I was a secretarial assistant that Mike got me on the payrolls. His name is Mike Hyland. He is a terrific guy. He got me on the payroll of First Boston as he assistant to the secretary named Louise. And I actually whited it out things on spreadsheets and typed them in because we didn't have Excel back then and then would take him to the photocopier and that was my first full-time job on Wall Street. Then there's a bunch of other people, not the least of which is my father, I'd say. And the reason why...”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Timing is a great example here. So personally, I was short in the last tech boom in the early 21st century. And I got squeezed out of my shorts and lost a huge percent of my net worth that sixty days later I would have tripled my net worth. So timing, which is a classic complaint everyone has, and that's the case even in SFR. Where everybody thought we were late because four or five people were in, but the reality is we were early.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“System. And that was great for me. It took a long time. You know, this was like we were out in the desert wandering around for seven, eight years before people figured out that it really was a business. The infrastructure of it is a little bit reminiscent of the Apple IBM computer debater of the 90s where it's like you were never incented to buy an Apple product if you were a corporate purchasing person because you got no penalty for buying IBM and you had a lot of risk if you bought Apple. And there's a lot of that in the investing world where you don't really get a penalty for buying Blackstone in most places. And God bless them. They do a good job. So that's no one should take that as a critique of them, but critique of the mindset of many, not all people in this space. I think that people write things off too fast because they often don't have the time or the willingness to explore.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Two things. One is despite people's best efforts, there's still a lot of consensus following and that's only been amplified over the years by technology driven investors and traders who focus on trend trading. And so the system really does still not reward people to be outside.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so I wanted to live a life that was didn't have one bathroom for five people that probably didn't require me to wear a uniform. I was excited to wear a suit, to be quite frank because I never had one, and got me out of a lovely little town called River Edge, New Jersey, and I just wanted to get out of there.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“I dreamed of being a detective because unlike other kids in the neighborhood who had a lemonade stand, I opened a private detective stand to look for cats and lost toys and things like that. I think the book was an encyclopedia brown was a little book about that as a kid. I used to avidly read them. So certainly at one point I thought I would be a private detective. And later I read a lot of Lou Archer type novels and as a kid so I loved that whole era. After that when I grew up better set of aspirations, let's say I like the guy who had the office down the block who was the insurance salesman because he didn't have to wear a uniform. My dad wore a green uniform. And he didn't go at any of my sporting events. Not because he didn't love him because he was embarrassed to be there in his uniform.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is there a better word than dilatant? Because it has such negative connotations. But let me tell you what I mean by that because it sounds very aspirational and royalty and what I really mean by that is a person who's interested in a lot of things and an expert in none. I collect some wines, but not so great. I have an art collection. I'm not that great. I play golf badly. I ride a bike. I used to be good. I'm not as good, but I love martying my bike. That's my favorite thing to find time to do because I find the relaxation after mile twenty five to mile fifty to be some of the best moments outside of working children. So that may be mine, my thing, but building this business has been pretty encompassing during that. But yeah, I have a lot of interest and I'm really not very good at any of them.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sheds being like industrial and logistics, beds being residentials and meds being dentical office. But what that just says to you how to favor like offices, which we all know, but it's going to be a massive restructuring of that space, I suspect it'll spill into others. And so the debt part of that market is going to get great. So historically, people have mostly done performing real estate debt. I think you're going to see a massive growth in that. So what we want to do is be in a position that over the course of the next five to 10 years, we've added areas that had growth opportunities that add value to clients. And in doing so, create an enterprise that will long exist past my time on this earth.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Aspirations are to be a two hundred billion or two hundred fifty billion dollar alt manager, hopefully faster than ten years. What we want to do in doing that is to create more new categories. I think some of the categories that will morph private credit is going to change a lot over time. We're going to have a default cycle in private credit, which will have an impact on distressed investing. It'll have a new round of expertise required. We focus a lot on intellectual property as a category, whether it's patent portfolios, whether it's financing people successfully defending their patents. We continue to look at how would we add real estate debt in the right way, I think. As I said earlier, real estate's never had this much dispersion. So as one of my clients said to me the other day, we're like a lot of people. We're only in three categories of new dollars in real estate. We're in sheds, beds, and meds.