How Shared Living Creates Cash Flow and Affordable Housing | Jay Patterson

Jay Patterson (00:00)
I’ve done my best to make my rooms very affordable. So my rooms are about $800 per room. Speaking with the pastor and other organizations, they said I’m one of the most affordable. A lot of other people are trying to charge, you know, a thousand, eleven hundred. So because of my price point, a lot of people that have SSI, people that have SSDI, there’s also other government programs like RAFT and other ones in the area that will either pay their first, last, and security, sometimes they’ll pay the whole year up front for them.

And then sometimes we’ll have them pay maybe twenty five percent of their rent and the government will cover the other seventy five. Well

Dylan Silver (02:08)
Hey folks, welcome back to the show. Today we’re joined by Jay Patterson, entrepreneur, real estate investor and founder of Family Property Team in Massachusetts. Jay, thanks for taking the time today.

Jay Patterson (02:21)
Thank you, Dylan, for the invite. Appreciate it.

Dylan Silver (02:24)
Now, shared living, we were talking about this in the green room, is an opportunity that you’ve delved into here and more so recently. What is the shared living space like up there in Massachusetts?

Jay Patterson (02:37)
So shared living is basically where there’ll be a group of people that will, you know, share the common area, share the bathrooms, the kitchens, but then they have their own personal space. Massachusetts, there’s Worcester specifically, there’s a big population of homeless people. So there’s a lot of different programs, there’s a lot of different resources to help them transition from either homelessness or sometimes transitioning from being in jail back into society.

And getting into a shared space is one, affordable. Two, it’s something that they can actually learn the new ways of living and then hopefully transition into their own private space in the future.

Dylan Silver (03:17)
Now, when you were realizing that there’s an opportunity here, how was this brought to you originally?

Jay Patterson (03:25)
I just kinda saw the market changing a little bit. I saw prices going up with rent where a two-bedroom was more expensive, then a single-bedroom is more expensive than a studio. So with that happening, everything’s gonna start to kind of push down. So I saw that how can I be of help? How can I add value and rooming and shared living seemed to be the answer.

Dylan Silver (03:48)
Now, when folks are looking for shared housing, right, on a granular level, if they’re you know in emotional distress or you know, they have—are certainly on a limited budget or they may be transitioning, how are those folks finding these shared housing situations?

Jay Patterson (04:06)
So a lot of times there’ll be like a caseworker over someone that I already have a relationship with. There’s a pastor that with people in need they go to him and they’ll refer them to me. And also there’s different organizations that just primarily focus on helping people get from their current situation to a better one.

Dylan Silver (04:24)
Now, you know, the importance of this can’t be understated, right? Because we have a lack of affordable housing, workforce housing, but there is with that, you know, a lack of spaces in general. And you’re talking about addressing people that are, you know, in some ways in critical situations, right? And so you mentioned pastor, you mentioned a caseworker. Do you know if there’s any marketplaces or folks that are or places online where folks can go to look for this type of housing in particular, or do they really have to know someone in order to find these spots?

Jay Patterson (05:50)
Well, yeah, especially in the Boston area, you can go on, you know, Rentals.com, you can go on Facebook Marketplace, you can go on, you know, even Zillow. You can go on any of these sites and you can look up a specific room depending on if you’re in the city or maybe a little bit on the outskirts, but you can find it anywhere if you if you need to. But I kind of primarily focus on the people that are in more of a need. I grew up working in the group home. My mom was in the group home.

So I just have a heart and a spirit for helping people get from their current state to the best version of themselves.

Dylan Silver (06:23)
Now I’m imagining when people are going through that transition, they’re gonna be on a budget. So how does, you know, payment work? Is this partially government subsidized? How does you know paying the rent work?

Jay Patterson (06:33)
Yeah, so I’m glad you asked that. That’s kind of one of the best parts of it is I’ve done my best to make my rooms very affordable. So my rooms are about eight hundred dollars per room. Speaking with the pastor and other organizations, they said I’m one of the most affordable. A lot of other people are trying to charge, you know, a thousand, eleven hundred. So because of my price point, a lot of people that have SSI, people that have SSDI, there’s also other government programs like RAFT and other ones in the area that will either pay their first, last, and security, sometimes they’ll pay the whole year up front for them, and then sometimes they’ll have them pay maybe twenty five percent of their rent and the government will cover the other seventy five. So that’s kind of the breakdown.

