Tax-Efficient Exit Strategy for Landlords: Transforming Portfolios Into Passive Income Streams With Ari Rubin

In this episode of The Same Day Podcast, Mat Zalk sits down with Ari Rubin, Founder and CEO of Flock Homes, to discuss innovative strategies for landlords looking to exit the rental market while minimizing taxes. They explore how landlords can leverage portfolio diversification for stability, the unique benefits of the 721 exchange, and why scaling through fund management offers financial advantages that individual owners often miss. Ari also shares insights into the long-term wealth potential of this strategy.

Tax-Efficient Exit Strategy for Landlords: Transforming Portfolios Into Passive Income Streams

Ari Rubin is the Founder and CEO of Flock Homes, a company dedicated to creating retirement solutions for landlords through a single-family rental fund utilizing the 721 exchange. Under Ari’s leadership, Flock Homes has raised over $30 million in venture capital from prominent firms like Andreessen Horowitz and currently owns 750 homes nationwide, including expansion into Tulsa. Ari’s diverse background includes serving in the Israeli Special Forces and a successful career as a hedge fund manager at Ibex Investors, managing over $150 million in assets.

 Here’s a glimpse of what you’ll learn:

• [07:22] Ari Rubin‘s journey from finance to real estate and the inspiration behind Flock Homes
• [13:59] How the 721 exchange offers tax benefits and flexibility over the traditional 1031 exchange
• [23:24] What happens when landlords move properties into Flock’s portfolio?
• [32:50] Leveraging bulk purchasing and strong vendor partnerships to lower costs for property maintenance
• [39:33] The impact of property management versus asset management on returns
• [45:50] How and when landlords receive quarterly cash flow distributions
• [48:42] Options for landlords to cash out and redeem shares when needed
• [49:22] Key considerations for property updates before transferring assets to Flock
• [51:18] How Flock’s scalable model supports long-term, passive income for landlords

In this episode…

For landlords ready to step back from hands-on management, finding a seamless, tax-efficient exit strategy is essential. The traditional options of selling or managing rentals can be time-consuming and costly, especially when facing significant tax burdens. Is there a better way to turn a real estate portfolio into passive income?

According to Ari Rubin, a real estate investment expert, there is indeed a more strategic path. He highlights a powerful yet lesser-known tax tool — the 721 exchange — which allows landlords to transfer their properties into a diversified rental fund, bypassing immediate tax liabilities while securing passive income. This approach offers investors continuous capital appreciation and cash flow without the headaches of day-to-day property management. Ari explains that the value of such a model lies in its ability to maximize wealth preservation for landlords nearing retirement or those who simply want a more streamlined way to manage their assets.

Resources mentioned in this episode:

• Mat Zalk on LinkedIn
• Yonatan Schmidt on LinkedIn
• Walter Bowser on LinkedIn
• Keyrenter Property Management
• Keyrenter Property Management in Tulsa | Oklahoma City | Arkansas
• Keyrenter Property Management email address: [email protected]
• Ari Rubin on LinkedIn
• Flock Homes: Website | Email

Special Mentions

• Hugo Weinberger on LinkedIn
• Situs Group
• Andreessen Horowitz
• Ibex Investors
• Progress Residential
• KPMG

Related Episodes

• “Scaling a Business: The Power of Networking” with Brandon Neth on The Same Day Podcast
• “How To Compete in the Banking Industry: Relationship-Based and Customer-Centric Service” with Jared Goldfarb on The Same Day Podcast
• “From Sale to Closing: Fine-Tuning the Home-Building Process” with Noah Bleicher on The Same Day Podcast

Quotable Moments

• “The best thing we have is just clean democratic processes, and it’s just kind of fun.”
• “I come in like, like thunder or like, like a tornado with gusts.”
• “There are 17 million Americans who own rentals, and at some point, every single one of them is going to want an exit.”
• “Our goal is not to buy low and sell high. It takes a while for people to get used to this in real estate.”
• “I have a very strong sense of duty, and I like managing people’s savings, but I wanted to create more value by solving a problem.”

Action Steps

1. Understand the 721 exchange: It allows for tax deferral while diversifying investments, which could be a major opportunity for landlords looking to exit the rental market without incurring significant tax burdens.
2. Evaluate your property portfolio: This step is effective because it helps identify properties that are ripe for investment or those that could benefit from strategic upgrades to enhance valuation before a potential sale or exchange.
3. Leverage scale for cost efficiency: Consider how pooling resources or joining larger investment funds can reduce costs through bulk purchasing and better vendor terms.
4. Explore passive investment opportunities: For landlords who are looking to step back from active management, researching passive investment funds like Flock Homes could be beneficial. These funds offer a solution to reduce the hands-on burden of property management while still preserving cash flow and upside potential.
5. Develop a long-term real estate strategy: This ensures that you are not only managing your current portfolio strategically but also planning for future transitions, such as passing on assets to heirs with minimized tax implications.

Sponsor for this episode…

Keyrenter Property Management:

This episode is brought to you by Keyrenter Property Management.

Keyrenter Property Management is a full-service property management company that helps clients buy, renovate, and operate real estate assets.

The team helps clients build wealth while taking the headache out of property management.

That’s why, no matter what rental you have — single-family homes, condos, townhomes, or apartments — they can give you the management solutions you need.

To learn more about their services, go to https://keyrenterpmc.com/ or send them an email at [email protected].

Episode Transcript

Intro 00:04

Welcome to The Same Day Podcast, where we discuss driving incremental business growth and other topics related to real estate, property management and entrepreneurship. Now to the show at hand.

