More Income, More Impact: Atticus LeBlanc on Shared Housing, Cash Flow, and Workforce Rentals

Atticus (00:00)
Because if you look at just the empty bedrooms that are unused, that are not used for home offices, like the room that I’m in right now, ⁓ or ⁓ storage, well, there are 32 million empty, unused available bedrooms that sit every single night. So regardless of whether your estimate of the shortage is one and a half million to seven million,

By far, the most effective thing you can do is fill the empty bedrooms. And then if you look at the other spaces that could be converted to bedrooms, like formal dining rooms are a good example. ⁓ No landlord that I’m aware of has ever made money off their formal dining room.

Dylan Silver (02:09)
Hey folks, welcome back to the show. Today we’re joined by Atticus LeBlanc, founder and CEO of PadSplit, a mission-driven housing marketplace focusing on providing affordable housing through shared living. Under Atticus’ leadership, PadSplit has created nearly 33,000 affordable units across 40 states, all without taxpayer subsidy, by partnering with individual housing providers to deliver both income and impact. His work sits at the intersection of real estate.

technology and social innovation addressing one of the biggest challenges in housing today. Atticus, thanks for joining us.

Atticus (02:43)
Absolutely. Thanks for the opportunity, Dylan. And ⁓ man, great intro. I’m going to borrow that one.

Dylan Silver (02:49)
Now, when we talk about this space and we were talking in the green room, it seems like a no brainer, but it also seems like something that sometimes people have their difficulty wrapping their head around. How did you come up with the idea to scale these shared living spaces?

Atticus (03:08)
Yeah, I mean, I had been experimenting with shared living since 2009. So I started buying single family rentals in 08 and then apartments in 09. Kind of fell into this rent by the room model when some guys who were renting rooms in a really crappy rundown house next door said they were going to get evicted because the house was being foreclosed. And that’s how I fell into it. Two of those guys moved into my house. I saw that it was both more affordable and more profitable at the same time. There’s also a lot more work though.

And so over the next seven years, as I was expanding my portfolio, I saw that the profit and loss from this property just beat the pants off of everything else, but it was super operationally intensive and I was collecting money orders. had to go out there all the time. And so in really 2016, I had this thought that, I’ve watched Airbnb scale to 6 million units. I know the gravity of this housing crisis probably as well as anybody.

that’s in the housing space. And I see this shared housing solution really being an answer that could scale without taxpayer dollars and could just move much more quickly than any other solution out there. The problem was like that operational piece. And if we could create this marketplace and services business that would take the operational complexity out of the hands of

Dylan Silver (04:26)
Yeah.

Atticus (04:35)
housing providers, then pretty much anybody could do it. And you could remove a lot of those barriers for folks that were interested in both earning more income and creating more impact.

Dylan Silver (04:47)
Now, one of the things that I think people sometimes feel is tricky, and I actually saw you addressing this in a YouTube short, is I think, well, you know, if a short-term rental, there’s issues potentially with changeovers and with, you know, the tenants and the guests in the short-term rental, what about in a situation where you have multiple people living together? That has to be, you know, maybe exponentially more challenging. But of course, you had mentioned in the short that I was watching that that’s not the case. People have been living together for forever.

Atticus (05:16)
Yeah.

Yeah. Yeah. No, absolutely. the human civilization goes back 400,000 years. I can guarantee you we’ve been sharing housing at least that long. then for me, like that first house in 2009, I had one of like my third person who moved in there is a woman named Linda. She’s still in the same room today, 17 years later. So about 25 % of every group of people that moves in will stay very long, long term.

I mean, the like, don’t get me wrong, it’s co living management is a is a full contact sport. And it is, I think, more work than a traditional long term rental, but a lot less work than an Airbnb. And and so you have these these stays that are midterm in nature, by and large, if 25 % of people are staying long term, that that means that 75 % of the people are not. And they’ll stay anywhere between a month

Dylan Silver (06:50)
Hmm.

Atticus (07:03)
to call it nine months. And so you have turns, but with every cohort of people that move in, you have fewer and fewer turns. Because again, you have that 25 % of people that are staying long term. So if you got four rooms, well, for the next cohort of people, you probably only have three to move in. And then for the next cohort of people, you probably only have two to move in. And so over time, it actually becomes less work. And it’s really important to kind of build systems into.

into the framework that can scale with you. But overall, ⁓ co-living generally, I think, addresses two major issues when you’re thinking about operating any sort of rental portfolio. One is your vacancy loss, and two is your turn cost. And the beauty of this model with fully furnished, all utilities included, is your vacancy loss, meaning the time that, the period of time that that unit is actually vacant.

is significantly reduced. So on our platform, for instance, across all 40 states, the time from listing a unit on average to having that unit filled is less than eight days ⁓ across all of our units, which is really, really fast ⁓ compared to any other model.