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think that's a differentiator for us. So we don't want someone who is very beta-oriented but looks for complexity and thinks they can add value through complexity by applying the right resources. I'm not looking for hobbyists. So when we talk about non-performing loans, we often say, there's professionals and tourists. We want to be professionals only with the deep knowledge, with a specialization that adds the most value because of our knowledge. And the client can choose if they want to be in that asset class or not. Our job isn't to room the world and buy the cheapest stock off the Shanghai. That's not what we're going to do.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“for the clients. Culturally, they have to be collaborative, but they also have to want to use the infrastructure to inform their investments. One of the most valuable things that we have is a ton of information about how the economy is performing in a lot of different ways. And so smart people will make use of that tool. I think that what we want is critical thinking. It's a big factor that I look for in someone. Do they like to try to solve complicated problems in a way that creates value for the investment?”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things I'd observed that a lot of the folks out there are great investors. Actually, don't want to run the business of investing. So, in some ways, that's the first good fit for us. It's not like that's what I want to do, but we've done a pretty decent job of it. When I look at the culture within those people, it's being in a position that they're really on a mission to create value for the investors, I think, is critically important. I think it's also important that while a lot of people like to be absolute return people, most of the investors that I've come in contact really find that abhorrent just like how do I allocate that into my broader portfolio that the mandate is do whatever the hell you want. So I also like people who are aware of what their clients' needs are, not just focused on driving returns, but that their enterprise fits into the box that the clients want so in a way that we add value that's an ease of access.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, when the market wants to do that, when people aren't holding out for the last dollar, but rather saying, I want to make sure that I'm merging with a person I can work with because I have to work again, but I want to make it easier by being bigger. It's better to be acquiring platforms if the culture fits, going back to one of your first questions. The culture has to fit. The people have to like working together. They have to make sure it's a strategic advantage for the clients that you did this, that it doesn't look like over here is a private equity firm and we bought a long short equity fund. Yeah, that's nothing to do with each other. So there's a strategic initiative beyond the leadership getting along. When you can get all those things, I think you're going to see a lot more of this because a lot of people out there are trying to figure out what they do next.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“And now we have to go back at it again, back into the salt mine, and rebuild a new thing, a new adjacency, get it larger, higher, so that we can have that efficiency for our client. The landscape is scattered with guys with 10 to 30 billion dollars. I'm in the older vintages of these guys, but there's a whole lot of them between fifty and sixty five. And they've all thought that. They had reached their goal of being able to take it public or realize value, and now they can. I think you're going to see what Angelo Gordon did with TPG is the beginning of a massive wave of this. There's a lot of mergers that are going to take place.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Than it is doing it organically. Twenty four months ago, it was all about organics. Now it's about acquisitions. At this moment, valuations for a lot of alt asset managers have gone down. But a year ago they were very high and pretty attractive. So there was a lineup of guys all thinking about going public. And all of us who manage these things are humans. So we have a normal array of emotions. What happens is to all of us with an emotional set that's not like Spock on Star Trek is the fact that we're all disappointed that we work so hard that our peak success was a year ago.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“When I think about growing businesses for Predium, you have to start top down again. You have to make sure that you're looking at a business that solves a problem for an investor. Can you differentiate the product? Is it a needed product? Is it something that creates an attractive enough return for the risk you're taking? Then you look at it and you say can I create that In a reasonable way by acquiring a platform or a team. Speed usually does make a difference in these things. Pretty quickly, if it's a relatively new category or a relatively new adjacency, there's either competitors in the space already. Have Mindshare, and so you need to be in a position that you can bring some differentiation. I think that acquiring people right at this moment is far more attractive.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Cut down on the number of homes you're building so below trend for almost a decade and increase the number of prospective buyers or renters. That's why this is so extreme. But active adult is where a lot of these folks will end up moving. Actually, I think that it almost be redefined as active adult is over sixty five, not fifty five in many cases. My parents are eighty five and eighty six and they live in an active adult community. But with all that being said, we think that's a great opportunity set too because it's an area that benefits from scale. There's a large amount of ownership. There's not a lot of opportunity for rentership in that committee. So if you think about the things that are adjacencies that we think we can use our toolkit for and improve the environment for the residents, active adult housing choice ventures, building communities and using our financing arm to help build more homes at this point.