Mat Zalk 00:20

Mat Zalk here. I’m the host of The Same Day Podcast, where I connect with top business experts and real estate leaders. Past guests on our show include Brandon Neth, who’s a local Tulsa real estate investor and a self managing landlord. Jared Goldfarb, who’s the Vice President at BancFirst, and Noah Bleicher, director of operations at Capital Homes. This episode is brought to you by Keyrenter Property Management At Keyrenter Property Management, we are a full service property management company helping you buy, renovate and operate real estate assets. We help our clients build wealth while taking the headache out of property management. Listen, Ari, you know better than almost any of our guests how hard it is to line up contractors to get make readies done in a reasonable amount of time after a tenant leaves a property? Contractors are busy. The work seems to drag on forever, and all of that leads to lost rental income. At Keyrenter, however, we line up our dedicated vendors so that turns can happen super quickly and we get more money back into the pockets of our owners, our investors. And that is why, no matter what rental you have a single family home, a condo, townhome, home, apartment. We have the management solutions that you need. Go to keyrenterpmc.com or info at keyrenterpmc.com. If you want to email us before introducing today’s guest, I want to give a huge shout out to Hugo Weinberger, who introduced us to Ari. Hugo has been has not been on the podcast, but he should. I need to get him on his business site. His group has been syndicating Value Add Apartment complex deals in Denver for more than a decade, and in addition to that, they do land deals in Colorado, development deals and a bunch of other fun stuff. And I am a limited partner in LP and I don’t know, six or 7 or 8 of Hugo’s deals at Situs Group. Very exciting stuff. And he’s had a bunch of really good exits that I’ve been proud to be a part of. On to our guest for today. Ari Rubin is the Founder and CEO of Flock Homes. Flock is building the retirement solution for landlords, a single family rental fund that uses the 721 exchange to help landlords seamlessly exit, defer taxes and preserve upside and cash flow. Flock has raised over $30 million in venture capital from leading firms such as Andreessen Horowitz, and they currently own 700 homes around the country. And they’re expanding into Tulsa, which we’re excited to talk about today. Before Flock, though, Ari was a portfolio manager at Ibex Investors in Denver, where he led a Volatile Volatility derivatives fund from inception to over 150 million in assets under management, while generating over 50% annualized returns. Ari served in the Israeli Special forces, graduated with an A.B. from Harvard College, and is on an extended leave of absence, with quotes from Stanford’s Graduate School of Business. Find out more about the great work that Ari is doing at Flock Homes by visiting the website flockhomes.com. Ari, Rubin, welcome to the show. We’re so happy to have you on.

Ari Rubin 03:36

There we go. I’m psyched to be here, Mat.

Mat Zalk 03:38

It’s election day in America.

Ari Rubin 03:40

I know, and we’re wasting it. We’re wasting our time with each other, I love it.

Mat Zalk 03:44

Well, I voted there’s limited. There’s limited benefit to watching the news cycle. That just tells us. I don’t know what it tells us. Between 7 a.m. and 7 p.m. You can’t do much until they start counting elections.

Ari Rubin 03:55

How are how are the polling places? Was there heavy security? Was was it a running efficiently or was it. Do you have any.

Mat Zalk 04:01

It was pretty good. I went at 7 a.m.. I got there at 6:57 a.m.. Polls opened and I waited 45 minutes from the time I got there. At 6:50, I was out by, I guess 7:30, about so 40 minutes. It was pretty good. There was some confusion. People were standing. They didn’t know whether they were actually putting their filled ballots into the machine, or whether they were waiting for a booth to go find some privacy and actually fill out their ballots. But oh no, it was that was that was promptly corrected. I’d say it was pretty good.

Ari Rubin 04:33

That’s what scares me. It’s the like people like like, you know, I just want this thing to be over and clean and just, like, just, just let’s transition. You know, we’ve been everyone’s been like, just make it orderly. It’s the only thing we have. I mean, we have a lot of great things in this country, but one of the best things we have is just clean democratic processes. And it’s just kind of fun.

Mat Zalk 04:51

So yeah, this was I think this was this was user error. Oh, this was user error, which you could argue that there should not be any room for user error in a system that’s perfect. But this was this was relatively modest. It was like, hey guys, we’re in the wrong line. Are you guys waiting for that? For that privacy booth over there? Are you waiting to put your ballot in to the machine? And the machine was locked. It was good. It was mechanical. It was, it was. It was a computer reading the ballots. I felt good about that. Everything looked locked. It was good. It was good. All right. What’s going on? How are you doing? What’s happening?

Ari Rubin 05:25

I’m doing great. I really enjoyed my visit to Tulsa last week. Great. We are busy. I’m psyched to chat more about the world and our business and your business. It’s always very busy for us around year end. So I have been just around the country. Yeah.

Mat Zalk 05:40

So let’s just let’s just talk full transparency. You were here last week. The weather was beautiful and then you left and it started raining and tornadoing. So we’ve been cold and rainy for the last couple of days. I’m not saying you caused that. I’m just. I’m just stating the facts I came in.

Ari Rubin 05:56

They say I come in like a like. I don’t know if this is an appropriate joke for Oklahoma, but I come in like, like thunder or like, like a tornado with gusts.

Mat Zalk 06:04

And you left and it just started. It just kept spinning from there. How are the houses?

Ari Rubin 06:09

Is everything okay or are you guys.

Mat Zalk 06:10

Everything’s mostly. Most things are good. We have some limbs down and some. A lot of just leaf debris everywhere. And some. Some, like, lines at a house that I own. For example, a line. A tree came down a limb, came down, knocked the electrical off the house. So I’ve got to spend like, I don’t know, 2500 dollars at re-attaching it with an electrician before PSA will come out and actually, you know, rehook up power. I think that happened yesterday. Actually. I can’t imagine without power for a very long. So we proved it yesterday. I’m sure it happened yesterday. I proved it maybe two Monday and it should have happened Monday or yesterday. So anyways, mostly. Mostly good. Haven’t had too, too much crazy stuff. I want to ask you. You came in with a suitcase. You came in like, I don’t know, Friday. You or whatever. You came in with a suitcase. You left the same day. So I imagine you’re busy. Which is why I want to. I want to get to the meat of this. Let’s talk. You and I had a fascinating conversation about your volatility trading the VIX, and a bunch of other crazy stuff. How did you go from a world of high finance to the world of single family real estate.

Ari Rubin 07:22

Yeah the nitty gritty. The bottom feeders as I like to call it.

Mat Zalk 07:25

I didn’t want to go slumlord because that’s not what we are. We try to take good care of our assets, and I think Flock is the same way. But then that into that hands on, you know, if times get tough, you might go swing a hammer yourself type of type of world. You formally clicked a bunch of buttons on a keyboard and it executed, you know, potentially hundreds of millions of dollars of capital flowing around the world. And now you’re you’re now you’re like, you know, draining hot water tanks.

Ari Rubin 07:48

Yeah. Yeah. I used to I mean, I literally we moved the S&P 500 from my small little rinky dinky office in Denver. And now we’re dealing with, you know, I’m I’m looking at expense reports and work orders from, you know, like an HVAC system and a roof and, like, you know, the nitty gritty world. Maybe if it’s helpful, I’ll give a little bit of a background on on sort of myself and the business is that.

Mat Zalk 08:15

Yeah. Just go for it.

Ari Rubin 08:16

Cool. And Mat, tell me, is most of your listening audience, most of the guys out there I can’t I can’t ask, are they mostly in the Tulsa area or. I know you guys are. I think they’re.

Mat Zalk 08:25

Every I think they’re everywhere. We get feedback from people that are all over. The majority of them would be interested at some level in some of our markets. So Saint Louis, Tulsa, Oklahoma City, Wichita, Northwest Arkansas, they’re they’re in the Midwest, or they’re interested in investing in the mid central Mid-central States. Yeah.