Dylan Silver (08:13)
Yeah, that’s huge. Now,

when I think of that specifically, it’s almost shocking because when you’re talking about finding a tenant for really anything, it can sometimes be challenging. And I’m thinking specifically in the Sun Belt, where I’m licensed as a realtor in Texas, I know places right now, know, apartment complexes that are doing huge concessions, particularly in some markets like, you know, the greater Austin area.

to get people to fill these units. But I think there’s still even with that, you would think, okay, well, there’s this surplus of places. There’s gotta be there for enough places for people to move into because there’s a surplus, right? But it feels like there’s still not enough affordable housing. So they’re building these luxury high end, two gyms and two pools and a place to walk your dog. But where’s the affordable housing, right?

Atticus (09:09)
Exactly. Well, it’s not just the affordability component in terms of like what your rent is on a monthly basis that can you actually afford it or qualify. But there are also some barriers to entry where left to their own devices, landlords have shot themselves in the foot in terms of just being able to fill those units. And what I mean by that is they put up these barriers to entry that they think will mitigate risk. So for instance, an upfront deposit is probably the most common one.

or a three to one income to rent ratio under the semblance that like by some miracle, 30 % of your income is actually what everybody spends or should spend or should be capped at spending on their housing, regardless of what they’re spending on transportation. like Dallas is a great example. Like if you’re commuting two hours, well, guess what? You can pay a lot less in rent than you could if you were 10 minutes from your job. And

none of the existing models really consider

those types of questions. And so what we do is get rid of all of those assumptions. And we just started testing and we saw that, look, you don’t need an upfront deposit to get the effective collections rate that we have 97.5%. You can include utilities in every rent payment. You can include furniture. And more recently, because as you mentioned, those multifamily complexes have just gotten more more desperate, we’ve actually seen a lot of them coming to us.

to say, can you help us fill these units? And the answer is unequivocally yes. I was on a call yesterday ⁓ with our chief growth officer who we had an apartment complex here in Atlanta come to us with one bedroom units. And we said, look, if you’re gonna list them, you have to include the utilities and they have to be furnished. But they were struggling with occupancy enough where they said, fine, like we’ll do it. That unit filled in three days.

Dylan Silver (11:11)
Really? Wow.

Atticus (11:40)
And you can imagine they’re adding more. So again, like that vacancy loss is massive, which is why you see so many traditional rental operators providing these huge concessions. Sometimes one, two, even three months of rent. And sometimes they’re even adding like a $500 gift card on top of that.

Dylan Silver (11:56)
Yeah.

was just gonna save that. Outside of Austin, I’ve seen several months of rent plus a Visa, Amazon gift card, right? And it’s like, well, this is completely contradictory to what most people are thinking and preparing for potentially when they’re moving into an apartment and they’re thinking they’re gonna have to do first, last, security fee, binder fee, right? And here you are getting money to move into a place and they still can’t fill the units. And what’s interesting too is I think they may be saying, we’re at,

90 % occupancy, but how much of that is people that are paying and how much of that are units that are like, you know what I mean? Like what’s their real vacancy? Yeah.

Atticus (12:35)
Yeah. Yeah. Yeah. What’s, what’s, what’s the revenue? Well,

well, well, and the other crazy part is they’ll offer that like three months rent plus the, the $500 gift card, uh, which is, which is wild in the first place that that even happens. But I’ve heard a couple of instances where it like that has actually been the offer, but, so they’ll make that massive offer, but then they’ll say, Oh, well, you need to come up with your deposit to move in.

and you can’t have any prior evictions and you have to have a 680 credit score and you still have all these barriers to entry that keep people from ever getting to that offer. And for us, it’s been really pretty simple that like, look, I have this super controversial idea that people want to be housed and… ⁓

Dylan Silver (13:13)
Yeah, we are.

Atticus (13:29)
It shouldn’t be controversial, but it seems like it is based on these practices. And if you just make it really, really easy for people to pay for their housing, then all of these barriers to entry don’t really matter as much. And so like we do weekly all-inclusive payments on every unit on the platform or even even customized per payday. So if you get paid every second Tuesday, you can set your billing date every second Tuesday. But like the traditional operating model for most of these

these housing operators just doesn’t consider any of those things.