Dylan Silver (07:15)
Now, when you’re looking for opportunities for shared housing, what do these properties themselves look like? Are these single family homes, you know, triple deckers, which I know is common in Boston? What do they look like?

Jay Patterson (07:28)
So for my particular area, I like to take, you know, a single family that’s oversized. In Worcester there are a lot of those old colonial old school houses where there was just a lot of space. So you can get a single family with seven bedrooms in it. Or sometimes what I’ll do is I’ll go in and I’ll renovate, you know, something that has a double parlor. You can create an additional bedroom out of that. And then I’ll also do a two, three or four family. So I like to stay in that that kind of that type.

Because once you get over five units you’re getting into the commercial loan. But one to unit—one to four unit is easier to kinda take down.

Dylan Silver (08:04)
Now, you’re also have a background as an agent, and we were talking in the green room about going from agent to investor, and you had a mentor at the time who really said, you know, you should get your license first. I’ve seen this from not just podcast guests, but you know, my journey as well. And there’s sometimes I would say some competition or maybe, you know, some conflict between investors and agents. So because you’ve been on both sides of the space.

You know, how has your journey, you know, been influenced by both the agent side and by being an investor?

Jay Patterson (08:40)
So I am glad that my mentor said, Listen, Jason, I’m not gonna work with you unless you get your license because there’s something to passing that test and going through adversity and understanding the laws, you know, per your state of what you can and can’t do. A lot of wholesalers get a bad name because they don’t really understand all of the inner workings and it’s kinda like the wild, wild west. So I’m glad that I was able to get my license to understand the proper way of operating.

And more so being able to hop on the MLS and really dive in and see public records, what’s sold, how much is it really worth, all of the numbers, that’s a great, you know, benefit of having your license as opposed to just being an investor.

Dylan Silver (09:24)
Now, one of one of the things that I think is interesting about being active in Massachusetts is just the acquisitions cost for these properties is demonstrably higher than in some other markets. So you do have to come with the right capital stack. And especially if you’re doing multiple deals simultaneously or even subsequent deals, it can be tricky, right? Without giving away all of the gold here, what has been your best way to finance these properties, what’s been your capital stack when making acquisition?

Jay Patterson (10:29)
Yes, great question. So depending on the deal, the exit, what we’re gonna be putting in for renovations, holding costs, sometimes I’ll partner with the seller. If it’s a healthy enough deal, you know, most hard money lenders or lenders wanna have seventy to eighty percent is what they’ll give you as a down payment. They want you to put in twenty to thirty and sometimes I’ll have the seller take a second mortgage or the seller would be involved in the deal. Sometimes I’ll use my capital and you know, sometimes I’ll raise, depending on how it works. But yeah, it can be a lot to raise money at these numbers and actually have enough money for all the deals you’re doing. So sometimes you need to get creative depending on deal.

Dylan Silver (11:07)
You mentioned the seller taking out a note. On a granular level, what does that look like?

Jay Patterson (11:12)
So say the seller will do easy numbers of we’re gonna buy it for a hundred thousand and the seller doesn’t have a note on it, it’s paid off. A hard money lender just says we’re gonna give you seventy percent and then we’re gonna give you a hundred percent of construction. So they’ll give us seventy thousand to close on it, and the seller if they wanna be a part of the deal and have some upside, you know, they’ll hold back thirty thousand dollars of their quote-unquote profits. So at close they’ll get seventy thousand.

And then they’ll wait for the flip or the renovation to be done, they’ll get that thirty thousand left and also anything else on top as a kicker.

Dylan Silver (11:46)
Okay, so that’s a very interesting deal. So you’re talking about basically doing a joint venture with the seller. So they’re part of the deal. They’re your partner in this and they’re recouping their funds from the you know, note that they’re taking out upon exit.

Jay Patterson (12:01)
Yes, yes, definitely. That’s a great yeah, go ahead.

Dylan Silver (12:05)
On a on a contractual level, that’s gotta be an interesting contract. Again, without giving away all the gold here, but if we can give away a nugget, what do those contracts look like? Is this something that you you got from your your mentor or or someone that you’ve worked with over the years? Do you have an attorney relationship who helped you write this up?

Jay Patterson (12:22)
Yeah, so mentor did definitely help me on that. I do have a a bunch of attorneys as well and you know, it becomes a template after you do it a couple of times just rinse and repeat. But essentially we close at the HUD, the seller will get their seventy percent, seventy thousand, and then we’ll give them a mortgage or a deed. And a lot of times they’ll go into second position to make sure that the money’s secured. And then deal by deal I’ll have the seller as a part of the LLC so that they have additional you know, protection. So that when the deal is done, we go, we sell it out and then everyone kinda gets the split of their funds.

