73: Are These Companies Changing The Future of Real Estate?!

Is it possible to change the way we do real estate again? In today's episode Alan Corey dives in to 3 upcoming business models that have a new and unique way of doing real estate. 

If Flow, Bungalow, and/or House Hack aren't on your radar yet, after today all 3 of those companies will be. Alan goes into detail about these upcoming real estate ventures and how they can change the way real estate is done. 

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Read the Transcript here:

House Money Media. It's episode 73 of Real Estate Maximalist. Today we're talking about the future of real estate and the companies trying to change how we do business, how we live. I'm talking about companies flow, bungalow, House Hack. Are those company names on your radar or do they sound completely foreign and you've never heard of them?

Well, stay tuned cuz we're gonna see the exciting ideas they have about the future of real estate and how it affects all of us. But first, a word from our sponsors.

I'm Jasmine from Jasmine Mortgage Team and we love working with first time home buyers and new investors, really anyone looking to change their life through real estate. I love helping people make really smart financial decisions. I have worked with Alan and his personal clients for many years on many, many deals, and I would love to spend some time learning about your journey and helping you achieve your goals.

You can book a free consultation with us by calling or texting 404-600-1500. Follow us on Instagram @JasmineMortgageTeam, or our website is jasminemortgageteam.com. Hey, this is James and Emily, and you've heard us on episode 72 at the Real Estate Maximalist Podcast, and we've just launched a course on teaching you how to manage your Airbnbs remotely.

It is a video course. There's videos, and then there are lessons that go along with that so you can read along. We have 10 different templates, a furnishing checklist, a cleaning checklist, a quarterly cleaning checklist, a quarterly maintenance checklist. We have all the tracking for spreadsheets. We've got some templates for guest messaging, and then we actually go through and show you like, Okay, this is what you should be doing.

This is how we find cleaners. This is how we find local handyman. This is how we schedule those people. We go through all of that process, everything that we do, we have on there, we've covered all our bases, and teach you how to do everything remotely as well. And for the listeners of this, you can go to rethinktheratrace.com/maxi to find our course for $399.

And you're also gonna get some bonus content there as well. You can find that at rethinktheratrace.com/maxi. M A X I.

This is the Real Estate Maximalist Podcast. I'm your host, Alan Corey. I'm the author of three books, and I've been real estate investing for over 20 years. I got started with a $99,000 one bedroom apartment, and today I've grown that to over a 300 door portfolio, soon to be 350 doors as I just went under contract on a 52 unit Fixer upper in Atlanta, Georgia.

I'm also the lead of the Alan Corey team, where it's my mission to create a group of agents who understand real estate investing in and out, so we can help clients make the most money that they can out of real estate. I also tweet multiple times a day @RealEstateMaxi. I also have several short-term rentals and long-term rentals, and I've done flips and new construction, but I just find it easiest to say I'm a Real Estate Maximalist.

All right. Let's talk the future of real estate. I love this because there's some principles in real estate investing just never change. I grew up reading the books of the real estate investors before me, the formulas, and it's all about long term rentals and flipping properties, and that sort of model is evergreen, right?

Buying a property, having a fixed rate mortgage, renting it out so you have positive cash flow. That's evergreen investing. That's always gonna be successful, but there's always new technologies popping up. When I got started, Airbnb didn't exist. I actually, I worked at a startup that got acquired by Airbnb back in 2011.

That's how long ago. And it was a foreign concept. It was something that people didn't think was gonna work. And here we are where people are making millions of dollars in the Airbnb niche as a real estate investor, right? And there's so many people making money in this Airbnb way. It's not just a real estate investor, you know, the host, the property managers, the, the people who work at Airbnb itself.

It's created this whole cottage industry that's taken off. So I'm always excited to see what's coming next, what are the new trends, and that's what we're gonna get in today. Some of you might be familiar with the name Adam Newman. He's someone who's controversial. He had a spectacular rise in fall.

There's been documentaries created about him. You might know the company he started, which was called WeWork. A great idea, Hey, let's take office space and let's just rent it by the room, but we'll have shared conference spots. It's basically Fractionalizing office space for small businesses or solo entrepreneurs

who don't necessarily need a giant, you know, brick and mortar, but they could benefit through force networking and shared spaces, and also keep the cost down. Great idea worked well until coronavirus hit and everyone was work from home anyway. Now he's no longer involved with WeWork, and like I said, there's some stink on that company.

The, the numbers weren't as rosy as they originally were in IPOs, and, uh, there's some, you know, iffiness of whether he was someone who was actually a great leader or not, but there's obviously people out there who think he's someone worth investing in again, cuz he just raised $350 million for his new real estate company that's trying to change the way we do real estate.