Dylan Silver (14:04)
Now, I had mentioned to you in the green room that I first heard of pad splits several years ago when I heard a gentleman who was buying ⁓ properties near airports, putting them as pad splits for, you know, pilots and personnel who were transitory. And I thought, what a great idea, because, you know, it’s really hitting all needs, right? So those people are going to need housing. They might not want to stay in like a full home, right? They might not want to stay

in a hotel, they’re there for several days, they might want to have their own spot. That’s this. And then also from the investor standpoint, he was talking about, yeah, I’m going to do a lot more of these because the returns are so phenomenal. Are you seeing more people now hearing about pad split and then also maybe even pivoting away from a single family model into a pad split or at least diversifying into these types of offers?

Atticus (14:58)
Definitely, definitely seeing that.

mean, historically, we’ve always seen people shifting from a long-term rental model because your net operating income increase is typically around 2X. And it’s just, it’s too much of an income increase to ignore for most of those folks. What we’ve seen over last two, two and a half years is people shifting from an Airbnb or short-term rental model, which has been much more surprising to us. But because of just the workload that’s required,

required and you always need to keep that five star rating otherwise you’re not going to get any bookings. And it’s just it’s a lot of work and people who thought they were getting passive income turns out you’re just getting a second or third job. so they’ve turned to pad split. And in some cases, like we’re not talking about comparing like a beachfront property to a beachfront property because like pads was never going to outperform a short term rental in that case.

But if you’re just like a standard house in town or close to an airport or close to a medical center or other job center, then it can absolutely be significantly better, both on returns and certainly on the workload. What we focus on though, or what I would encourage hosts to focus on, and you mentioned the pilots. Well, and this kind of gets back to that apartment question of like who they’re targeting. Well, if everybody decided, I’m going to create houses for pilots. Well.

Sure, it’s a great model, but there aren’t that many people. Or even if you take it up to ⁓ flight attendants. Okay, well, there are more flight attendants than there are pilots, but there’s still a really limited number of flight attendants in the US. Well, for us, think of every TSA agent, every person on that tarmac, every single person that works in retail or concessions in that airport. And now all of sudden, your population of prospective applicants and renters is massive.

And that’s why we really focus on this kind of workforce frontline worker segment is because it’s an enormous pool ⁓ of potential customers and like they have a desperate need for better housing choices.

Dylan Silver (17:43)
Yeah.

Now, the workforce housing segment, you mentioned this earlier, it’s absolutely needed. People need affordable housing, but then they’re still having in many cases to jump through hurdles. They’re needing a guarantor, they’re needing someone to sign with them, they’re needing to put up money even if they’re getting money in return. And so as much as people are saying, yeah, we’re providing affordable housing, there’s still so many barriers to entry that I think there’s…

inevitably still and going to continue to be this massive, massive shortage of affordable housing, even as we’re seeing there being other forms of housing being built. It feels like everywhere there’s a new subdivision being built in Texas, a new multi, I’m a Texas realtor, and multifamily housing being put up. And so, you know, how short are we? I mean, I know it’s probably a difficult question to say, but how many more,

affordable housing units do we need throughout the country? It feels like we’re hundreds and hundreds, not millions of units short.

Atticus (18:43)
Yeah.

Well, it’s a great question, but I’m not sure it’s necessarily the right question. It’s one that a lot of folks focus on. And depending on the think tank or the resource that you look at, that shortage is anywhere between, call it a million and a half to seven and a half million units. Okay, well, that’s a massive range and they’re measuring different things. The way that I prefer to think about it is, well, one, let’s assume that we have a shortage. How…

how cost effectively can you build a new unit, assuming that you have to build? How cost effectively can you build a unit and what does that cost? And then to underwrite that unit in order to cashflow that unit, what does it cost to cashflow? What’s the income that’s required? And I think in your best case scenario right now, even a market rent one bedroom unit, you’re talking about easily $200,000 plus to build and…

I mean, whether you’re taking like the best 3D printed technology available and you automate everything, you’re still comfortably in that 200,000 plus range. Well, guess what? Like one third of the entire rental population in the United States are a one or two person household that total earn less than $35,000 a year. And they rent, right? So if they earn less than $35,000 a year, that means the max that they’re going to

qualify for under traditional underwriting is going to be $873. Well, $873 max rent does not work for a unit that’s over $200,000. It just doesn’t work. And so the way that I prefer to look at the same problem is to say, look, my goal is to create viable housing opportunities for those people that are one third of the entire rental population.