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you go and look, yes, the millennial generation is the greatest generation scale since the baby boomers? But the baby boomers don't think they're old yet, and so as a result, they're still living in homes, single family homes much longer than any generation. If you went back to 1992 and you looked at the data, you turned 60 years old and you moved out of a single family home. And it was like a rock dropping out of the sky, how fast a curve goes down. And you looked at that same curve in 2019 pre COVID, which is going to make this even more extreme. People don't move out of their house till they're seventy-four. So you took 14 years of inventory that used to come off the market.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“the land and finance them, and so as a result we'd expect to be good partners, so that's another adjacency. One of the fastest growing categories is active adult, as most people know, but basically they are as the similar, quite similar communities just with older folks in it. By the way, 55 and older isn't that old anymore. Kind of a strange concept. Age has changed tremendously. It's a huge factor in the housing shortage.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that the most obvious things that we're going to be focused on as we continue to drive the efficiency of asset servicing? We should bring that to multifamily in the same communities that are single family homes from. So we're actively seeking out platforms to purchase in those communities or create one. In addition to that, we're focused on our home builder colleagues, some of the smaller ones in Home Builder fifteen through fifty. They are the ones who are most challenged by what's happened with the regional banking system. While we don't necessarily think about that impact on the home building industry, it is quite significant for all the smaller and midsize homebuilders. And so we have platforms that have been lending to construction. We're increasing our staff and increasing our capital to be in a position to take on these regional homebuilders as a part of our ecosystem. And we can be a great support to them because we can both buy the houses, help them buy.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because we have the scale that we did and so many good residents making payments, we were able to go out and hire twenty five people just to specialize in helping the people who couldn't make payments and help them apply for federal support. So I think the arguments against scale. Are actually misguided, scale makes a big difference in helping support both the residents and connectivity to the community, which is a big part of our program for the next two years.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“You have to err on the side of helping the resident any way reasonably possible. And so our desire to use our scale. When helpful for folks is one of the advantages we bring as an entity. For us the incremental thousands of dollars to do that is the right thing to do. But mom and pop who have three houses that they're renting can't perform that intervention. Not because they're not well intended, but most of them that's their business and they're running very tight, similar to what happened during COVID. So during COVID, mom and pop entrepreneurs who are renting assets suffered the most. Because folks could go into rental moratoriums in effect, they couldn't evict people, understandably, but they had to pay their mortgages on those assets.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sales drop down in January because mortgages are too high. We're like, okay, we'll take a billion dollars of houses. So the home builders have come to look at us as the safety net, the lender of less resorts, so to speak. So I think the critique is unfair that I think we will increasingly serve a great balancing function, both for residents and construction in a way that makes the market less prone to volatility and gives people more aspirational assets to live in.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so people are raising their children in better school districts and better houses with more aspirational community members because they live in an ownership community. So I think it's a little unfair both to the industry and our residents, not just us, our residents, that people are trying to eliminate the opportunity for them to live in those communities. The other thing that I think that is underweighted is because of our capital, not just ours, but the industry, we're putting billions every year into building new houses that during a cycle like this wouldn't take place. Homeowners would back away the imbalance would continue to a greater extreme”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“People focus on that, they don't focus on as well, at least equally, should be the fact that we're putting people in communities that historically they wouldn't have had the opportunity to live in. So, if you're a 620 FICO score with sixty thousand dollars worth of debt making one hundred fifty or one hundred sixty thousand dollars a year, you weren't living in this community.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Efficiency of power delivering? Another regulatory nightmare'cause if you put solar panels on a hundred thousand houses, guess what? I'm a utility. I don't want to be a utility. I just want to drive efficiency in delivery so we have to sort that out. The other thing is there's a lot of ways that we touch to the consumer. The structure of the market's inefficient. Like, why are we making people pay monthly instead of when they get their paycheck every two weeks? I think we're going to see things like that. So as a result, I think we'll find that this business will end up being more important to consumers, drive higher returns, and more efficiency for the consumer. The other parts of critiques are that we're taking housing stock away from prospective owners.