That company's called Flow. Now Flow's probably not on your radar, but Adam Newman's name might be, that's on purpose. Flow is trying to keep under wraps what their business idea is. However, Wired just came out with a great article title, "Get Used to Startups Trying to Reinvent Housing", and they did some digging and they revealed the business plan behind flow.

What has happened is Adam Newman apparently took that $350 million and bought 4,000 apartment units in four startup cities, Atlanta, my hometown, Miami, Fort Lauderdale, and Nashville. So he's spread these apartments out. Let's say he is got a thousand in each of those cities. And his idea. And Flow's company business model, according to this Wired article, is to lean in on flexible housing arrangements.

So similar to if you got a gym membership to say a national chain, Gold's Gym, Equinox, something like that. You can go travel to other cities and use their gym, right? It's, it's a universal membership and so he's taking that concept and that idea and applying it to housing. So basically you buy into a Flow membership

and it's very flexible. Let's say it's a thousand dollars a month, $2,000 a month. I, I, I have no idea what the pricing, I'm just giving you an examples. You pay that and you can live at any of their units. So you could live for two years in an Atlanta apartment complex and say, Hey, I'm gonna go live in Nashville for a week.

And you, you go, and if there's availability, you just swap out your housing and you go stay in the Nashville apartment. Maybe you wanna spend three months in Miami. Maybe you wanna spend three months in a different part of Miami. This is the concept that he's building and selling where you have a membership to apartment living.

And this leans in to a generation that emphasizes flexibility over home ownership. Imagine you have a furnished apartment in multiple cities across the United States, and all you need is to pack up your suitcase and go, and it's gonna have the same wifi password, the same sheets, the same amenities, and you're in and out.

You know what to expect. You don't have to negotiate. And you, There's a website. You can always see what weekends, something's available, and as soon as you move out of your place, it makes something available for someone else. Your amount that you're spending each month doesn't change. You're not beholden to one location for any period of time like you would with traditional lease. With technology and work from home and digital nomad trends.

I kind of see that this idea has legs. Right? How fun would it be if you're a work from home person instead of just going to a WeWork office in your hometown every single day, your housing situation can change. Like I can go live in Nashville for two months, do the same work I'm already doing on online, but I also feel like I'm traveling and that apartment's already been furnished. 

My rent doesn't change cuz I just pay the same monthly fee. I know I'm gonna be in an apartment complex with other people, either whether it's temporary or permanent, but we're all part of the same membership group. And so it's a way to sort of upgrade your living, but you have roommates and you don't get to pick those roommates.

Obviously there's pros and cons to that, but you could also say, You know what? This house isn't working for me. And then they'll go Put you in another home in the same town. And I find this very interesting. It continues to lean in on the importance of freedom and flexibility and being able to sort of, live life on a whim and travel.

So that is Adam Newman's Company Flow. Now, another company in a similar space targeting the same sort of affluent, single independent renter is a company called Bungalow. And what they're doing is they're buying nice luxury homes in popular big cities, and they rent it by the room on a long term basis.

So you're signing up for a six month, 12 month lease, but you have a curated roommate situation. They do the typical background check. They have a little bit stricter credit scores and. It's a little bit more intrusive in getting to know you before they rent to you, and then you have a meet and greet situation at the house.

So imagine they've got this luxury six bedroom house and they have a spare bedroom. You would go meet the five other roommates currently there. And they would either give you a thumbs up or thumbs down and they give you a thumbs up then you get to move in. It's already furnished. It has shared spaces that bungalow takes care of the cleaning and the stocking and what you would expect by paying a bit of a premium to rent.

And now you have a built-in network of sorts because you have five other roommates that approved you and this is great I would imagine if you are someone who's got some extra disposable income, moving to a new city, don't know anyone. Well, here's a way to be living and having some co-shared spaces with probably people that have the same values as you, or at least the same interests, or probably in the same

age range. It's a premium product and you get to upgrade your life. You're not gonna feel lonely living in a one bedroom and a part of town you're not familiar with. So you could kind of plug in to a local hipper scene, if you will. Um, and, and you'll pay a premium for that. That's the company's bungalow model.

It's a bit of luxury housing rented by the room. With both Flow and Bungalow and other companies surely trying to pop up in the same space. I see this as a conglomerate play of landlords. You know, there's gonna be probably in 50 years, a hundred years, maybe 10 big landlord groups and they own the best prime real estate in every major city.

That could be the future of Wall Street Landlordism. And, And if you're gonna be a mom and pop investor, like I consider myself, you're gonna have to offer different things. Obviously, one would be a cheaper rent because you're not offering them the freedom to move willy-nilly to different cities, right?

