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Show Summary
In this episode of the Real Estate Pros podcast, host Michelle Kesil speaks with Dusten Hendrickson, CEO of Mailbox Money, about his mission to address the affordable housing crisis through innovative workforce housing solutions. They discuss the importance of efficient design, overcoming community resistance, and the significance of partnerships in business growth. Dusten shares insights on investment strategies, target demographics, and the challenges faced in the real estate development landscape.
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Dusten Hendrickson (00:00)
So the single family house is becoming unaffordable and that’s why you’re seeing way more apartments that pop up everywhere.Michelle Kesil (01:37)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil. Today I’m joined by someone I’m looking forward to chatting with, Dusten Hendrickson who is the CEO of Mailbox Money, specializing in real estate development, primarily workforce housing. So excited to have you on the show today, Dusten.Dusten Hendrickson (01:59)
Thanks for having me, Michelle. I’m excited to chat with you.Michelle Kesil (02:02)
Of course, I think our listeners are really going to take something away from how you’re creating efficient and design friendly, affordable spaces. So we can dive into all ofDusten Hendrickson (02:15)
Sounds good.Michelle Kesil (02:16)
First off, for those who are not yet familiar with you and your world, can you share what your main focus is?Dusten Hendrickson (02:22)
My main focus is solving the affordable housing crisis and we are doing that through efficient workforce housing and which is also in very desirable locations and has everything you need to live with a Scandinavian interior. So it’s very Instagrammable and attractive exterior as well with lots of landscaping and connections to nature.Michelle Kesil (02:48)
that is awesome. Are you operating in specific markets or is this nationwide?Dusten Hendrickson (02:53)
Yeah, so we first rolled this out in eastern South Dakota. We have about five markets that we’re in in eastern South Dakota. It worked very well. We gathered the data. We put it against data on some A-class properties, and we realized that these are what the population wants, what the tenants need. We’re meeting an underserved middle market, and now we’re expanding to Rochester, Minnesota, Des Moines, Iowa.Kansas City and then just once we figure out how to scale regionally then we’re going to scale nationally.
Michelle Kesil (03:26)
That is exciting.So what brought on this idea to work on this mission and to create this type of development?
Dusten Hendrickson (03:36)
Well, I’ve always naturally been interested in efficiency. We had I started one of the first green building firms in my area, and that was before you could really buy LED fixtures and low flow faucets and things like that. And we started buying that stuff and figuring out what what green is and what people really want. And we realized that we could create a very desirable custom house that was a smaller footprint. And most of the trueEfficiencies came from just reducing your footprint, but if you could design it properly it would feel much larger Than a home that was designed a standard design So we started using bigger windows and that’s when we realized that natural light is kind of the big kicker for
creating wellness design and creating desirable spaces that are smaller. And so then we started designing apartments like that. And I just, I’m naturally inclined to efficiency. And so I just want to try and figure out how to make the most efficient product and how to make the most desirable product at the same time.
And then interest rates skyrocketed and construction costs skyrocketed. So we were forced to develop an even more efficient plan. And we only found one plan that was actually would actually pencil out and produce profitability in that market. And that’s when we knew we really had something. So sustainability first and foremost has to be financially sustainable, because if you’re relying on somebody somebody else to pay for it, it’s not going to be sustainable for very long.
Michelle Kesil (05:59)
Yeah, absolutely. Have there been any obstacles in creating affordable housing while maintaining this, you know, high level design?Dusten Hendrickson (06:10)
yeah.Yeah, so a lot of people don’t want…
apartments or multifamily in their neighborhood, the NIMBY, and a lot of zoning also doesn’t allow it. And so people say, well, we’ve been building so many apartments, why do we need more apartments? And so then we try to tell them, well, these are a little different than your standard apartments, but it doesn’t matter. They just see the density and they see that it’s labeled an apartment or a multifamily or a workforce housing, and then they try to fight it. So I’d say that the neighbors fight it, but once it’s built, then they’re fine with it.
And then the government zoning, they need to change the rules a little bit because single family houses are becoming unaffordable, especially for starter homes. The average age of a starter home in 81 was 29. Then in 1992, it was 28. Then in 2020, it was 33. So it jumped way up. So it’s flat for a long time.
jumped way up and now it’s 40 years old, meaning it just skyrocketed. So you’re having this flat and then whoop and then shh. So it’s exponentially rising. so first time homeowners are over are going to be over 40 in 2025 more than likely. And so there that means we need way more apartments to house a whole generation of people that normally would buy houses by now.
So the single family house is becoming unaffordable and that’s why you’re seeing way more apartments that pop up everywhere.