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think some people are still recovering from the this isn't scalable concept. So there's still like a cohort of people despite that it's been done and spite that it's still in front of them still aren't aware that It can be done in arguably that you can generate margins very similar to multifamily as an industry. We can provide more value to those folks because people have a predisposition to stay in an asset that's built around a school system longer. So as I think as an industry, true forces will be at work. We will continue to try to improve the experience of the consumer in the house by driving more efficiency and offering more services. So two or three of the things that all of the industry is focused on including us is”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“The demographics of Detroit don't justify a lot of the old buildings, but new buildings still might attract people. It's like new office does, right? I mean, office has the greatest dispersion today ever in office history. And Siegel Family Homes will eventually become like a regular real estate asset class. So we will be able to sell portfolios. We saw that pre-interest rate increase. We would sell portfolios to REITs that either use our management or somebody else's management. So I think exiting portfolios will be like every other asset class. You can sell them in pools to other institutions who like that asset class at that time, whether they want a value-added strategy or a new build strategy or just a stable cash flow, that will take place.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, I think there's a multitude of exit strategies for any portfolio, but let me frame it broadly first and then work my way down. Framing it broadly is, I think, this will always be an asset class, that people invest in like multifamily. It's never going away, right? It's just going to have good years and not good years and houses or apartment buildings that are out of favor.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Next tier down just doesn't have the scale for owning your own workforce, owning the strategic purchasing, being able to rent houses because of your advertising budget in a more efficient way. So what we've done is capture the mindshare of the prospective residents, deliver the assets more quickly, and deliver them more cost effectively. Each stage of it is tweaking things now at this point. There's a massive easy answer”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Once we built our internal structure where we did 100% of the operations, we were able to drive margins to 65% and even higher in some portfolios. So what's the difference that we do first versus that tiering? The first thing is what we did was actually save time. So it's not pricing. It's time by owning the workflow. We crushed that down to a fraction of what it used to be. The house cash flows more and the house is available for renters sooner. Reducing the cost of turnover by both the quality of maintenance while residents are in the asset and by doing it yourself with your own workers ends up saving money and creates time savings too. So I'd say the peer group of the largest folks. We have similar efficiencies, particularly I'm talking about invitation homes, for example, American homes for rent.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a couple of tiers to look at. There's the original small mom and pop home servicers in the communities when I own houses and those folks service my house, you at NOI margins of like thirty percent. When we put an asset management layer and create a federation of them and force tech on them, we were able to get the 45%.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Compared to home sold by open door offer path entities that right now the cost of financing is so high they're periodically forced to sell houses at attractive prices to investors and home builders are in a position where at any given point in time so in February when mortgages came down they would sell to retail when mortgage rates go up they'll sell more to us and so we think when the critical parts of success right now is being able to source assets from all three and potentially even four meaning build them yourself venues and so today the bulk of our houses are bought in portfolios A year ago or 18 months ago they were bought from owner occupants and now in portfolios as an example we'll probably buy fifteen to twenty thousand houses this year but almost entirely in portfolio”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it varies a lot. So I think one of the important things to Be aware of now is that for both investors and the market generally where value is changes tremendously so for many, many years homeowners would sell assets at very attractive cap rates to institutional investors because homes overall were depressed in price because we came out of that period where they traded amazing discounts. So I used to say it's really not that important to buy the house at the courthouse steps and get that extra ten or fifteen percent discount because all homes are cheap relative to demographics all homes. Now we're in a position because of locked in mortgage rates that all owned homes are rich.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Programmed iPads that fed the data into Salesforce. And so call it eighteen months into this. We use the Salesforce platform to manage workflow for all these inspectors, as well as create documents that they could use in their iPads remotely that would feed the information to the acquisition coordinator and then power the closing process so it was both streamlined and not require emails. So when the house is agreed upon to be purchased, it alerts and schedules the inspector to go, it alerts the closing department, it alerts the finance department, and they're given timeframes to execute their tasks. So that was a big win for us.