But you probably don't have to offer as many amenities. If you're married and you've got a growing family, you're gonna want some stability. So I don't see this as a business that will put outta place people who want that long term tenant. So just keep that in mind. I, I think that single family house in a good school district is always going to rent well.

I think there's always gonna be someone who doesn't wanna pay that premium. Has that job that they go to locally, that is not a work from home situation. All those renters are always gonna look for a safe, reliable place to live. So I don't see this as any way putting Mom and Pop and Lords outta business, but it could create a cottage industry of sort of influent young, freedom minded, flexible tenants.

And that's okay. There's gonna be a space for them and you don't have to compete with that.

All right

super exciting news. 

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All right. Switching gears to a different real estate company and a different space altogether is a company called House Hack. Now, I've talked about house hacking before. It's a real estate strategy where you live in your house and you rent out other bedrooms, or you buy a small multifamily, like a duplex or triplex, live in one unit, rent out the other sides, and let those rental income that's coming in cover the majority, if not all of your mortgage payment and housing expenses.

This company, although it has the same name, is not really in that space, but this is founded by Meet Kevin, who you might be familiar with. He's a very popular YouTuber, and he talks about real estate and I've watched a lot of his videos over the years and he's someone that I trust. And full disclosure, I actually put in money in this company House Hack as a seed investor.

And I, I think it has potential. I, Kevin, someone I, I really believe in and trust and he really knows his real estate stuff. But also I like his idea and what House Hack, the company is competing against is sort of the i-Buyer programs. Companies like Open Door, Orchard, Rex, Zillow Offers existed for a while, but they've now shut that down.

Companies that will basically give you an above offer on your home to make it easy, and then those companies are in the business of putting lipstick on a pig and reselling it. Now, I never understood this business model of predicted failure on this business model for every single company. My prediction was accurate for Zillow.

It didn't work out and they've shut down and they lost a bunch of money. I've sold multiple properties to Open Door, and it just makes no sense as a real estate investor to do what they're doing. But they're in the business of transactions. They're in the business of, Hey, let's replace the real estate agent.

That's their business model, which is not the House Hack business model. The business model for House Hack is saying, Hey, we will also give you a great price for your property. We're gonna pay you what Open Door would, we will pay you what Orchard would or any of these other companies that will, i-Buy your house, but instead of taking that house and trying to resell it for more and it just sits on the market for six months, House Hack is gonna take that house and put it up for rent.

Say, Hey, why don't we just offer flexible rental terms? Why don't we do a mix of short, mid, and long-term rentals? And I think there is a business targeting that tenant who wants some flexibilities, but these are gonna be single family homes. So you could also attract that long term stability tenant, that family that wants to live there.

And for House Hack, coming from a landlord perspective, they own all these single family homes. They're gonna individually look at each one and say, Can we make the most money with this as a short term rental? As a long term rental, as a flex rental? And because they have that agility to switch between it, if new regulations come in, they'll just pivot from a short term model to a long term model.

Right? Or if the town suddenly become hot destination. Uh, they can also pivot from a long term tenant to a short term. Or if someone moves out, they can say, Why don't we offer this, uh, all three and see what tenant we get, attract the fastest. It just basically gives 'em as many options to always have a renter in there.

And this goes back to the original evergreen principles of real estate investing. Finding a tenant to pay and rent your house is never gonna go away. And House Hack's saying We're gonna offer three different ways so that we reduce our vacancies. So what does this mean to you and your mom and pop and my mom and pop real estate investing career?

It's just saying when you buy a property, I would evaluate it. So you also have these options. If I'm buying a short term rental, I wanna make sure if I have to pivot whether I want to or if I'm forced to, to a long term rental, is this still gonna be profitable? And vice versa. Hey, if I buy this property as a long term rental, could I have options?

If I furnish it and do it as a flex rental or short term, is there still money to be made? I always want to have options. This is what House Hack is doing, but you should take that same principle in your own investing because it reduces your risk. No one has a crystal ball, but if you own houses and you have some flexibility and some options and some pivots in your back pocket, it's gonna benefit you long term.

 So there you have it, some movers and shakers trying to shake up the real estate industry. We talked about Bungalow, Flow, House Hack. I'm keeping my eye on these guys. It is exciting to see all the new things that come in the real estate space. As always, thank you for tuning in to Real Estate Maximalist. Follow me on Twitter @RealEstateMaxi.

Ask your questions, give me your feedback. I want to hear from you. I'm also in the Real Estate Maximalist Facebook group. Those are where I am most active, and I will happily answer all your questions real estate related. Thank you for listening to Real Estate Maximalist Podcast. I'm your host, Alan Corey. See you next time.