Ari Rubin 08:46

Cool. All right, so for everybody out there. First of all, thanks for having me on. And your listening. Keep listening to Mat. He’s a great guy. He’s. There’s a reason I’m on this podcast with him that we’re doing some business together, because I have a lot of respect for him and his whole team and operation. So it’s great to be here. I’ll give a little bit of background on myself and the business that I started about four years ago. I grew up in Chicago. My folks are in rental property there. After college, I have dual citizenship in Israel, and so I served in the Israeli military for a couple of years. And I did that I didn’t have to do. It was mandatory, as you know, Mat, there’s mandatory military service there. Had wanted to do it. Had a fantastic experience. Learned a lot. Served in like a special forces unit there. And then I came back and started my career working at a hedge fund based in Denver. And the fund that I was, it was a small firm as far as hedge funds go. We had about 300 million under management when I started, which again is small for hedge funds. And I sort of serendipitously fell into this role. They were launching a new strategy, a highly levered volatility derivatives fund, which I can nerd out more into later if you’d like. And I sort of serendipitously fell into this role of running the strategy. And the firm had done well, and we had managed successfully on behalf of a lot of our clients. And so we were able to sort of quickly scale this fund up. And the fund I was running did very well. I was we were putting up a for fees like 80% a year returns, which if you know anything about investing, there should be a little red flag going off somewhere like that’s like a little too good. And I’m the first one to admit, like, there was a lot of luck involved. There was some skill involved that I made. I had my, you know, ten minutes of fame on the front page of Bloomberg for a story that they got wrong. My mom liked it, but, you know, she could tell her friends, but they got the headline wrong. And but that was skill. We did have some skill involved with it, but the reality was the vast majority of the investing I was, we were extremely levered in a very, very concentrated trade and I took away from this experience. I love investment management. I like the feeling and I like what people are entrusting me with when I’m managing their money, when I’m managing their savings and I’m good at it. Like, I have a very strong sense of duty and I like this. But rather than just going around telling people we’re smarter than everybody else, invest with us, right? I wanted to create more value by solving a problem for folks. And so I stumbled on this space. It’s not really stumbling on my my, my parents own rentals and all their friends own rentals. And basically this business I started, Flock Homes. The thesis behind this business is there are 17 million Americans who own rentals. Wow. Who own investment properties. And at some point, every single one of them is going to want an exit, and they’re going to get to the point where they’re like, I don’t want to be a landlord anymore. Yeah. And you guys are a fantastic manager. We’re going to be working with you guys. But like at a certain, a property manager does not solve the problem of a three month vacancy. A property manager does not come out of pockets to to pay for a roof replacement, to really be hands on. That’s what owners do. That’s what ownership is about. And so the idea behind Flock was to create an investing a fund, a vehicle, but not only to give people better returns and say, hey, invest with me. It was to solve this problem. And the problem that we’re solving for folks is I don’t want to be a landlord anymore. I don’t want to deal with my tenants. I don’t want to deal with CapEx. I don’t want to deal with my property manager, but I don’t want to sell because, as you know, I hopefully you haven’t done this too many times. But as you know, when you sell, you trigger taxes unless you do a 1031 exchange, which we can talk more about. And when you sell, you typically to get the best pricing. You got to fix up the house and you got to kick out the tenants. And that’s not nice. And maybe you got to pay a realtor if you’re not a realtor, and so on and so forth. And so I came up with this idea of starting block homes to build the retirement solution for landlords, to help the millions of Americans who have built substantial equity in their illiquid real estate holdings to give them the most cost efficient, seamless exit strategy. Yep. And, you know, I’ll talk more about how the product works. But in short, you know, fast forward to today. We have a portfolio of coming on 750 homes around the country. My team owns and operates them. We do everything and you just go from you defer taxes. You now have passive cash flow, passive appreciation, get all the benefits of owning without any of the burden. So that’s kind of the idea behind this. I wanted to solve a problem. I wanted to, for lack of a better term, take this to democratize access to this really powerful wealth preservation tool called the 721 exchange.

Mat Zalk 13:44

So when somebody sells their portfolio, his or her portfolio into Flock, they get in exchange stock certificates or is it an LLC? And they’re now on the cap table. I mean, they’re now a limited partner. How does it actually work?

Ari Rubin 13:59

Yeah. Great question. So taking a step back before I go into how Flock, I think it might be helpful if I just explain. 721 exchange and even just quickly I mean, you want to take a stab at doing 1031 exchange and I can go into. 721 yeah.

Mat Zalk 14:12

Well, 1031 exchange, in essence, is a deferral of your capital gains that you would pay taxes on. So you would take an asset. You have the gains you have. You subtract out the any any payment that you made originally. So if you had a down payment that’s considered the principal on the, on the on the asset, if you had principal pay down that’s considered, you know, the basis in your asset, and any gain above that is, is capital gains. If you don’t want to pay the current capital gains rate, you defer those taxes by exchanging into a like kind property. And you can actually just continue to roll those exchanges on. And when you die, theoretically, if those assets are in a trust and you can go back to conversation with Megan whip or anybody else, any other trust attorney about that, you’d theoretically the heirs, the inheritors of that property or the trust inherits it has a step up basis and they no longer have any tax liability on those assets. Is that right?

Ari Rubin 15:06

Exactly. That’s exactly correct. The 1031 exchange has been around for a long time. It’s effectively not a lot of people know now. It’s effectively a real estate loophole. It used to apply to arts and also airplanes. You could do it. You could sell an airplane. And then 1031 into another one. You could do it with artwork as well, a couple other things. Now it’s just real estate. And it’s one of the reasons, you know, real estate is so great to own because it’s so tax efficient. And, you know, if the country is doing well, which I believe in this country, I know you do too. Like real estate will go up in value. It’s super. But but when you sell it, it’s super punitive because you pay not only cap gains, you also pay depreciation recapture. So as you just explained that’s why people do 1031 exchange. So 1031 exchange is great.

Mat Zalk 15:50

So so technically on a 1031 you take the depreciated basis. That’s what you carry forward. So you have to pay capital gains on what you have essentially not already, on what you have already depreciated. You recapture it and then you have a gain.

Ari Rubin 16:04

If you do a 1031 and you do it correctly, you shouldn’t trigger any taxes. You got to do it correctly. And the thing about it is, you got 45 days for this and 180 days for this. But yeah, but you could do it without triggering any taxes. And you, you, you, you carry over your basis from your individual property.

Mat Zalk 16:20

Right. So if I had a property that I bought for 100,000 and I’m selling for 200,000 and my depreciated basis is now down to zero because I’ve owned it either for 27.5 years or I accelerated the depreciation. My new basis, I would have to recapture part of that basis or all that basis in the new asset or. No, I mean, now my basis, how does it affect the basis of my new of my new asset? I now buy an asset for 300,000. What is the basis of that?