Dylan Silver (20:20)
Yeah.

Atticus (20:32)
The way to do that is to look at all of the empty bedrooms in the US.

if you look at just the empty bedrooms that are unused, that are not used for home offices, like the room that I’m in right now, ⁓ or ⁓ storage, well, there are 32 million empty, unused available bedrooms that sit every single night. So regardless of whether your estimate of the shortage is one and a half million to seven million,

By far, the most effective thing you can do is fill the empty bedrooms. And then if you look at the other spaces that could be converted to bedrooms, like formal dining rooms are a good example. ⁓ No landlord that I’m aware of has ever made money off their formal dining room.

But the difference between that formal dining room and a bedroom, architecturally speaking, is just furniture. Like you put a door on it in most cases and voila, it’s the same size, it has the same amenities.

You just change the furniture and lo and behold you have an extra bedroom that you just created for what? $2,000 maybe 2500 bucks, which is way cheaper than building that new unit and you’ve done it in a day versus Whatever the timeline you want to pick for for new construction and lo and behold if you did that Then you’d find that Looking at just the total housing square footage in the US you can create 7 million units

with less than 1 % of the existing housing stock in the United States. And to me, like that’s a pretty easy math equation and why it’s so much, it’s worth so much more focus on solving that problem and thinking about the efficiency rather than how do we, how do we build more units quickly when like, look, it’s not a question of space. We have enough space right now to address that, the needs of that one third of the rental populace.

Dylan Silver (22:02)
Wow.

Atticus (22:27)
⁓ Because like if you build it you’re still never gonna get to a rent that’s cheap enough to make it work for them

Dylan Silver (22:33)
Yeah.

Yeah. And, know, I’m thinking of all of the markets right now where, and I think a lot of our listeners can relate to this, people grew up in this town and then kind of the urban sprawl of the city bleeds into their town. Now they’re priced out of that town, having to go elsewhere when, you know, people may be sitting on huge equity, not sure what to do with, you know, their property. And in many cases, especially with an aging population, I think folks are

you know, sometimes at a loss for what to do. And I think that as crazy as this seems, coming from the background that I came from, that’s where you start to see distress happen in these properties where, you know, someone is inheriting a property or it’s just becoming a burden for people. And if you could turn that into a cash flowing asset, and at the same time, you’re doing a ton of good, that really is the win win there, you know, and I’m thinking I could talk about this forever. I’m thinking of

the market I grew up in in northern New Jersey where the average home prices, you know, upwards of $900,000. And you know, who is now going to be qualifying for those homes? Who’s going to be living in those homes? I think markets like that would be ideal for this type of opportunity.

Atticus (23:43)
Yeah, well,

I mean, it works for home buyers as well. And we have a number of examples of folks who, younger people who have felt locked out of the housing market, but have said, wait a second, if I rent the additional rooms in this home that I want to buy to live in, I can cover my mortgage and actually earn a profit and effectively live for free.

So we’re going to see that more and more. We’ve already seen it a fair amount. We have a number of really interesting case studies outlining that exact strategy. And I mean, if I were starting over, that’s absolutely what I would do.

Dylan Silver (24:22)
We are coming up on time here at Atticus. Any new projects, anything new with pad split and also too, what’s the best way for folks to learn more.

Atticus (24:31)
Yeah, so for folks who are interested to learn more, you can follow me on LinkedIn. But if you’re interested in hosting, just go to padsplit.com/hosts. ⁓ If you’re interested in running, just go to padsplit.com. And there are lots and lots of available options that you can find. In terms of what’s next for us, I mean, it’s really just growth and expansion. We’re adding between three and 600 units every week at this stage on the platform, which is pretty exciting.

and just trying to create more opportunities. I I love what I do. I love hearing the personal stories of people who literally say that this has saved their life ⁓ or just changed their life for the better. And it’s so powerful that we love the hosts who say they come for the income and we say they stay for the impact. But yet to be able to change somebody’s life.

Dylan Silver (25:22)
Yeah.

Atticus (25:26)
⁓ while actually increasing your revenue is a pretty special thing. And I just really feel privileged to be a part of it. Anybody can reach out to me at any time to learn more.