Dylan Silver (12:59)
This is such an interesting strategy. We could have a whole podcast just talking about that in in particular. When you’re looking at acquisitions as a whole, and there’s so many different ways to acquire property, you know, your referral network, people start to know you as someone who buys properties like this, you know, active listings things that may be high days on market, distress sellers and so forth. Do you have any one way that you have seen lately has been working or particularly fruitful?

Jay Patterson (13:25)
So since I started the main one that I’ve like my best lead source, I would say is probate. You know, a lot of times people have inherited a property and the family doesn’t necessarily even live in the area. Something in Massachusetts, they live in California or Texas. And I’m just trying to provide a a a service. So if they’ve inherited something, they have their primary, it’s not likely they’re gonna move and move into the house. I present an offer, I said I can help them clean the property out. I’m able to help them service it while they’re away, close quickly with cash. And then normally those ones are probably the the biggest deals that I’ve dealt with. So probate, sometimes auctions and you know, pre-foreclosure, those have been kind of the areas where you can have the most value.

Dylan Silver (14:10)
Those probate deals are tough, man. They’re real tough. So I know that, you know, you’ve seen everything going through this. Oftentimes you feel like you’re having to, you know, wear the head the the hat of somebody who really understands working with, you know, the the local real estate bodies, if you will, who will sort through this and it’s a legal process in many ways. It is a legal process, but you’re also having to bring families together, right? And to have to get them agree on what’s gonna happen here? And sometimes people haven’t spoken in a long time or maybe at odds. It’s challenging.

Jay Patterson (15:25)
Yeah, yeah. We definitely had one. It took almost a year and a half to close. It was the biggest wholesale deal I did, or the biggest probate deal I did. But yeah, there was three different heirs. Two of them weren’t talking to each other. There was three different attorneys. So one heir had to go to the other attorney, and then they had to figure out it was it was a cluster, but eventually we got to the finish line and also sometimes there’s issues with the deed. Someone didn’t record it properly. It was fifty years ago. So it can be a lot. But if you stick to it and you actually get it to the finish line, those are those are great deals.

Dylan Silver (16:01)
You mentioned staying on that one for over a year. I think you said a year and a half. These timelines can be quite long. When you’re moving deals along, how do you track where the deal is and how do you keep an eye on the finish line when you know it could be a long process?

Jay Patterson (16:16)
Yeah. I would like to say I have a great CRM and it’s all this stuff, but I just kinda use Excel and I kinda just keep a color code system of this is where it is, you check it every day, you see who you need to speak to, maybe ping the attorney, ping the seller, and kinda just stay on top of them. Real estate in itself are kinda long sales cycles to begin with, you know, thirty to ninety days. So it’s kinda just gotta stay on it every couple of weeks and make sure people are are doing what they have to do.

Dylan Silver (16:45)
You mentioned, you know, thirty to ninety days, with it being a a long sales cycle in and of itself. When we’re talking about the more transaction-heavy components of of real estate, being a realtor, you know, being a wholesaler, sometimes people think that, hey, I just got my license or I just started wholesaling, you know, the money’s gonna start coming in next month. Well, this could be a rather long process. How long is it gonna take you to find that first client or that first distressed seller? How long is it going to take you to find the buyer? And then when are they going to close? And then what issues are going to come up? When is your broker actually going to pay you? Right. There’s so much that comes into getting paid out that oftentimes people lack the, I would say, ability to correctly manage the expected timelines of these deals.

Jay Patterson (17:32)
Yeah, I I agree. The internet is great, social media is great, but it shows everybody the highlights and it will make someone trying to get into it think, Wow, I just turn on my camera, I make a video, I do this, and all this money comes in. But no, there can be a thousand things that happen from when you get it under agreement to actually getting it to the finish line. You know, title issues, that happened. The day of closing, you’re supposed to do a walkthrough and it’s supposed to be broom swept and it wasn’t broom swept and so it’s literally you’re almost working like a ninja to get some of these deals to to the to the finish line. It’s

Dylan Silver (18:05)
Controlled chaos. I mean, you mentioned broom swept. Could you imagine an investor or anybody, you know, a buyer not purchasing a home because it wasn’t swept? But I know you mentioned it. You have to have seen it.