Ari Rubin 16:42

You stay at your own basis like you keep your own basis where it gets a little bit nuanced in 1031 is you got to make sure you match your debt exposure. Yeah, right. But for all intents and purposes, let’s say you have no debt. You just own a property outright. You’ve depreciated to zero. And you know, so now your basis is zero and the property is worth 200 K. When you buy that 200k property, you’re at zero basis now. So you don’t get you don’t trigger. The nice thing is when you do the 1031 you don’t trigger depreciation recapture. You’re assuming you do it right. You don’t trigger the depreciation recapture. You don’t trigger the cap gains, but you’re just kicking the can down the road until eventually, of course, as you talked about a very common, you know, exit is you know what ultimately you know the ground. Right. You and 30, 50, 80 whatever years and you pass on to your heirs who get the step up but the way. 1031 yeah. The way. 1031 should work is you just you’re deferring that tax liability of both depreciation recapture and cap gains.

Mat Zalk 17:39

And now you have a new asset that you depreciate that’s much more expensive theoretically.

Ari Rubin 17:43

Well depending on what you have you may not have any depreciation left. Or you may have depreciation that you can now do. But this is so the. 1031 are very common. So look if you’re you know for the folks out there who are listening and they’re still growing their portfolios or they’re still active managers. 1031 can be a really effective way to strategically reallocate, right, to roll into a bunch from single families into a multifamily building to roll from one asset class into a higher yielding, depending on what your goals are, right? 1031 is a very effective way, but they’re complicated. And again, you got to do you got to identify. Then you got to use a qualified intermediary. If you have debt, there’s a whole nother layer of sort of complexities there. So it’s good because it sort of lets you defer taxes and be more strategic. But it’s bad because if you’re trying to get out of the landlord game, if you’re trying to passively retire, that’s not how you do it, right? Right. And so what we’re using is what is kind of like a secret weapon that most individuals have never heard of, because it was never really available to individual mom and pop landlords. We’re using something called a 721 exchange, and it’s not a real estate loophole. It actually applies to equities to private stock. One of the one of the first. What’s the uses of the 721 exchange was Phil Knight and Nike. Wow. He was the founder of Nike. He had a bunch of concentrated stock position in Nike. He didn’t want to sell it and trigger the taxes, but he wanted to diversify. And so some wealth advisors built him a large partnership, a fund whereby he exchanged his Nike stock in there and he received back diversified ownership. I’ve heard this story from a number of Stanford professors, where I went to business school for a short time, that that Phil Knight was one of the first use cases of this. So it’s a very common wealth building tool. And also in real estate, if you own a $100 million hotel or a large multifamily building away, a lot of these rights in the 1980s really were built, were through these 721 exchanges going to these individual operators who had low tax basis and allowing them to roll in. So just in really plain English, just to sort of round out the numbers here and explanation of how it works. Let’s say Mat has a $200,000 single family rental that he bought 30 years ago in Tulsa, and he’s depreciated to zero. He’s got no debt. He’s got zero basis on it. Right. The way it works is Mat would exchange his $200,000 property and get back shares in our partnership, in our fund that we created. It’s not today, it’s not public. It’s not like a publicly traded real estate investment trust. One day, perhaps we take it that direction. It’s just a very, very simple partnership that owns 700 homes around the country and growing. And you’re now going to own your pro, you’re going to own your share in that partnership. So instead of you have nothing to do with that asset anymore, you’re from you don’t own it. You’re not liable for it. You don’t have to manage it. Your returns are now driven by all the homes in our portfolio which we own and operate. So I can tell you more, but but that’s effectively how the 721 exchange works. Whether it’s for a self-storage facility that you own and you’re doing it with a publicly traded REIT, or you’re doing it with Flock Homes with your single family rental home.

Mat Zalk 21:13

Does the transaction have to go through a qualified intermediary?

Ari Rubin 21:17

Great question. It does not. And the way we transact, and this is one of the beauties of why people like working with Flock. 1031 is a really complicated and you got to match the debt exposure and you could accidentally trigger you got to find another asset. We can go more into this. You got to go through a qualified intermediary. They charge for it, right? The way folks work with Flock, I can tell you about how we priced the homes, how we operate. We’ll come back there later. But the short, the way a transaction works is you’re literally selling us property. You’re selling us that $200,000 house with a title company. Everything. A normal settlement, instead of receiving cash, which you might be like, cash is king. Cash is great. Sometimes it is. Cash also comes with a massive tax bill at the end of the year. Sure. And if you don’t want that, right. So then it’s not good. You may think you want it until April next year or October next year. And you’re like, oh man, I don’t think I wanted the cash. And so the way it works with us is just we work with the, you know, we work with First American and a couple other very large title companies, and it’s a regular transaction. We can close in as short as 15 days. And on the settlement statement, it says rather than taking cash, you’re receiving shares in our fund and then you get access to our portal. You see all the other homes, right? You see your account value. We have a third party, what’s called fund administrator. It’s very like by the book in that regards. But again, rather than receiving cash, you can receive a little. Some people take a little bit of cash. You got to pay taxes on that of course. But yeah, for most folks they just do this in kind exchange. No qualified intermediary, no multiple steps, just super clean. You don’t have to kick out the tenants. You don’t have to fix up the house. We just price at fair market value and it’s super easy.

Mat Zalk 22:57

And so the settlement statement looks like any other settlement statement they would get. It would just be credit. The credit to the seller would be a share exchange rather than cash.

Ari Rubin 23:06

Exactly, exactly.

Mat Zalk 23:07

Got it. So tell me, what would a for any owner that wanted to pursue selling their homes to Flock, what would a transaction look like from start to finish? Yeah. They get in touch with you or your team and say, I’ve got a portfolio of ten houses. It’s worth $2 million.