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“We believe the acquisition of assets, which I talked about, is critical in all the things we do. Also, servicing the assets in a way that drives return is important. A lot of people think servicing is beta. We think it's a source of alpha, and then financing the assets wisely is equally important. Building the enterprise for us was, again, an iterative process because there wasn't anybody around doing this. And when we started it, pretty much no one in multifamily thought it was a business. So we had a huge struggle both getting everyone down the value chain. So we had to create our own group of handymen and otherwise inspectors from other fields and train them with our tools that we created. We eventually moved from the old school clipboard with check boxes and numerical scores that were fed in that quickly to customers.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Inspecting roofs and foundations, one of the big events that took place. There was a Chinese sheetrock problem in Florida. So we quickly put that into our inspection report because that was you had to rebuild the house because those houses, the timber was fine, but the sheetrock was horrible and damaging and unhealthy. And so we tried an iterative approach to reduce fat tails.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Lots of tail risk embedded in them. So, the things that we focused on there, just to give examples of risk factors, we used to joke a lot, but a lot of the houses that were in foreclosure like that, they used to call them grow houses because the squatters would break in and the power was still turned on and they would grow weed illegally in these houses and that was more common in Southern California and Arizona than it was in other parts of the country we saw. And so we just didn't want to go through all that drama. So that's why we eliminated the risk of that through own occupied housing even within that. It was an iterative process to improve our inspection skills. So one of the great things in the US system today is the 30 day inspection period. All Americans have. And so we were able to reduce our tail risk further by”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“When we started in the beginning, as I said earlier, we bought houses like a lot of people at the foreclosure sales and the tail risk was very high. Then we start to look at portfolios that were for sale of houses from Fannie Mae and Bank of America.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Houses were renters, and those were usually lower quality assets with lower quality schools. That's changed a lot with both our programming as well as others. And so in looking for those houses, it's one of the ways that folks are able to break out of generational poverty by living in ownership communities. But we look for assets like that because we're looking for those aspirational tenets who want to take care of the asset, want to stay there for a long time because they like to live in that community.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“We tend to look for 30 minute commute times, low crime rates, all data you can buy, good school scores, not great schools, not because we're picking for people, but the Americans like good schools, but very few of them really want to spend the extra money for great schools. We want a front and backyard, so it's a classic American home you dream about if you grew up like I did. And I think our house was less than a thousand square feet with three boys in one bathroom, so that was not what we're buying. We're instead looking for a three-bedroom, two bath house, front backyard, an eat-in kitchen, two car garage where the predominance of the members in the community are owners. So for many folks, that's the lifetime dream to live in an asset like that. And for renters, it's really a huge advantage because historically, most folks lived in renter-based communities where all that.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we built the technology that analyzes houses for sale in all the markets we operate in. And so we're able to acquire houses one at a time by sort of driving a proprietary search engine that didn't take four astrophysicists locked in a black room for months. The ability of off-the-shelf technology to create a lot of the things I'm going to describe is one of the reasons this industry exists. technology wasn't ready and cheap enough to build it off the shelf using things like Salesforce and basic modifications of search to have done this in two thousand. It really was the technology and the entry point occurred at the same time.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess you could buck it into two or three things, right? So there's the how do you acquire all those houses? Then how do you service all those houses? Or at least two of the biggest categories? So when we acquire houses, our first 59,000 houses, we bought one at a time. That's usually one of the things that makes people's eyes a little bit like glaze over like how the hell did you do that? How did you?”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“Then we are actually crushing demand. So the Fed's in a really awkward spot. But the reality of it is we saw that the mismatch of housing, the ability to scale, the need for rental stock delivered in a better way, and I say a better way because we do service faster than entrepreneurs do, understandably, because they don't have full-time staff. And we have hundreds of people doing service. And so we believe that we have both created a solution for a need as well as made the product better.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's always going to be someone who wants to live in a good community that can't afford to purchase that house. And there's a cohort of Americans are increasingly choosing to rent over own because they have other priorities in their life. That's why we stayed with both private as an investment manager and as our assets. And we think that opportunity is only increasing, not decreasing at this moment. Because if you looked at what happened, we have 70% of Americans have mortgages less than 4%. They're not selling their house anytime soon. I think when you go to five, the number's 95%. If the Fed raises rates, as some people are suggesting, one or two more times, mortgages will be seven. At this point we're crushing more supply.”
2023-06-29 · Capital Allocators · Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324) · IDENTIFIED FROM THE TRANSCRIPT · source