Jay Patterson (18:17)
Yeah, it’s it it happened we I think it was like sixty days ago we closed one and they were complaining about it was like a paper on the ground. It was it was ridiculous stuff. So but when you’re dealing with, you know, the end buyer, sometimes they they want what they want and you know, they ask for a credit for whatever it was, but you gotta do what you gotta do to get the deal closed.

Dylan Silver (18:37)
Do you want to pivot here? I saw on your Instagram health and fitness is important to you. And sometimes that can be completely overlooked in this real estate game, right? Because people are not focused on getting into the gym or staying active. Has that always been important to you? And and do you think, you know, all real estate operators should absolutely carve time out to stay physically active?

Jay Patterson (19:00)
Yeah, so sports is my first love. Basketball, I wanted to go to the NFL, didn’t make it. You know, a lot of people that are in sports and stuff like that, they kind of pivot to sales because of the mindset. So on that same thought, yeah, people, you know, your mental stability, especially at real estate, needs to be strong. And the quickest way to do that is get a little bit of discipline, you know, make sure you get a gallon of water, get in the gym. If you can’t get in the gym, do, you know, maybe a walk, push up, sit up, something, whatever can kinda push you mentally and physically is is something that’s majorly needed to be able to withstand this game for a long time.

Dylan Silver (19:36)
You know, you mentioned the mental component of exercise. At a certain point as you’re scaling your real estate business, you start to just become a problem handler, right? And you know, you’re you’re dealing with not just your own routine and finding more clients and marketing and but you’re also dealing with everyone else’s stress. And so it starts to feel like, okay, well, I’m just putting out fires all the time. And it can easily become daunting, overwhelming. That’s how people become tired landlords, right? And so you have to be able to find a way somehow, even if you’ve got to scratch claw and fight your way through it, to have some semblance of, you know, joy and normalcy outside of the real estate game because there’s so many, I know I know you know them, there’s so many tired landlords and tired realtors who may have actually scaled a sizable portfolio or have millions and millions of dollars in transactions and dozens of transactions a year, but they’re just burnt out.

Jay Patterson (20:34)
Yeah. So I be I think on on that point I think a lot of people see the money in real estate, right? They they they want to change their life and have, you know, a legacy. And like you said, you build up this portfolio. So on the other on the flip side of that is you have all this money, you have this, you know, net worth, but what toll did it take on you? Are you all overweight? Are you this? Are you that? Like the so it has to definitely need to be a balance. So I I meditate a lot, I’m trying to hear what should the next move be? ‘Cause you can make a wrong move and it could cost you a hundred thousand dollars. So you definitely have to be stable, mental, and get in the gym so that you can actually fight through.

Dylan Silver (21:15)
I’ve had two guests tell me recently that if they’ve got a serious enough problem that they can’t solve during the day, that they’ll start asking their brain to sleep on it and wake up with an answer. And I think more people are gonna start trying this. I’m gonna start trying it because you know there’s not always the ability to even extract a solution right now. And that can be so painful for people, right? Having to wait till the next day to solve something that you feel like needs to be solved now and it feels like an emergency. But once you’ve scaled to a certain number of flips, or you’re managing, you know, contractors and subcontractors, or you’re managing seller expectations, right? And then you’re looking for more deals, it can just become chaotic. And so you have to just become accustomed. That’s the new normal, right?

Jay Patterson (22:01)
Mm. Everything is you’re you’re like a counselor, you’re a therapist, right? You gotta your finance you gotta raise money, then you gotta manage people. It’s it’s a lot. So you definitely need to be able to to balance it all and get up.

Dylan Silver (22:15)
We are coming up on time here, Jay. Any new projects that you’re working on? And then also anything you’d like to mention directly to our audience.

Jay Patterson (22:24)
Yes, I would say anyone that’s involved in Investor Fuel or wanted to get into real estate, I would say it’s a great career. The reason why I did it was the freedom. So you’re gonna have to work hard no matter what you do, whether you have an employer or you’re gonna have a different career, you’re gonna have to put the time and energy anyway. And real estate gives you that flexibility to so I’ve I have five kids. So it gives me the ability to drop them to school and to be around more. So real estate is definitely a great career, great path. And then in terms of what I’m working on, yeah, it’s just shared living. And I want to help house—I want to get a hundred rooms by the end of this year is the goal and help as many people as possible transition from where they’re at to a better situation.