Ari Rubin 23:24

Yeah. So I’ll take one step back. So just quickly, like, who are the types of people we work with? If you started buying rentals two years ago and you’re like 80% loan to value and you’re actively growing your portfolio, we’re probably not the best fit for you. And I’d say keep doing it. Cause in 30 years, you know, if you like, love calling Mat and Yoni and being like, yeah, you know, don’t do these turns, do all this stuff. And by the way, your site to put in the CapEx dollars and do this all on your own and you can generate your own alpha also not for you if you if you like, you know, sticks and bricks and you like dirt block is not for you. What Flock is for? We find our best with sort of two types of clientele. The one clientele is just like I own a bunch of. I’m just. I’m done with this thing. I got a portfolio and and maybe, by the way, I got 50 homes. We work. A lot of guys and gals like this. They’ve got 50, and they’re like, I want to start with ten and check it out. Yeah, but they’re like, I’ve got my time is better spent growing my self storage business or spending time with my kids, or spending time with my grandkids, whatever, that sort of personal or professional endeavor. I don’t want to be a full time landlord anymore, but I don’t want to sell and trigger the huge tax hit. So again, just it’s that sort of clientele. We also have a lot of younger folks too, and they’re like, I’m not institutional, like to be a good partner. The key renter team I got to like put in the dollars and I don’t want to I don’t want to think about the $10,000 of CapEx and value add I got to do. I just want to go fully passive. So those are the types of folks we work with. So how’s it work? We’re not a house flipper. Our goal is not to buy low and sell high. It takes a while for people to get used to this in real estate. Our goal is to price at fair market value. We don’t make money off of. I’ll tell you how our business model, how we make money. We don’t make money by low balling you. So how’s it work? Somebody brings us ten homes in a market that we’re in or a market we’re expanding to. So you bring us ten homes in Tulsa or ten homes in Saint Louis. We submit some information on our website. You can also just send us an email with your property addresses and we take an initial we do an initial underwrite on that portfolio. So our head of investments spent years at Progress Residential. He’s bought 7000 homes in his life. The firm progress is now obviously the largest firm in the country owning single family rentals. We don’t take every home. We’ve got a buy box. Of course, that buy box is single family duplexes, triplexes and fourplexes. Within there there’s a lot more. But but at a high level, that’s kind of like the buy box. So you bring us your property information and we underwrite it. Again, we take a comps based approach. We try to price it at fair market value. And as part of that we assume like, hey, for that $200,000 home, you got 20 K of work that is needed to bring it to a like new C-2 condition. So that’s the initial step and we’ll say, hey, your ten home portfolio is worth 2 million bucks. We then start our due diligence process on your homes, and you start your due diligence process on us. How we operate, how who we are as a team, what other homes we own, right. What kind of cash flow will you be able to take from the fund? What’s your fee structure? What’s the minimum? All the important questions. We’re going to go open book with you. We’ve got a portal where you can see every single home that we own. The price that it’s marked on our books at, how efficiently our managers are doing, managing them. We self-manage and third party. I’ll come back into that later. But like, you see everything about us. You meet our team, you meet me, you know, you get to know us. You do a reference call with other clients, right? You do your again, you’re making a big investment with us. You got to do your due diligence on us. By the way, we’re acquiring your houses. And I got a fiduciary to all of our clients. We got to do diligence to your homes. Right. So at a certain point we say, all right, Mat, we’re ready to move forward with you. With you. You say, hey, I’m ready to move forward also. We then we go to inspection. And when we inspect our goal again, it’s not like we assume on that $2 million portfolio. Let’s say we assume there’s 200 k worth of work to bring it up to our standards once we go inspect. Half the time that it goes up, half the time it goes down. If you kept your houses in really good condition, your value will go up. If you if your houses were in worse condition, you actually have it done in HVAC replacement. Like you said, it’s going to go down and then and you now you have an understanding of how much cash flow you can take quarterly, right. What are sort of return profile. And our goals of the fund are. And then, you know, we both say, hey, we’re ready to move forward. And then we proceed towards closing. So that process typically takes I would say from start to finish usually actually like within 45 days. And a lot of folks say, hey, I’ll call you back next year when you’re bigger. And I say, great, call us back. We’ll be around. Fees will be higher, but that’s how it works. And then a lot of folks say, hey, I’ll start with a couple properties now, and then other folks just say, hey, you know, I’m ready to do the whole thing and focus elsewhere in my life. And so that’s kind of how the process works, typically 45 days from start to finish.

Mat Zalk 28:32

And so they go through the inspections. You give a new number. You agree. Settlement statement looks just the same as we covered. They get shares. They get access to the portal. Yeah. Now see every home they can see the the what a cash on cash return equivalent. Do they see like a checking account experience? What do they actually see?

Ari Rubin 28:56

So you kind of you can think of it. And I could have planned a demo here, but you can get one of these online from our website or set up some time. But basically you log into your portal now and you see your account value. So if you rolled in $2 million in the real estate you see there again, you see all our homes, all our earnings calls, everything, our monthly updates, so on and so forth. But you now see your account just like you would in any investment fund that you have.

Mat Zalk 29:19

Whether I own Vanguard Total Stock Market Index and I own, you know, I own $2 million worth of that and the the portfolio, the ETF is worth 200 billion. So I own a tiny fraction whatever.

Ari Rubin 29:33

Exactly. So same thing with us. You see that sort of you see the account statement. You see how it’s trended over time. Now let’s talk about what drives returns in our fund because it’s pretty simple. It’s just like your own real estate. So if you own a piece of real estate, what drives your returns there? It’s two things. One, what happens to the change in like to the value of the real estate? Did your home go up in value over time or did it go down in value over time? You don’t. You know, when you own real estate on your own, you don’t see that every month, but you could if you wanted to. You could log into Zillow. Like you could create a little Excel sheet. Sure, you could log into Zillow, or you could hire an appraisal and you could say, hey, you know, I bought this thing for 150. Now it’s worth 160. You could track it monthly. So that’s kind of the first thing is just what happens with the real estate values. The second thing of what drives returns in real estate is your net operating income. It’s your rents less your expenses. Right. It’s and it’s the same thing with Flock. So let’s say, Mat, you’ve now got a $2 million account with Flock because you’ve rolled in, you know, your ten properties. And every quarter you’re going to see an updated value based off of, again, those two things. What happened to the portfolio values. So every quarter we revalue the homes in our portfolio. We also do appraisals every quarter for every two years we appraise everything. So the first thing is how did the homes change in value? Again, that’s not like cash in your pot. It’s just like you’re on real estate, right? It’s like if you own real estate for five years and the housing market went up. You’re sitting on more paper gains than you would, you know, if it went down. And same thing with Flock. So your count goes up in value as the real estate market goes up. By the way, if the real estate market goes down our fund, your shares are going to go down in value. Exactly right. And then the second thing that drives it is is cash flow. It’s how much rent did we collect. Less the property taxes, insurance, property management as well as you know, how much CapEx are we doing, not only maintenance but also reserves that we hold back. So all the expenses associated with owning the real estate, again, just like your own individual account, how you own it, real estate on your own. So that’s the two things that are going to determine returns.

Mat Zalk 31:47

So the question I would have is across a portfolio of 750 houses, plus the ten I just added in our scenario, if I were doing this, everything is like derivatives moving. I don’t know how you explain it. Like when you cut a derivative down in calculus, you can do it. Obviously the movement is towards, you know the time equals zero, right? So you can cut a period of a year into 365 days or 720, you know, half days or whatever. If I was doing this on my own, I could theoretically work with a bank every month to say my portfolio of $2 million at 70% loan to value. I’ve got, you know, a million foreign debt, and I’ve got the excess 600,000 in cash that I’ve put in its equity in the House. And as that portfolio goes to 2.2 million, my debt could scale, theoretically saving the 70% loan to value. And the bank’s going to hand me a little bit more cash that I then put in my pocket as a distribution equivalent. Is Flock doing anything like that, where every time it gets re-evaluated? Exactly. My cash distribution exactly like.