Michelle Kesil (07:42)
Yeah, definitely. What do you feel are some of the main keys that have made the biggest difference in allowing your business to be able to grow and run successfully?Dusten Hendrickson (07:54)
Really good partnerships, so we collaborate with lots of people. I always say collaboration over competition. We don’t get.We don’t care if we lose the deal. So if we come to a spot and the deal’s not working out and we have to drop the deal, we don’t care. We drop that deal and move on to go to the next deal. So we’ve created an abundance mentality and I feel like people want to work with you when you have that. So we have good relationships with bankers and then just.
having a reputation and just doing good things for so long. And I think that comes from an add value first and then you’ll get paid value. I think if you are worried about how are you going to extract your value, it’s going to be harder to create that value if you’re worried, if you’re just more focused on how do I create value, it comes back into you. And so that’s one thing that’s really helped us.
Michelle Kesil (08:46)
Yeah, absolutely. Are there other forms of development that you focus on or is this like the main area?Dusten Hendrickson (08:54)
So I used to do a lot more commercial mixed use development, but I realized that I had to, it was gonna be way better for me to select one niche.And this was scalable, repeatable, just everything about it. And we can solve way more problems than the issues. So we can still go do a commercial project if we feel like we want to improve our neighborhood or improve a part of the community. But.
Those tend to be more one-off projects. You’re always doing a one-off project and this, we just build pipelines of these and ⁓ we can put them all over the nation. we feel that we can solve a much larger problem and then when you solve a much larger problem, you add more value. And I think a lot more people can do the commercial aspect. I’m not as good at the commercial as I am at the ⁓ residential.
I just have a natural passion for apartments and I guess I always have. started building duplexes over 20 years ago and then I tried doing a whole bunch of other things because it was pretty cool and fun and neat. But then and it wasn’t bad but it just wasn’t really scalable. So going deep into a niche and being scalable and having a much broader segment audience is is awesome. So anyone that makes you know 30,000 to 100,000 dollars which is the majority of
population can live in our apartments or are going to be forced to live in some sort of housing like what we provide. So you won’t be able to afford a house even making a hundred grand here very shortly if you can even now. I don’t even know if you can now.
Michelle Kesil (11:10)
Yeah, definitely. Those are some things to consider. So your project, it’s meant for ownership or is it rentals or a mix?Dusten Hendrickson (11:18)
No.It’s rentals. It’s a first stepping
stone. It’s a really nice option for you to have a first stepping stone coming right out of college, getting your first job. Or if you’re saving for a house, you know, you can, it costs about 20 % of your median income to live in our apartment. Whereas the median house cost 50%. So that’s the Delta. So you can save 30 % of your wages for either retirement or a home. So that’s who we’re targeting.
We’re not targeting ownership.
Michelle Kesil (11:50)
you. Awesome. What have been some of the major obstacles that you have faced and overcome as you’ve created this project?Dusten Hendrickson (12:01)
Well City Council meetings so you get a lot of the angry mob that show up there and they’re all mad about it ⁓ and Some cities listen to them and just shut the project down and then we move on and then some cities say well We need this housing, so we’re sorry, but we’re gonna put it there ⁓It’s kind of the same everywhere if they have an a voice they’ll say no just put it over there and then you go to that spot and then people say no put it over there so it’s No one really wants to allow it ⁓
Also, the government is a major obstacle because they don’t change very quickly. And so the financial landscape is changing extremely quickly and the government is so slow to react and to change their regulations and their zoning and their parking requirements. Like parking requirements are pretty crazy and we have empty parking lots. So we’re wasting. They say at the same, so the government says we want permeable ground, meaning so the water can soak through.
but then at the same time they say we want you to put in this huge parking lot that nobody’s going to park in and so we have 25 to 30 percent empty parking lots and so some municipalities are starting to see that so they’re slowly reducing the parking requirements but people are have definitely having less cars and I think that’s just because cars are also becoming pretty expensive as well so people are getting by with less vehicles.
Other obstacles, financing is always an obstacle. Not as much though, once you get more experience, financing becomes less of an obstacle. But equity is our primary obstacle as far as what is more in our control. so, I mean, it’s still, someone still has to give us the equity, but.
That is the part that is our biggest challenge business-wise. So non-governmental-wise or not with the citizens. So finding enough equity sources has been our bottleneck for the last three years, probably.