Ari Rubin 32:50

And look, we’re very conservative. We run it like 30% loan to value which like or little a little bit less even. And like some of your folks out there will be like, what do you why do you own real estate if you’re not levering it? But like we are in this for capital preservation. This is like folks who come to us, they want to know that we’re going to be around for their kids, and they think it’s 40 years, and I say 60 years because I think people are going to live longer. So we’re in a very low leverage. But yeah, the simple way to think about what we built and you could do it, I mean, a lot of people do do this on their own. Imagine you own an LLC, right. And and in that LLC you have ten houses. And let’s say you have no debt on that. And the value of the portfolio is $2 million. And you worked every month. You worked with an appraiser company, or you worked with Zillow’s estimate or whatever it is. And you, you know, you had a bank account set up and you collected all the rents for those properties into that bank account. And every month you could look at your real estate and be like, oh, look, I’m worth $2 million and $10,000, 2 million, $10,000 at the end of the month, because I got 10,000 in excess profits for the month. Oh, I can go borrow. Oh, and by the way, my real estate just went up in value because a cop sold in the neighborhood. Now I’m like, worth more on paper. Oh, I can go to the bank now and borrow a little bit more. And like with that, I can, like, renovate the houses and drive value by replacing doing value add. So it’s and imagine doing that on your own with ten houses and then with one other buddy. So you and one other guy get together and now you have 20 homes in the LLC, right? He puts in his ten. You have your ten in there. That’s the exact same thing that we’re doing. But rather than doing it with just like 1 or 2 guys or gals, we’re doing it with, with hopefully one day with the millions of retiring landlords out there who would benefit from this, because at the end of the day, and this is one of our key sort of like theses here is scale really helps if you are an individual landlord and you’re told you’re entirely concentrated in Tulsa and that windstorm hits and you don’t, you’re not sitting on a couple hundred K of cash reserves Or, by the way, even if forget the windstorm, like summer vacancies, like most retiring landlords are like, I don’t want to drive, I don’t want to push revenue. I don’t want to do value add work. Right. But when you are a larger owner and you have sophisticated tools to manage your portfolio and to manage CapEx and to spread out rent expiries right. You can be a lot more efficient with scale. And that’s what we’re trying to achieve.

Mat Zalk 35:20

So let’s let’s talk about that. Larry is a client of ours. And I was talking to him about flocking. And Larry said my biggest fear is that I can, you know, manage the stuff. I can manage expenses and cash flow. I can do it pretty well. And I’m afraid to lose control of managing what I can do pretty well at this point by giving it into the portfolio of 750 houses that that I have no control over. What do you say to those people? Besides, just this might not be the right product for you. Yeah. What’s the what’s the what? How does Flock do it? Better than Larry can do it himself.

Ari Rubin 35:53

Yeah. So I would say two things. First of all, like that’s a totally a natural response, especially for someone who still is hands on. And I would say I would say two things in response to that. First of all, maybe you’re right. Maybe you actually can do it better yourself. And if that’s the case and it’s worth your time to do it also, I would say keep doing it. Like maybe that is correct. However, having talked now with thousands, maybe tens of thousands of our team of retiring or not just retiring landlord active landlords too, there are very like there are certain things you can do with scale that you can’t do as an individual. And maybe you think you got an HVAC guy, that you think you can get cheaper than we can, or some company from Denver, right? But actually when we go into a new market, we line up vendor relationships and they know we’re going to be a consistent source of business that pays on time and they give us bulk pricing. So on vendor relationships, we typically get, I think, the best, if not like better or best price execution. The second thing and this is really where scale is helpful, is when you own 700 homes across a wide range of markets, you can be more aggressive as far as a driving rents and be against expenses. And that’s just like it’s obvious if you have bulk buying abilities, like you can do that. And so I’ll give you an example. If you are just in one market and you’ve got a vacancy and you’re like, oh, I don’t want to deal with you, just you take the first, you don’t screen for the right residence, right? So you’re not as efficient or you take that first bid instead of pricing your rent where, where it actually should be, where the market actually is. Right. And you’re like, what’s a hundred bucks difference? What’s a hundred bucks difference on that house? Well, multiply that times 12 and then carry it forward a couple of years. And you actually just left a lot of money on the table. And and where I’d more the biggest distinction. So that’s on one thing just in terms of like making sure you’re pricing rent at fair market value. The biggest difference. And Mat, you know, this is a property manager. And also as an owner there’s a difference between property management and asset management. Yeah this is the biggest thing. Asset management is okay I have a resident moving out. Should I put in 20k of CapEx put in stainless steel appliances, replace that roof, do a full Reno. What is the return on equity for that investment or do I leave it as is? And that is something that no property manager will solve for you. And no individual, frankly, has access to that sort of robust market data, that institutional expertise. Again, maybe Larry knows the Tulsa market well and he knows these assets. But the ability to take a step back and be like, hey, this is how we more efficiently manage turns and renovations and this is how we price more efficiently. And we have access to this data.

Mat Zalk 38:41

And we can buy and we can buy 15 stoves at once from Home Depot, Lowe’s Home Appliance wherever, and distribute them across the portfolio and get better pricing.

Ari Rubin 38:51

Exactly. And I just like again, I meet a lot of young investors out there. And if you’re doing the work yourself and you’re handy, maybe you save a couple bucks on a couple jobs. But for the vast majority, and this is what what we’ve seen in every real estate asset class, when you have scale, you are better like it is just it is not. It’s because you can bulk buy.It‘s because you can be more savvy and sophisticated. But again, you lose control. And that’s why you got to get to know me and the team and and our partners as well.

Mat Zalk 39:18

So what do you what are you able to bulk buy? Can you bulk buy insurance. Can you bulk buy a service that will protest tax increases? Can you can you bulk buy roofing material? What can you bulk buy?

Ari Rubin 39:33

The first two things you started with I didn’t even tell you to say these ones, but that’s exactly like we we protest every single property tax assessment system.

Mat Zalk 39:41

So you have somebody in house that does that, or you just have a good relationship with a vendor that does all this.

Ari Rubin 39:45

We partnered with a vendor who does it. They actually they they don’t even service mom and pop landlords anymore. And this is another thing. There’s a lot of really good tools that have been built over the last 12 years as institutions have entered single family rentals that are not even accessible. So like this company out there, they will not work with individual mom and pop landlords. But but they will work with us. Same thing with insurance. We bulk buy insurance and we have property insurance, right? Again, you know, we made a lot of landlords. Some of them were like, I have the cheapest insurance. I don’t pay for it. I’m like, well, you know, you don’t have it. Like, yeah.

Mat Zalk 40:21

That used to be the, the, the common thing in carpet cleaning, people would say that carpet cleaning companies would say, I’ll pretend to clean your carpet if you pretend to pay me. Yeah. Not not really. Okay. So you can buy carpets.

Ari Rubin 40:34

Carpets like another great thing. Like, do you guys in most of the terms that you guys are doing, are you just replacing. Do you guys do carpets?

Mat Zalk 40:40

I think your point about asset management is 100% right. I cannot on my properties. I can make a decision because I know what the cash balance of the bank account is, which of course, as a property manager, we distribute the money every month. And so I don’t see what you do with that $1,300 that I sent your way. But as the owner, I know what the cash account looks like. I know what property I’m looking to buy next and what I need to say for that. I know what vacation my family needs to go on, and whether I’m going to sweep that account or take it from another place. I have a full picture. As the property manager, we don’t have the full picture. We may be paying the mortgage for the owner and see what’s left over at the end of the month. We may not. We may be paying insurance, we may not. We may be paying property taxes. We may not. I don’t have the full picture. So for my properties, of course, what we do is take out carpet and put in luxury vinyl plank, because I know that’s a better use of the money, and I know whether I can afford that right now or I can’t. But on our on our pure property management, all we can say is here’s two quotes. One is for carpet, one for LVP, here’s two quotes. One is for bringing this, you know, the flue pipe on a hot water heater up to code. And here’s replacing the tank. I can tell you, hey, the tanks, you know, maybe it’s a bad example. The AC is in the attic and if it leaks now that’s a really bad thing. We need to change the drip pan. We need to change out the. We need to blow out the lines. But that’s the extent of what I can do. I can’t tell you what’s in your bank account.

Ari Rubin 41:54

Right. And even what.

Mat Zalk 41:55

Your appetite is.

Ari Rubin 41:56

So when you. This is exactly correct, by the way, like I personally I still own my former primary, which we hope to move back to. It’s a rental in Denver now, right. And like, you know, we had a vacancy coming up this or we had a renewal coming up this summer. And I was like, I had a honeymoon to pay for it. And I was like, whatever you do, don’t move out. You know, and then and like, the tenants move out and it’s like, do you, you know, do you what kind of turn do you do on it? Do you do the value add like you should and do you fix things or. But it’s like it’s like you’re thinking very short term sometimes it all depends on what’s going on in your life. And I think to sort of to, to to extend that, first of all, it’s not just carpet and LVP. Right. Or, or the drain. It’s multiply that across the 270 items in a house. And so like one example, when we go inspect a home, we have this like 270 item checklist for every single home that we take in. And then and this is an important part. We then catalog. So we go inspect homes, we go catalog all those things into a system. And we know on every single home that we own, we should be budgeting for an HVAC replacement in seven years on that home. And on this one, when that home turns, we got to pull out the carpet. And so like instead of weighing like, do I take the family on a vacation or do I do the honeymoon or do I do the LVP now you’re just like like it’s all categorized and you’re managing this in a far more efficient way. And like nobody, I’ve met one landlord who tracks his properties like this. I had my spiel and I was like, nobody. And he’s like, actually. And let me show you my excel sheet. And he pulled up this Excel sheet with like 50 items in the house. I was like, wow, you’re a little bit weird, man. Like, you know, and he was tracking. But most people, they don’t track historical property pnl to the line item and also forecasting for the, you know, for the prior ten years. In the next ten years.

Mat Zalk 43:42

Yeah. Let’s let’s transition for just one second to, to cash out when you put your portfolio in. So in this hypothetical that we’ve been dealing with, I’ve got my $2 million of property in the in, in the the sale. I got the stock in exchange stock, however it actually works. And now I do it on November 1st. Now is November 30th. When am I going to expect my first distributions coming out? Cash distributions coming out of as a result of my I guess these would be called dividends, right? Yeah. So when is my first dividend cash out?

Ari Rubin 44:16

I’ll first talk about like our quarterly cash flow. And then I’ll talk separately about like okay, you want out of this thing in five years, ten years, 20 years. How does that work? So first of all, as far as quarterly cash flow goes, again, we collect all the rent we hold back for expenses, and then we pay out the rest in cash flow. Half of our clients don’t even take the cash flow. They they don’t need it. And if you leave your cash flow in it, what it it has the impact of actually increasing your tax basis and you can leave it in to reinvest. It’s kind of like a dividend. You just leave it in to reinvest. Maybe you’re still young and you’re still earning an income. You don’t want the cash flow. You just leave it in and your account increases every quarter and your tax basis increases. So that’s one option. Half of our clients again they don’t even touch it. The other half we have folks who literally rely on their cash flow and Social Security. And that’s it. So you better believe we are like this thing goes out. You know, we close the books on the end of the quarter. So Jan first, April 1st, July 1st, October 1st, 25 days later, the books are finalized. We could do it faster, but we use a third party admin to make sure all the numbers are right. We use KPMG at the end of the year for an audit just to make sure everything is by the book. We do an earnings call and the cash flow goes out. So it’s typically the 24th or the 25th of the month, depending on the weekend. Cash flow goes out. Direct deposit into your account. The so so the so the first.

Mat Zalk 45:42

So for my November 1st sale into Flock my first cash that I would expect would be 2420 5th of January.

Ari Rubin 45:50

Exactly, exactly. And you would only because think about it. It’s all about your system. Everything that we’re doing is always goes back to the system. You’re only going to go get two months of your cash flow, as opposed to somebody else who was in for October, November and December. They get three months, right? It’s the same thing. So that’s how the cash flow works. And then over time again, so you’ve got this account on day one. It’s $2 million worth, right. Let’s say ten years goes by. We everyone who comes into Flock, you have like what’s called a minimum hold period. We don’t want people just leaving in a month. It’s not like a good partnership. That’s not what we’re trying to build here. We hope that people are going to be with us forever until they pass, because they’ve got a low tax basis. And if we’re doing a good job, why would you? You know, hopefully you’re not going to need the cash and you’re going to pass it on to your heirs. That’s why many people come to us. But let’s say ten years from now, you need a little bit of cash or you want out. You’re just like, that’s your lifestyle, sort of your financial planning. Your plan is to liquidate over time. So 5 or 10 years. So today you’ve got a $2 million account. And let’s say over the next ten years the real estate market goes up again. So let’s say in ten years your account’s worth, I don’t know, for easy numbers, $3 million. Okay. The housing markets continue to go up. We don’t have enough. Or, by the way, maybe it’s flat. Maybe there’s no appreciation. I have no idea what the next ten years is going to be like. But easy numbers. Let’s just say your account is now worth $3 million, and you call us and say, hey, I want to redeem from the fund, I want to liquidate. So we do that. And first of all, I don’t want to go too much in the nuances here, but there’s actually super tax efficient ways you can do it where actually you can liquidate without triggering the taxes. And that has to do with it’s kind of treated like a cash out refi, which we can go more into the nuances there later. But the short summary is there’s you can actually access some cash without triggering taxes. Sometimes, depending on where you are and how it looks, we can talk more about that. But ultimately we make those redemptions. We we facilitate that liquidation in one of the very simple ways. Number one, we can sell a house. So if you call and say, hey, I want to redeem, we just that’s why we own houses. They’re the most liquid assets we can sell houses. The second thing is we can use debt. Part of the reason we run at such low leverage. So 30% is for that reason, the ability to borrow a little bit. And then third, we also have some cash investors in our fund. And we anticipate raising more here as well. We worked with a very large church who invested just just $10 million of the cash directly into our fund. They’re a phenomenal partner for us, and we expect to raise more equity as well there. So those are the three ways that when it’s time to redeem, you know, hopefully that one of those three ways is sort of how we facilitate that.