Michelle Kesil (14:06)
Yeah, absolutely. And are you working with like investors or how are you working on raising capital?Dusten Hendrickson (14:13)
So we work with retail investors and we work with institutional great equity. So we have we will what we like to do is we like to help people get invested in real estate without having to do any of the work or have any of the worry. So they don’t sign they don’t they’re not responsible for the debt. They’re not liable for a slip and fall. They don’t have to ever worry about a tenant. They just put their money in they get their ownership they get their tax benefits. They’re protected as a limited partner. So we have that option and then we have if you want to take the whole deal down youcan come in as a JV or you can come in as a single LP writer and still have the protection. So we have offer whatever you want. And so we work with $50,000 investors up to 10 million, $20 million investors. We are launching a $100 million fund this year. And so that’ll be our first real big institutional grade equity.
Michelle Kesil (15:06)
Yeah, amazing. That’s exciting.Dusten Hendrickson (15:08)
We’re pretty pumped.Michelle Kesil (15:09)
How do you see this business scaling? you have goals for the type of reach that you’d like to have?Dusten Hendrickson (15:58)
Yeah, so we are going to go regional through the Midwest. So we’ll be, you know, 500 miles with within 500 miles roughly. And then from there, we’re going to go nationwide. So but we do target specific areas. We like business friendly locations. So we typically target. We typically target the Midwest, kind of in the south.It’s hard to do business in the Northeast or the West Coast. you can still make, you can still do really well doing real estate there and they have a need for it too, but it’s just not how we operate. So it’s easier to just stick to one style of operations because you have to change the way you operate when you operate in those heavy regulated spaces. But, and I’m not good at, at operating with a lot of governmental intervention. So we prefer more free markets. And so that’s kind of what we target.
And then, but we like we like high growth, high education, high income, low crime. Those are kind of the areas we target. And those areas usually need workforce housing the most because they’re usually more expensive. So if we can somehow get near those areas, we offer a very inexpensive option for their workforce.
But we also plan to go from a thousand units a year in 2026 to 10,000 units a year in 2030. And that’s, so that’s our main scaling plan is that we’re trying to figure out how to do that. So that’s our next big challenge.
Michelle Kesil (17:13)
Awesome. Yep.Absolutely. So who is kind of the ideal client or tenant that would be best served?
Dusten Hendrickson (17:36)
So typically we tend to have a young professional ⁓ There’s they typically tend to be female as well because there’sThey’re smaller boutique-ier buildings. They’re high-designed. They’re trendier. They’re a little bit smaller spaces. They have secure entries. They have video cameras. So a lot of times, the parents will also help their child or their kid get a place even after school. They’re still really involved. The parents seem to be a lot more involved than they used to be. So we have some college students also that rent.
So there’s that and I’d say they seem to be about 60 % roughly of the tenants and then there’s some empty nesters. There’s a few families but not too many and then there are just some professionals that rage in age that tend to be more transient. Say they live somewhere else but their job’s there. They’ll get one of our studio units, something like that where they can come in for three days instead of getting a hotel. They can have their stuff there. They come in for three days then they go back.
home to wherever they live. that’s actually quite a big tenant base as well.
Michelle Kesil (18:52)
Awesome. That is a cool niche of people to serve.Dusten Hendrickson (18:57)
Yeah, we find too that they, the young female ⁓ professional is the least, has the least wear and tear on the unit. So it’s, they take care of the unit best. We have the least complaints. We very rarely get any police called. It’s a very good demographic in my opinion.Michelle Kesil (19:18)
Yeah, absolutely. And that’s awesome that you’re able to make it design friendly for everyone as well.Dusten Hendrickson (19:25)
Yeah, ⁓ lots of dogs too. So you can almosthave a dog show at a lot of these apartment complexes. There’s so many gorgeous dogs. All different breeds, just very, very nice.
Michelle Kesil (19:36)
I love that. So fun. Great. Well, before we wrap up here, if someone wants to reach out, connect, learn more, where is the best place for people to find you and connect with what you’re up to?Dusten Hendrickson (19:51)
⁓Mailbox money re.com is our website where you can find all of our access and you can sign up to our portal or you can get our contact information. ⁓ Otherwise the social media platform I’m most active on is LinkedIn and that’s just Dusten Hendrickson D-U-S-T-E-N Hendrickson on LinkedIn and I’m the most active there and you can follow personal stuff and work stuff. We just put a little bit of everything on there.
Michelle Kesil (20:22)
Perfect. Well, I appreciate your time, your story, your perspective. Thank you for being here.Dusten Hendrickson (20:27)
Yeah, thanks Michelle. You ask a lot of great questions.Michelle Kesil (20:30)
Amazing, thank you for that feedback. And for those listeners tuning into the show, if you got value, make sure you’ve subscribed. We’ve got more conversations with operators like Dusten who are building real businesses and we’ll see you all on the next episode.