Mat Zalk 48:32

It’s cool. I’d love to learn a little more about the cash out refinance option. It’s probably not on this show, but we have to have you back for a separate show to talk about. It’s a cool it’s a cool thing.

Ari Rubin 48:42

And and you could do it on your own again. It’s like if you had that LLC, you had $2 million of properties. You could call a bank and be like, but most guys, when they’re at that stage in life, they’re not they don’t want to take on recourse debt. They don’t want to like.

Mat Zalk 48:56

What should before somebody comes to Flock and wants to sell in their into the portfolio, should they replace the roof, replace the HVAC, are they going to get better value that way? Or they say, look, it cost me seven grand to replace the roof, or I can take a 6000, but it costs $6,000 to replace the roof. Should I not replace the roof and sell it in and take the $6,000 discount to the C2?

Ari Rubin 49:22

Yeah. So we’ve had this conversation many, many times where actually with a big Tulsa portfolio owner, we’re having this conversation right now. He’s like, I know I can get better pricing. So I’ve had this we’ve had this conversation with so many landlords. The look, if you want to go through the process, there’s a chance you could save a couple of bucks by doing this. But taking a step back, our goal, like we don’t profit off this, we don’t flip this house, we don’t charge a markup on the work we’re going to do. Like that’s not how we make money. We want you to join Flock. We make money. We take an onboarding fee. Right? Kind of like a transaction fee to sort of set this whole thing up. And then we take recurring management fees. That’s it. We don’t take a percentage of the profit. We’re not lowballing you and taking the vig. None of that. We want you to. So on the one hand, we want you to join. On the other hand, I got a fiduciary to hundreds of clients who have entrusted us with their whole net worth and Flock. And so we got to be judicious and thoughtful on pricing. We can never, you know, we can’t cut corners. We got to we got to budget accordingly and prudently. Right. So when we work with retiring landlords like it typically like we’ve seen this happen so many times where somebody’s like, oh, I can do it for cheaper. They’ll do the work on their own. And we’re like, look what we have. Like we have different standards. And you laid your LVP flooring and you didn’t do a good job. And now I got to ding you further than that, you know, and it’s just like you spent the.

Mat Zalk 50:38

Money and the value is not there that you paid for.

Ari Rubin 50:40

And that’s the worst thing because and by the way, you had to kick out your tenants and do the work and all this stuff. And it’s like, look, we’re in this for the long term with you. We’re, we’re we’re thinking in terms of ten, 20, 50 year partnerships here. If it’s worth you to save 500 bucks or a thousand bucks on this, like, you know, doing the flooring yourself, go for it. But like, that’s not how we view the world. And frankly, like, I don’t you know, I don’t think that’s how you view it either if you’re really in this for the long term partnership.

Mat Zalk 51:07

So that speaks to why you come up with a price and you don’t change the price because you have responsible fiduciary responsibility to everybody else in the portfolio to pay a fair value, but not more or less than a fair value.

Ari Rubin 51:18

And guys and gals get this. Like they come to Flock and they’re like, you know, Mat brings me his $2 million portfolio. He’s like, oh, I would love to get 2.2 million for that. But then you’re like, wait a second, if they’re going to pay 2.2 million for that, do I really trust them to manage my net worth? And with all who else are they doing that for, you know? And so going to your question of like, how’s the best way to work with retired landlords, we find that most folks, it’s just like, just just get out of this. See our and by the way, start with a couple like, you know, we’re we’re working we work with a couple owners who like they’ve got hundreds. They start with 20 or 30. Like you don’t need to do the whole thing. See the system then by the way, you see in the portal, we do the work. You can see everything in there. And then it’s like, oh, we just like ding people for pricing. It’s like this is actually reserves that we then go and do you know.

Mat Zalk 52:05

Have you guys considered getting into the commercial space. Commercial space.

Ari Rubin 52:10

So we started in Flock Homes because it’s such a large opportunity, such a large asset class. But the idea was, you know, we and we’ve raised a lot of venture capital to build this from some of the leading investors. We it’s a legal and a tax structure with a really good group of people around it who know how to operate real estate? We built a lot of tech to do that, right. So the idea was start with homes. Obviously, it’s such a big market. It’s such a big opportunity. We have the team to do it, but now we can extend this and create multifamily and self-storage and start expanding into other asset classes with like minded owners and clients. So we started with homes. That’s our flagship product. That’s what’s going to that’s our brand. That’s what everybody’s entrusted us on one day. I imagine doing this with student housing, with other asset classes, but right now it’s just solely dedicated on the homes, our core product, delivering returns to our clients.

Mat Zalk 53:03

Oh my God. There’s another owner that I just thought about needs needs to sell into Flock Homes because they’re done. They’re done dealing with it. So I got to make that.

Ari Rubin 53:11

Connection and on our way we’ll, you know, we’re ready for them.

Mat Zalk 53:14

All right. Rubin’s the founder and CEO of Flock Homes. Flock is building the retirement solution for landlords, a single family rental fund that uses the 721 exchange to help landlords seamlessly exit, defer taxes, and preserve upside and cash flow. Flock has raised over $30 million in venture capital from leading firms such as Andreessen Horowitz. Currently own 700 750 around the country, and they’re expanding into Tulsa. If you want to learn more, you can find out more from flockhomes.com. Is there anybody in your team that people should reach out to directly, if maybe an email address, or should they just go to.

Ari Rubin 53:48

You can email us at [email protected]. If it’s late at night, I’m probably manning the chat. I mean, you know, we’re all we’re we’re real people behind this business. We’ve got a couple two people on our team grew up in Tulsa, so we’re really psyched about the markets. We’ve got some real roots there and we got a phenomenal partner in Mat here as well. So we’re and the rancher team. So we’re really psyched about expanding.

Mat Zalk 54:08

I love it. All right. Thanks for being on the show.

Ari Rubin 54:10

Thanks Mat. Take care. See you.

Outro 54:15

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